Cost of Goods Sold – Learn the Ropes of Calculating Your COGS

Do you know your Cost of Goods Sold?

You’ve tried everything when it comes to lowering your food costs but the daily mayhem in your restaurant keeps you so busy that your numbers are falling by the wayside. You’re starting to see more red numbers, and it’s not just because you’re running a pasta special. It sounds all too familiar.

You may know that the key to lowering food costs is knowing your restaurant Cost of Goods Sold. Or maybe you’re reading up on it for the first time.

Either way, if it’s not done right, your COGS won’t help you.

At Orderly, we’re COGS experts. We’ve taken all of our knowledge and compiled it all together— from things we’ve learned working in restaurants ourselves, to data from thousands of customers. Thus, creating a system that puts time and money back in your pocket!

What are COGS anyways?

Cost of Goods Sold are the total cost you can attribute to the production of goods sold over a period of time.

For a restaurant, it’s the total cost it took you to create all the food you sold over a period of time. COGS is also the metric that stands between your pleased regulars returning week after a week and a “closed” sign on your front door.

COGS looks at everything that came into your restaurant over a period of time and your total sales. It also accounts for the ingredients you have on the shelf before and after a given period and measures the overall health of your restaurant.

Why should I calculate my COGS?

If you start calculating and following your restaurants’ COGS, it’ll make a world of difference.

You’ll be able to determine when ingredient prices rise and even negotiate better prices. Your staff will stop over-ordering and you’ll know exactly how much you’re spending each week.

You’ll also know where sales were good and where they lagged, allowing you to adjust your purchases accordingly and control your inventory.

How to calculate COGS?

Calculating your COGS can be a tricky process.

Luckily, Orderly automates this arduous process for its customers. But if you still have an itch to find out how to calculate your COGS, we’ll break it down for you:

(Beginning Inventory + Purchased Inventory) – Ending Inventory = COGS

Your beginning inventory is the amount of product you start with at the beginning of a period (let’s use Monday for this example). This is whatever is left over from last week.

To get this number, your team has spent hours walking around the restaurant counting EVERYTHING—from strawberries in the cooler to sugar in dry storage.

Let’s say you have $3,000 worth of product leftover from the previous week—this is what your beginning inventory would be.

Next, you’ll need to figure out your purchases over that same time period. EVERY SINGLE purchase. Don’t forget to update prices on your inventory count sheet with the latest price you paid for every ingredient!

Finally, we’ve got your ending inventory which entails the amount of inventory leftover at the end of that period. Back in the cooler to count again! Fun, right?

Now let’s calculate:

Beginning Inventory + Purchases – Ending Inventory = COGS

Sound like a lot of work so far? That’s because it is!

Now let’s show you the Orderly way:

1: Snap a photo of each invoice into Orderly as an order comes in

2: Enter your sales on a daily/weekly basis

3: BOOM. Instant COGS!

Orderly was created to give your restaurant accurate COGS without any of the unnecessary hassle we walked through above.

No more counting inventory. No more math problems to dive into.

All you have to do is snap photos of your invoices and update your sales once a week in the Orderly App.

Too good to be true? Well, it’s not!

Our customers have found Orderly’s COGS to be more accurate and consistent than doing it themselves. When taking inventory by hand, your team may guestimate, miss things or just do a sloppy job. I mean, it’s not their fault, who really enjoys taking inventory anyway?

It’s the digital age. Embrace technology that empowers your staff, saves you time and helps you run a more profitable restaurant when you let Orderly take over.

OrderlyCost of Goods Sold – Learn the Ropes of Calculating Your COGS
Read more

Recipe Costing Technology Made by Chefs, for Chefs

An easy way to ensure you are profitable is to align the cost of your recipes with your selling price.

At the end of the day running a restaurant is a numbers game. Plain and simple, but let’s be honest, not everyone is a numbers person.

I remember costing out recipes and menus in my old kitchen.

I would spend hours in the kitchen like a mad scientist in his lab, diving into math problems, the likes of which I haven’t seen since high school. I was converting ounces to quarts or asking myself “How many grams in a fluid cup?”

I was portioning, cutting, measuring and weighing the breakdown of every ingredient in my recipes, down to the grain of rice. “I would have the most comprehensive recipes ever!” I thought.

After HOURS of work, I was finally able to sit back in the glory of my achievement and look at my finalized menu.

That’s when I began to realize that the margins on some of my recipes weren’t where they once had been. With the rising prices of ingredients, some of my most popular menu items were LOSING me money. To top it all off, my distributors were sending substitutions for products I had never purchased before.

This meant that if one ingredient changed or there was a price increase, I would have to go back into my spreadsheets and constantly update product changes and prices. What a headache.

Now some restaurants are blessed to have full time staff members to manage the numbers.

But not me.

Aside from being a chef, I unwillingly also signed up to be the in-house plumber, fridge repairman, and personal therapist for the wait staff. On top of that I was also expected to be the numbers person.

The number of hats I was wearing aside from running the kitchen was growing, and all the moving parts involved in costing out my menu were completely out of my control. So unfortunately, like many chefs, recipe costing got put on the back burner.

The Problem

The problem with recipe costing is that there are so many variables constantly changing.

Ingredient prices are skyrocketing, vendors are substituting ingredients you typically buy due to product shortages, and on a busy Friday night you run out to the local store to pick up supplies.

The price you paid for ground beef pre-pandemic is nowhere close to what you are paying today, meaning your margins have shrunk immensely on your burger.

Unless you are inspecting every invoice that comes through your door with a magnifying glass and noting ingredient price trends, you have no idea what menu items are costing you today.

This is bad. Every day that you are unaware of your profit margins is a day that you could potentially be bleeding money!

The Solution

Hopefully by now you get the gist of this post. Recipe Costing is SO important but also extremely difficult to maintain.

Orderly was developed for chefs, by chefs, to be the easiest and most reliable food costing tool on the market. The less time you spend in our software the more time you have to do what you truly love!

Simply build your recipes in Orderly once.  One time.

That’s it.

With every invoice that comes into the system, Orderly will automatically update the ingredient price showing you the true cost of the recipe today and the current margins based off your selling price!

This allows you to make many updates and revisions as a problem arises.

Buying a new ingredient or your vendor sent a substitution? No problem!

Orderly groups together substitute ingredients with the products you typically buy.

This means that regardless of whether you bought Hormel Apple Wood Smoked Bacon last week or Oscar Myer Apple Wood Smoked Bacon this week, Orderly will group these like items together and use them interchangeably in your recipes depending on which item you bought most recently, giving you the most up today price for every menu item you build in Orderly!

Recipe costing is something that NEEDS to be done to ensure you are running a profitable business.

FINALLY, a recipe costing solution resilient to substitutions and supplier changes. 

Say goodbye to daily recipe maintenance!

Ready to put your recipe costing on autopilot and receive up-to-date food cost insights?

Reach out today and our team will be happy to discuss how Orderly can help!

OrderlyRecipe Costing Technology Made by Chefs, for Chefs
Read more

The Technology Solution to Your Inventory Troubles

 Orderly experts recently sat down with Steve Moody, our Digital Product Marketing Manager, to discuss his experience with inventory during his career as a Chef.

Find out how he tackled the tedious task and the game changing solution he found that made the process quick and easy.

Taking inventory was like nails on a chalk board. While chewing on a broken bottle. In a burning building.

But worse.

Inventory management for a restaurant can be a cross between gibberish and long division. In fact, it’s such a pain that the task can often fall to the bottom of the to-do list, where it sits unchecked for the week. Then weeks turn into months.

I don’t need to explain why taking inventory is important. You know it’s important.

I remember my old restaurant days. Sunday night was our designated inventory day. The kitchen team would break up the inventory list so we could get through it quicker. I’d take the walk-in; Jenny took dry goods; Ben took the alcohol closet; we all rushed to count what was on the shelves and filled in our spreadsheets.

Needless to say, the problem with our inventory process was immediately clear.

Nothing ever lined up correctly.

Big ticket items were always being counted lower than expected and out of nowhere someone would stumble upon three 50lb bags of AP flour.

Our kitchen was a disorganized mess. Items were spread out EVERYWHERE, making counting them extremely difficult.

Lemons? They could be found in the bar area, walk-in fridge, even dry storage.

See that case of avocados over there?  I would count it as half a case. Jenny would count it as half a case half the time and two-thirds the rest of the times and Ben walked right by it just trying to get out of the restaurant before midnight. Counting discrepancies were unavoidable.

At the end of the day, we were spending so much time taking inventory and the information we received was still wrong.

By the time we got our Cost of Goods Sold and inventory for May it was the second week of June. We were always reacting on old information instead of course-correcting immediately.

There had to be a better way.

Enter Orderly.

The solution to this inventory problem is to implement a system that transcends the variability of your staff, doesn’t require hours of work on your end and gives you up to date reporting so that you can make decisions today before you have a problem tomorrow.

Orderly simulates an inventory and backs into your weekly Cost of Goods Sold without you having to count a single product! No more relying on Ben and Jenny to take inventory!

By simply snapping photos of invoices and entering POS sales data, you will receive weekly Cost of Goods Sold, highlighting where potential problems may be costing you!

Prefer to take a physical inventory? Orderly has you covered!

Easily set up your inventory by using Orderly’s categories OR build custom “shelf to sheet” inventory lists. Milk lives in the walk-in, flour in Dry Storage, you get the idea.

As you count, on hand dollar amounts will be automatically calculated and beginning and ending inventories will show you exactly what you went through over a given period.

Orderly will continue working for you, whether your team has hours to spend counting inventory this week or they need to rely on our auto-COGS next week.

Rising prices of ingredients, over ordering and product waste can all lead to a high food cost.

Knowing that you have a high food cost is one thing. Identifying why your food cost is high is like finding a needle in a haystack. Orderly is going to help you shrink that haystack, so you can easily find the needle and the culprit for your rising food costs.

Would you rather spend 5 hours a week counting inventory or 5 minutes a day in Orderly?

Schedule a live walkthrough of Orderly’s food cost management solution!

OrderlyThe Technology Solution to Your Inventory Troubles
Read more