From Avocados to Ziti, Go Granular on Food Costs with AP Automation

August 8 2019

Food costs represent a huge percentage of a restaurant’s overall costs, about 25% to 30% for profitable operations. To determine the true cost of steak, pasta, or other foodstuffs, you need to perform a cost analysis on a per-item basis—an impossible task with manual accounts payable. Your food costs are likely to be skewed, and you’ll lose on opportunities to save.

Here’s why: Most invoices from national food vendors are long and detailed. Your busy AP folks will process these invoices as simply as possible, so costing will be by food category—meat, produce, dairy, etc. If the cost of a specific item fluctuates, you won’t be able to adjust the price of a menu item to cover the true cost.

How much is that guacamole, really?

The perfect example of this is avocados, which are currently in short supply. President Trump’s announcement of possible tariffs on Mexican goods may have caused avocados prices from that country to surge to its highest since August 2017. What’s more, the tight supply of California avocados is unable to keep up with swelling demand. 

“The price in the wholesale market is up every day, and it’s simply because there aren’t enough pieces of fruit,” says James Shanley of Shanley Farms in Morro Bay, California.

By using restaurant specific accounts payable (AP) software together with modern inventory management tools, you can segment the price you pay for avocados from other fruit. Thus, you’ll see the real cost when you click on an ingredient and run a cost analysis report. Then you can accurately determine if and by how much you need to increase your price on any avocado-based menu items.

You’ll reduce your food costs based on real-price visibility and analysis—something you can’t do with manual account payable processes. 

Slash average processing costs by almost 70% with AP automation

If you’re still on the fence about investing in AP automation, consider this: According to the research firm Ardent Partners, best-in-class businesses only spend $2.52 to process a single invoice compared to the benchmark of $11.57 for most companies. 

It’s also important to clearly understand your current costs and unique processes, which you can do by answering a few basic questions:

  1. What are your current invoice and payment processing costs?
  2. How long does it take to approve a single invoice?
  3. How many people are approving an invoice?
  4. How long does it cost to process a single payment?
  5. How many invoices are processed monthly?

Investing in best-in-class financial management software such as Sage Intacct makes it easy to reap the benefits of AP automation. Its cloud-based architecture allows easy integration with your choice of leading AP automation solutions such as PlateIQ or MarginEdge.

Don’t let food costs eat away at your restaurant company’s bottom line. With AP automation and Sage Intacct, you can get instant insight into real food costs and start saving right away. The restaurant accounting and technology experts at Tablespoon can help. Reach out for a consultation today.