Maximizing Margins: How Aggregating Cost of Goods Data Can Help You Improve Your Bottom Line

Maximizing Margins: How Aggregating Cost of Goods Data Can Help You Improve Your Bottom Line

Written by
Melvin Wang
Date published
December 16, 2022

Maximizing Margins: How Aggregating Cost of Goods Data Can Help You Improve Your Bottom Line

Aggregating sales transaction data from different sales channels and food procurement data can help F&B businesses monitor their operations closely and identify patterns and trends that can inform decisions.

Food procurement data can help businesses understand their food costs and identify opportunities to reduce waste and improve efficiency. By analyzing this data, businesses can identify which ingredients are the most expensive and which are being wasted the most. This can help them make adjustments to their menu and purchasing processes to reduce costs and improve profitability.

What CoGs Metrics do we track?

When you have cost of goods sold (CoGs) data and sales data, you can calculate a variety of metrics that can help answer important questions about your business. Some examples of metrics that can be calculated include:

  • Gross margin: This is the difference between revenue and cost of goods sold, expressed as a percentage of revenue. It can help answer questions about profitability, such as how much profit is being made on each product.
  • Gross margin return on investment (GMROI): This is the ratio of gross margin to the cost of the goods sold, which can be used to determine the efficiency of a company's inventory management.
  • Food cost percentage: This is the ratio of food cost to sales, which can help answer questions about food cost efficiency, such as how much of each sale is going towards food cost.

By calculating these metrics, business owners can gain insights into the performance of their business and make data-driven decisions. For example, if gross margin is low, the business may want to consider raising prices or finding ways to reduce costs. If food cost percentage is high, the business may want to consider adjusting portion sizes, changing suppliers or finding ways to reduce waste.

It is important for F&B businesses to monitor metrics such as gross margin, GMROI, food cost percentage, and sales by product because they provide insights into the performance of the business and can inform decisions that can improve operations and increase profitability.

For example, monitoring gross margin can help a business understand how much profit is being made on each product. If gross margin is low, the business may want to consider raising prices or finding ways to reduce costs. If GMROI is low, it may indicate that the business is not managing inventory effectively. This can help the business make adjustments to reduce waste and increase efficiency.

Monitoring food cost percentage can also help a business understand how much of each sale is going towards food costs. A high food cost percentage may indicate that the business is paying too much for ingredients or that portion sizes are too large. This can help the business make adjustments to reduce costs and increase profitability.

Overall, monitoring these metrics can help F&B businesses stay in business profitably, reduce costs and avoid adverse business outcomes by identifying patterns and trends that can inform decisions to optimise their inventory, pricing and staffing.

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