Restaurant Inventory Management: Free Template & Tips
Although it may not be the most exciting part of operating a restaurant, accurate inventory management is key to running a sustainable business. In fact, accurate inventory counts can prevent unnecessary losses and improve your profit margins. This is particularly important considering that poor inventory management is one of the leading causes of thin profit margins and mismanaged costs for restaurants and ghost kitchens.
Using a simple and straightforward inventory tracking sheet can assist you with getting started with organizing your stock levels. Doing so can also be a stepping stone towards adopting a comprehensive inventory management software that can help significantly with speeding up the process. In this article, we have shared some resources, tips, and formulas to help you confidently navigate your journey towards effective inventory management for your restaurant or ghost kitchen.
5 Tips To Optimize Restaurant Inventory Management
1. Organize Your Storage Space
The first step before you start tracking your inventory is making sure that your storage space is organized. Having an unorganized storage space can lead to many issues including frustrated staff and unnecessary costs due to over-ordering miscounted items. It is important to keep your storage areas organized to prevent these issues from occurring. Here are some simple organizing strategies that can help you make inventory tracking a smoother process:
Create a unique SKU for each item: Label all your ingredients and supplies by creating a unique ID. Use this to track inventory in your spreadsheet. You can use the same SKU provided by your supplier if available. This will also make things easier to find for your staff.
Organize your items by food category: Group similar items together in the same storage area (ex. All meat items in Freezer 1). This can help track inventory more efficiently, as well as make it easier for staff to find items in the storage spaces.
Label each storage unit: Clearly label each fridge, freezer, and other storage space.
By taking the time to organize your shelves in a logical way, you can easily see what ingredients you are low on or which you have too much of, as well as easily set up your inventory data on an inventory tracking sheet or software.
2. Use an Inventory Tracking Google Sheet or Excel Sheet
Manually tracking every item in your inventory with pen and paper can be extremely time-consuming and tiresome. Instead, you’ll want to use an inventory management software, or at least a spreadsheet, to better oversee your inventory. Using an inventory tracking spreadsheet can simplify inventory counts for you and your staff.
It can be difficult to know where to start when creating an inventory tracking spreadsheet completely from scratch. From different units of measure to multiple suppliers and storage areas, having an organized system is crucial to making inventory tracking a practical and rewarding habit. By downloading our free spreadsheet, you can set yourself up for success and customize this resource to your specific needs.
3. Set Up Your Customized Template
Here’s an example of what you should include in your master inventory spreadsheet:
Category: Label items by category (ex. meat & alternatives, fruits & veggies)
SKU: The number you assign to each inventory item (ex. ID: 456734543)
Item Name: Ex. potatoes, salmon, scallops
Unit Size: The quantity of 1 individual item (ex. 5 lbs per bag of potatoes)
Case Size: The number of cases/packages (ex. 10 bags of potatoes)
Quantity in Stock: The number of units in stock
Storage: Location of an item in your storage space (ex. Freezer 1)
Unit Price: Unit price for each item in stock. It’s important to use the most current price so that you can better understand your current cost of goods
It can be difficult to know what should go in your inventory tracking spreadsheet so we have provided a free template for your restaurant. This template includes a detailed example to help with easy formatting and step-by-step instructions to guide you. It can easily be customized and edited to meet your unique restaurant business needs. For example, you can incorporate additional columns and formulas that may be suitable to meet your needs. This organized template should provide you with a solid guideline to help get started on tracking your inventory!
4. Six Useful Formulas and Ratios to Boost Your Restaurant Business
Using formulas and ratios to better understand your inventory management is another great way to help elevate performance and better target your revenue goals. The calculations below can help you stay organized and better analyze key performance indicators. Tracking these formulas consistently can help you gain an accurate way of monitoring your business’s growth and see where there is room for improvement. Below, there are a few important formulas and ratios that we recommend:
1) Reorder Level of Stock:
Accurate reorder levels can help your restaurant business operate smoothly while avoiding unnecessary waste and also reducing expenses associated with maintaining inventory. We recommend entering this formula into your spreadsheet so that you can know how much to reorder.
Reorder Level of Stock Formula:
Multiply average demand (number/quantity of an item that you sell/use within a given time) with lead time (time it takes to receive a shipment of specific inventory item after placing the order). Also, add your safety stock amount if you have this (extra quantity of an item on hand in case encountering a sudden increase in demand).
Reorder Level Formula:
Multiply average demand times lead time then add safety stock.
(Average Demand x Lead Time) + Safety Stock = Reorder Level
2) Inventory Turnover Rate Formula:
Inventory turnover measures how many times in a given period you can replace the inventory that has been sold. It is beneficial to calculate this as it shows which items are profitable for your restaurant and which items have weak sales performance. A higher turnover implies that sales are strong, while a lower turnover indicates weak sales and the possibility of excess inventory.
Inventory Turnover Rate Formula:
Divide net sales (cost of goods sold) by inventory (average inventory) for a specific time period.
Cost of Goods Sold (COGS) / Average Inventory = Inventory Turnover Ratio
3) Cost of Good Sold (COGS) Formula:
It is important to be aware of your cost of goods sold as it clarifies the value of your inventory and can help calculate other useful formulas. The cost of goods sold is important because it’s tied directly to your revenue, profit margins, and inventory management.
Cost of Goods Sold Formula:
Add the cost of inventory at the beginning of the year to any additional inventory costs and then subtract the cost of inventory at the end of the year.
Beginning Inventory + Purchases – Ending Inventory = COGS
4) Average Inventory
Average inventory is your average value of inventory within a time period. It is needed to calculate inventory turnover as shown above. This formula can be useful as you can use it as a point of comparison when looking at overall sales volume and also track inventory losses.
Average Inventory Formula:
Take your beginning inventory for a given period of time (usually a month). Add that number to your end-of-period inventory and then divide by 2 to get the average.
(Beginning Inventory + End Inventory)/2 = Average Inventory
You can also measure this by adding inventory over multiple time periods (ex. months/quarters) and then dividing it by the total number of periods. For example: (Quarter 1 + Quarter 2 + Quarter 3)/3
5) Sell-Through Rate
Sell-through rate allows you to measure the efficiency of your supply chain. That is, it helps you understand how quickly your items are selling. With this information at hand, your restaurant can make more intelligent inventory purchasing decisions and ensure that you have enough items in stock. A high sell-through rate indicates that you sold your inventory quickly in a given time period, while a low sell-through rate indicates that the items are being sold slower than expected.
Sell-Through Rate Formula:
Number of units sold in a given time period divided by the number of units received by suppliers in that same time period.
Sell-Through Rate = Number of Units Sold/ Number of Units Received x 100
6) Ending Inventory/Closing Stock
Ending inventory can help you understand how much inventory you have left at the end of a specific time period. It is also a key metric to know while doing your accounting and finances.
Ending Inventory Formula:
Add beginning inventory value (last period’s ending inventory) to net purchases (items bought/added to your inventory count) and then subtract the cost of goods sold.
(Beginning Inventory + Net Purchases) – Cost of Goods Sold = Ending Inventory
We recommend incorporating these formulas into your spreadsheet so you can keep track of these useful values in one place.
Streamline Inventory Management for your Restaurant
Managing inventory is critical within the restaurant industry and failing to do so properly could lead to a number of issues such as food waste and unsustainably high food costs. This could also significantly impact your restaurant’s bottom line in the long run. Whether you own a large restaurant chain, ghost kitchen, or independent restaurant, the importance of inventory management is clear if you’re looking for more ways to raise your bottom line.
A good inventory management system can help you control and organize every aspect of your stock, maintain a smooth flow of supply, and help you boost your overall profits. By using the template we have provided, as well as the additional tips in this article, your restaurant should be able to manage inventory tracking in a much more organized and efficient way.
If you’re still feeling overwhelmed, or you feel ready to take the next step, using a comprehensive inventory management software can make the inventory tracking process even more efficient as you can access everything you need in the convenience of one place. For more information on NextGen Kitchens inventory management software contact our team through the form below: