We live in the Information Age when “knowledge is power.” And quicker access to knowledge is your business’s strength. When I was the COO for a franchisor of 30 restaurant sports bars in Arizona, the person I considered my partner in the business was a guy named Gary. Other than his business savvy, one reason I enjoyed Gary so much was he told great stories of the “good ol’ days.” For example, in the good ol’ days of the 70’s, Gary was operating his own chain of restaurants in the Salt Lake City, Utah, area. To calculate his daily receipts, food costs, etc., he would go into his back office and pull out a large book filled with accounting green bar paper, a pencil, an eraser and an old fashioned calculator. Then he would start working on his numbers by hand.

To many of us, that almost sounds like Fred Flintstone writing with a stone tablet, hammer and chisel. Well, today Gary has several restaurants on his own again and even he can’t say enough about how technology has changed doing business — for the better. Now he has a powerful point of sale system (POS) that is tied into QuickBooks. And when it comes to entering his daily receipts… it happens automatically everyday!

When it comes to POS systems, a common problem among independent restaurant owners, whether a full-service Italian/pizza restaurant and bar or a delivery-only pizzeria, is that they buy a POS system and then don’t use any of the timesaving and valuable back office reporting. Instead, they use it like an expensive cash register.

Profitable Reporting
POS systems can do a lot more than ring up orders. The following are examples found in most POS systems (please note: some of these features are add-on modules, depending on the vendor):

Finding your ideal food cost – When you enter all of your menu items into your POS, you enter the item descriptor, modifiers and price. There is also usually a box where you can input the item cost. When you do this, it gives you the ability to run an item-by-item sales mix report for any given period.

For example, if you run the report from the first of the month to the last day of the month, the report will display the number of each item sold, how much money it brought in, how much you used in product (total cost), and at the bottom, it will show you what your ideal food cost is.

This can be a powerful number to compare against your actual food cost and know if you have any problems in your kitchen so you can search out the problem and fix it, resulting in a lot more money for what you’re already selling.

Controlling costs – Many POS systems can track your inventory. They allow you to input every line item on your invoices. You can also build each recipe for every menu item you sell into the POS. For example, an order of hot wings has six chicken wings, three carrot and three celery spears and four ounces of blue cheese dressing.

Every time an order of wings is sold, the POS depletes the appropriate portions of wings, carrots, celery and blue cheese from your inventory.

Now you can compare what the POS says you should have on the shelves against what you actually have. If they are different you can identify theft, the need for training or attack portion controls. You can even look at this report to help you set pars for ordering properly.

Each one of these benefits sets you up to control and reduce your food cost.

Controlling labor – Labor costs are your restaurant’s number one expense. If you don’t pay attention to this one, you’ll lose money by the minute… literally!

Using the time clock feature of your POS lets you track labor costs by the hour, guiding how you ultimately cut staff. It allows you to keep employees from punching in too early or riding the clock at the end of a shift.

Avoid trouble with the IRS – It’s no secret that the IRS is gunning for businesses that tip employees. When businesses don’t report those tips, it’s tax revenue they’re not getting. And restaurants top their target list! Every year, with few exceptions, you are supposed to file your 8027 Tip Report with the IRS. This report basically tells the IRS what percentage of sales your restaurant claimed as tips, as well as compares the cash tip vs. credit card tip percentages.

When there is a discrepancy, you’re going to get audited! You’re required by law to have a system in place for your directly and indirectly tipped employees to report their tips to you. You in turn are responsible to make sure they are reported as wages earned, ultimately making sure the government gets its share of tax revenue.

Most POS systems have a tip reporting system built into the software. All you need to do is have your employees enter their tips collected when they punch out. Then a manager can look for any discrepancy and make any adjustments needed. Finally, the manager can print off the tip sheet and have each employee sign their name verifying their tips reported.

This can help you avoid being audited — or worse — being fined. For more info in Tip Reporting, see article by Mike Roberts at http://www.pmq.com/mag/2002fall/mike_roberts.shtml.

Theft – Stop the Bleeding
I recently polled a large group of restaurant owners, asking them “What keeps you up at night.” Employee theft made the top five concerns. In all of my years in the restaurant business, I have always believed there is nothing you can put in place or do as an owner or manager that will stop a dishonest person from stealing from you. But with active management on the floor and systems in place to prevent theft, you’ll keep honest people honest. Because if they think they will get caught, they’ll stay on the path of the straight and narrow. A centerpiece to this strategy is to utilize the power of your POS systems reporting features. Here are just two examples:

No-sale reporting – Most POS systems allow you to program in a “No Sale” key. This key allows a bartender or cashier to open their cash drawer without closing out a check. While I always discourage using this key in the first place, it gives them the ability to give change to a server or a customer.

This key can be easily abused if management is not paying attention. For instance, a bartender can ring up a drink order, leave it on the screen, collect money from a customer, and then instead of hitting the “Cash” key, hit the ”No Sale” key. Everything looks normal; you saw your bartender ring up an order, serve it, collect money and close out the order.

But what really happened was the bartender hit the “No Sale” key, voided the order and opened the cash drawer as if it were cashed out. Now the bartender takes a paper clip, penny, rubber bond or a toothpick and assigns it a dollar value, using it as a marker. Let’s say the price of the drink was $3, and for every paper clip he or she leaves around the bar, at the end of the night when they pull their charge tips from the drawer, they total the number of paper clips laying around and multiply that by $3 and take that out of the drawer, too.

You can catch this at the end of every shift or the end of the day by simply running the no-sale report. It will show every time the bartender or cashier hit the “No Sale” key. And if you see a voided order seconds before the “No Sale” key was hit… you probably have theft.

If they say they did it to check a price, inform them they have been removed from the bar until they go through training again because they need to know their prices to work behind the bar. Nine out of 10 times, it’s theft.

Transfer reporting – Many restaurants have a bar that is more like a waiting area for customers’ who are waiting for a table. Because of this, you may have turned on the feature that allows employees to transfer tickets. This is a function that ultimately makes the customers’ experience more enjoyable. However, this same feature often allows employees to transfer individual items, too (usually to separate a large party into separate checks). And this can be abused very easily.

This is often referred to as the floating soda. A table sits, orders and the server drops the check. If the customer pays with cash, the server will transfer one soda to a new table that just sat down to order (assuming they will order a soda). Then the server closes out the first table’s ticket and pockets an extra $2.

The server will continue transferring this single soda throughout the shift and end up making an extra $20, $30 or $40 a shift; money that should have made your safe that day.
Want to catch this? Simply run the transfer report on your POS, and it will show you every transfer transaction, including the server name, time, ticket number, items transferred and price.

The Big Benefit
Whether you have a POS system in place, or not, the following will really drive home how important they can be for your business.The franchise system I was a part of had 30 units in Arizona. The average franchisee was in business for about 10 years or more. With that said, a handful of the restaurants still operated their businesses with a cash register.
As the price of POS systems came down, they finally upgraded to a POS. Each restaurant saw an increase in sales anywhere from $5,000 to $10,000 a month, from the first month the system was installed.

A POS system is in place to make sure you are collecting every dollar you earned. Don’t under-utilize the powerful reporting and profit generating benefits of your system. Open your manual or call your dealer and find out what reports your system has that can make your life easier, and ultimately, make you more money.