2 Chapter 2- Manual Calculations and the Technology That Automates Those Calculation
Spreadsheets vs. Technology
Chances are you will use some level of technology to make the same calculations we will be making manually in this course, so why is understanding manual calculations important?
Technology plays a massive role in modern food & beverage management. Software and AI (Artificial Intelligence) can automate many calculations, making processes faster and reducing errors. However, understanding manual calculations is still crucial for F&B students:
Conceptual Understanding: Manual calculations provide a foundational understanding of the financial concepts behind the software. They explain why financial calculations are done a certain way, not just how the software outputs the answer, empowering students to interpret the data effectively and make informed decisions.
Software Reliance Issues: Technology can be fantastic, but it could be better. Software malfunctions and data entry errors happen, and external factors can disrupt systems. Understanding manual calculations allows them to troubleshoot issues, identify discrepancies, and ensure the software works correctly.
Adaptability: Not all operations use sophisticated software. Smaller businesses, pop-up restaurants, or catering events might rely on manual calculations. This skill set makes them more versatile and employable across different F&B environments.
Menu Engineering & Pricing: While software can aid menu costing and pricing, the underlying principles involve manual calculations. Understanding these formulas allows students to analyze data, adjust recipes, and make strategic pricing decisions for better profitability.
Manual calculations are the building blocks for using technology effectively. They provide a critical framework for understanding financial management in the F&B industry. While software automates the process, the human element of analysis, interpretation, and informed decision-making will always be essential.
Why do we use spreadsheets for the calculations in this course? Spreadsheets are ideal for calculating recipe costs, including ingredient pricing, portion sizes, and yield, helping to determine menu item profitability and identify areas for cost optimization, including:
Menu Pricing:
To determine optimal menu pricing strategies, they can factor in food costs, labor costs, overhead, and desired profit margin.
Inventory Management: Spreadsheets help track inventory levels, project future needs based on sales data, and identify potential spoilage or waste, ensuring restaurants have enough supplies without overstocking.
Sales Analysis: By capturing sales data, spreadsheets can reveal sales trends for specific menu items, days of the week, or customer demographics, allowing food and beverage operators to make data-driven decisions about promotions, staffing levels, and menu adjustments.
Cash Flow Management: Spreadsheets can forecast future cash inflows and outflows, identify potential shortfalls, and plan for seasonal fluctuations in the industry.
Budgeting and Forecasting: Businesses can create financial models using spreadsheets to project revenue, expenses, and profitability over a specific period.
While some limitations exist, such as the potential for errors with manual data entry, spreadsheets remain a cornerstone of financial management in the food & beverage industry. The next chapter will reinforce the PBR Triangle to simplify more complex calculations.
