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September 26, 2022
4 ways automated invoice management helps fight inflation
Inflation is all anyone can talk about these days and it's for a good reason. August’s overall consumer price index was up 8.3% compared to 2021, with food prices coming in at 11.4%. It’s not all bad news for restaurants though, as the increase for food at home vs. food away from home was higher at 13.5% to 8% respectively.
While this difference may push guests to opt for dining out rather than in to save money, 8% still doesn’t have us popping the Moët (or André if we’re being realistic right now).
It's not something you might think about often, but streamlining invoice management can be one of the biggest weapons for fighting inflation. We spoke with one of our former operator team members, Nathan Klebanow, to ask how working with invoice processing systems helped save his restaurants money.
Here are 4 ways restaurant invoice management helps fight inflation:
1) Automatically track food costs
This one might be obvious but it's an important point nonetheless. Tracking food costs by hand on a spreadsheet is time consuming and soul sucking if we’re being generous. It’s also no longer the most efficient way to monitor your purchasing. Automated invoice management systems categorize purchases for you and track costs, and all you have to do is snap a picture.
Let’s say you run an absolutely killer barbeque joint and your food costs typically end up right around 35%. This isn’t bad by any means and how big of an impact it makes on your overall profit is really going to depend on how costs balance out across all expenses (labor, maintenance, utilities, etc.).
Now let’s imagine you’re not tracking food costs so you don’t realize the cost of brisket has increased 186% compared to last month. Maybe you’ll catch an invoice and recognize the price has gone up, call your vendor and make a change, but if you’re not processing invoices on a daily or weekly basis, it’s likely brisket won’t be the only thing getting slowly roasted.
Finally at the end of the month when you ship your invoices off to your bookkeeper, or have to sit down and sort them out yourself, you would find you’ve been at 50% food costs for the last month and it's halfway into the next month already. By then, it’s too late to make a change.
With an automated invoice management system, you could’ve caught the rising brisket prices after the first invoice. Once it was processed into the system, you would have seen in real-time where your food costs were and made a quick and impactful decision.
Nathan tells us when he was a food and beverage director in New York City, implementing a cloud-based, automated invoice management system was a huge step up. He notes, “It changed the way we did business, because you’d know what was happening on a weekly basis, so we could make decisions quickly.”
Even if inflation appears to be cooling off slightly, it’s still a fiery, blazing inferno (we’re talking sautée station on a Saturday afternoon in June, in Texas, hot). Tracking your food costs with automated invoice management takes just minutes a day and can save you thousands of dollars.
2) Save on labor costs
The only way to know what your food costs are is to track product prices from your invoices. Often this is done manually on a spreadsheet, which requires consistency and a ton of human hours spent entering in data.
This may feel like the more cost effective option at first glance, because you can do it in-house with someone already on your payroll, but when you look at the numbers it doesn’t always add up.
Nathan told us, “The reason why anyone in a restaurant is there, is not related to their ability to do paperwork. For many, it's not in their wheelhouse or honestly something they have time for. Sure they can figure it out and understand how to do it, but it’s not why they’re there.” So oftentimes you’ll get a general manager, food & beverage manager or even an executive chef who’s stuck tracking numbers on a spreadsheet when they have a million other things that would make better use of their time and skill sets.
Using an invoice management system that costs a couple hundred bucks a month isn’t as expensive as you might think. According to payscale.com, the average salary for a restaurant general manager is about $51,000 a year. Naturally, this will depend on where you are located, experience, etc. but let’s just start there.
$51,000 comes out to roughly $24.50 an hour, so if your manager is spending more than 3 hours a week on paperwork each week, the invoice management system has already paid for itself. That’s simply for labor alone and doesn’t factor in the cost savings from knowing your Prime Costs on a daily basis and being able to do something about them.
“Outsourcing that work to someone else has only been available to restaurant groups with corporate setups in the past. In independent restaurants, most if not all of the people working there don’t have the time or inclination to do all that paperwork. Now it's more accessible, and technology does a good enough job there’s no reason why a chef should be hand-coding invoice information every month,” Nathan explained.
3) Prevent accounting discrepancies
No one likes to admit it, but sometimes invoices go missing. They get lost in a stack, fall behind a desk or get tossed out with the shipment packaging. While it’s not the end of the world, it can mess up cash flow and create headaches chasing down vendors to get their receipts for your bookkeeper.
Invoice management systems prevent these slip ups by keeping digital copies of everything coming in every week (as long as you use them, but that should go without saying).
Sometimes vendors don’t keep digital receipts or copies, so what do you do then? One of our sales reps, Kaley Guth, shared with us that when she worked for a family-owned restaurant for many years, she ordered limoncello from a little old man who would write down what was purchased and delivered on the back of business cards. “If I lost that card, we were screwed,” she tells us.
With an invoice management system, you can snap a pic of any and all invoices and know that not only will the information on the invoice be coded and categorized for you, but you also have a digital copy when the vendor or tax-man comes knocking.
Finding an invoice management system with a combination of artificial intelligence (AI) and humans is also super important. Kaley mentions, “AI takes care of a lot of the mistakes that happen with manual entry, but AI can make mistakes too. Like coding mustard instead of mustard seed- it happens a lot- and humans can catch those mistakes so the effort to fix them isn’t passed onto the user. Otherwise what’s the point of outsourcing invoice processing if you have to manually fix entries yourself.”
With invoices processed in less than 48 hours, you have an accurate view of cash flow within your restaurant which is vital to staying on top of profits, especially during periods of high inflation. No more “oh crap" moments when you get a bill from Giuseppe asking for the $2,500 you owe for limoncello last week.
4) Pinpoint waste with theoretical usage
A final way invoice management can help with inflation is when it’s used in combination with taking regular inventories (cue the groans).
Look, we know they’re a pain, but the fact is they help save money.
Invoice management systems tell you what you bought, POS data tells you what you sold and inventories tell you what you have on hand. From there, it’s just math, which thankfully technology and a restaurant management system (RMS) can calculate for you!
This can be used for food and bar items alike. For example if you know Giuseppe sold you 10, 750ml bottles of limoncello last Monday bringing you to a total of 12, 750ml bottles on hand (you had two before he came by), and your POS says you’ve sold 90, 1-oz servings, you should have 8.45 bottles left (roughly).
12 x 750 = 9000 ml | 90oz = 2661ml | 9000ml - 2661ml = 6339ml | 6339ml / 750ml = 8.45 bottles
You take inventory and see you only have 5.5 bottles left, meaning you’ve got almost 3 bottles worth missing. So maybe you start using measured pourers, or train your staff how to mark out give-away shots on your POS. Either way, now you know about it and bonus- you didn’t have to do the math to figure it out.
While an invoice management system and RMS can’t tell you why the waste is happening, it can quickly show you where it’s happening so you can do something about it. Being able to nip waste issues in the bud is a powerful way to combat inflation rising product prices.
It might not seem like the most obvious answer to inflation, but invoice management systems can really make a positive impact on your bottom line when margins are thinner than ever. Restaurant management technology has the power to take manual tasks off of operator’s plates and give them a better way to visualize the financial health of their business, allowing you to work on the business rather than in it. While an additional monthly spend might seem like the last thing you need- its benefits can pay off big time both for your wallet and your sanity.
To learn how MarginEdge can help you say goodbye to the paperwork, reduce costs and streamline your restaurant’s operations, contact us to get a free demo.