Managing Loss at a Coffee Shop

Loss is going to be one of the biggest expenses, but with careful planning it can be managed. Loss will occur through waste and through poor ordering practices. Here are two ways to manage loss.

Keeping Track of Waste

Waste can kill you with its spiraling costs. Waste occurs when:

  • A drink or food item is improperly made
  • Expiration dates pass before the items are used
  • Proper portion control methods are not employed

Improperly made items are going to happen. As new staff members learn the ropes, they are going to mess up a few drinks. Even experienced staff will sometimes mishear a customer and make the latte with 2 percent milk when the customer asked for soy. If you see a problem consistently happening, try to identify the root cause to keep it from repeating.

Ordering only what you need will help with using everything before the expiration date. This might be tough as you are just starting out and finding the rhythms of your business. And sometimes those things just happen in the zeitgeist; one day everyone wants blueberry muffins and you run out, so you stock up the next day and none of them sell at all.

Keeping a waste log will help you track the costs associated with both items above. The list can be created several ways. You can create a table where employees fill in the item that was thrown away, the reason (past expiration, for instance), and the cost. Or you can create a table that lists all perishable items in your shop and track what is wasted due to expiration or improper preparation.

Compare the waste log to your ordering log on a weekly and monthly basis. The analysis will help you identify trends and better target the quantities that you order. Use this log as a tool to help you track what you go through so that you can alter your inventory as needed to reduce waste.

As for portion control, start by explaining the cost of each item to your employees. When you set the prices for your menu, you likely broke down every drink and sandwich into its components and priced accordingly. Now take your employees through this exercise to show them how it is done. Your employees might think an extra shot of flavored syrup at no charge makes customers happy. Show them how much that extra shot adds up to over the weeks, the months, and the year. Explain how significant loss affects your profitability and, therefore, any increases in wages.

If you prepare food, use scales and standardized recipes. Whenever possible, give your employees tools that they can measure with. If a bowl of soup is 16 oz, then buy a ladle that is 8 oz with the understanding that customers only get two ladlefuls. You can also buy shot glasses that are marked with fill lines. Education is always going to be your key to reducing waste. Tracking costs by maintaining a waste log can help you translate mistakes into dollars and cents for you and your staff.

Keeping Track of Orders

Although it’s going to be best for your business if only one person handles the ordering, sometimes this isn’t possible. Maybe the person who does the ordering is gone on vacation, or took an unfortunate turn and had to be hospitalized.

Now the ordering and receiving must be completed by someone else. Unless specifications were created, this person is going to be completely lost and likely end up ordering too much of one item and not enough of another.

Creating specifications of everything that is ordered is an important part of ensuring consistency in what you purchase and, ultimately, the products you supply to your customers. The spec sheet should include brands, quantity, unit size, quality and so on, for every item you stock. This will save you time from remembering what you ordered last time; assist the person making the order if you can’t do it; and allow you to better track use versus waste

The spec sheet is only one part of the ordering process. You need to keep detailed information of everything that is ordered so that when the shipment comes in, you are only signing for what was ordered. If your supplier doesn’t stock you with purchase order sheets, then create your own. The purchase order should include:

  • A unique number (just like an invoice)
  • Your contact information
  • Description of what you ordered
  • The quantity (to the detail, such as a case of 24 12-oz bottles)
  • The price it was ordered at

Always, always, always compare the purchase order to the shipment received to identify errors. Only sign for what you ordered, or it could lead to a costly error down the road! And just as the spec sheets serve as a guide, the purchase order does the same. If you can’t be there to receive a shipment, you need to leave a record for whoever does the receiving so they know what to look for.

Make sure you designate and label an area in storage for everything. Label and date everything. Investing in a simple price gun will make this easy for you.

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