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F&B Budgeting

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What you may not have known about budgeting in food and beverage

Published in: Education, Business, Technology

F&B Budgeting

  1. 1. By: Murage Macharia
  2. 2. Objectives At the end of the topic students are expected to be able to: 1.define given terms 2.explain the functions of budget 3.prepare a given budget 4.discuss budgetary control. Murage Macharia
  3. 3. Introduction A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms. Murage Macharia
  4. 4. Budgetary Process This is the process of converting plans into budget. Budget can be expressed in terms of i) Cash budget Sales budget Labour cost budget Budgeted profit and loss account.  Murage Macharia
  5. 5. Cont…. Other than money for example personnel budget may project the number of separation over a period of time and show number of employees to be engaged for various departments. ii) iii) Budget percentage of room occupancy. Budgeted number of cover. Murage Macharia
  6. 6. Budgeting Control This is a means whereby responsibility for budgeted results is assigned to the managers concerned. It is the personal responsibility of a manager in relation to the establishment or department or certain that he controls the responsibility is expressed in terms of The target group. The profit margin. The cost of operations The profit target The comparison of budgeted and the actual results. Murage Macharia
  7. 7. Objectives of Budgeting Planning Planning must be properly co-ordinate and comprehensive for the whole business. Control Manager must be given a guide to help him to produce a certain desire result and the actual achieved results can be compared against the expected. Murage Macharia
  8. 8. Objectives of budgetary control To give practical expression to the aim and policies of the business e.g. assessment of the sales performance of the business and this will depend on: a) Past performance b) Current trends c) Any limiting factor. Murage Macharia
  9. 9. Cont…. NB// any analysis of past sales should distinguish between food sales, accommodation sales etc. However there could be negative effects on sales caused by: a. b. c. d. Condition of local industries State of employment Political situation Government policy Murage Macharia
  10. 10. Kinds of Budgets Capital Budget It deals with assets and capital funds of a business. Operating Budget Deals with the income and expenditure of a business. Master Budget It in co-operates all the income and expenditure plus the assets and liabilities of a business Murage Macharia
  11. 11. Cont…. Departmental Budget It is done in respect to the single department of business e.g. special functions like banqueting, wedding receptions, the sales and purchases have to be budgeted for. Fixed Budget This is a budget which is independent on the level of turnover e.g. advertising office administration, maintenance budget; this is because short-run changes in the volume of turnover have no effect on the budget concerned. Murage Macharia
  12. 12. Cont… Flexible Budget Budget which provides for several level of turn over and pre-determines cost or cash flow accordingly, for example changes in the rate of room occupancy may affect labour cost in a small hotel. Murage Macharia
  13. 13. Examples of Limiting factors in a business Establishment Size and capacity of the establishment. Special functions capacity – limited availability of facilities. Sitting capacity – seats available are limited. Consumer demand – depend on the area, the population, the average income competitors transport facilities and weather conditions. Murage Macharia
  14. 14. Cont…. Quality of management and staff will enhance the reputation of the establishment and thus increase the sales potential. Unskilled staff is disastrous, good quality food comes from skilled staff and the efficiency of the waiting staff will be reflected in the service offered. Insufficient capital – lack of enough funds to expand. Murage Macharia
  15. 15. Cont…. Management policy – if the management have laid a set policy that will only cater for a certain type of customer and will accept certain type of business such as football or rugby netball and pool games Murage Macharia
  16. 16. Sales Budget The purpose of the sales budget is to pre-determine the volume of sales in respect to a trading period; this enables an assessment of the sales performance in a business at the end of that period. Murage Macharia
  17. 17. Importance of Sales Budget It has an influence on the volume of sales on profit. It influences the preparation of other budgets. Budgeted volume of sales will influence. Budget food & beverage cost Labour cost Overhead cost Murage Macharia
  18. 18. Cont…. Budgeted volume of sales will depend on Past performance Current trends Any limiting factor which may be in operation with this budget. Murage Macharia
  19. 19. Development of Sales Budget Factors to be considered: For each revenue produced department special Circumstances affecting each department. Complete analysis of the previous years, actual sales figure for each department. Analyses of the sales mix percentages. A careful study of propable future trends and purchases. Murage Macharia
  20. 20. Cont…. Any significance change in the sales milk must be analyzed to see what effect will have on the purchase budget. Any changed in the use of food stuffs e.g. pre-packed commodities or convenience foods must be noted and studied for effect on the cost of purchases. Any change in supplies. Murage Macharia
  21. 21. Budgeted Profit and Loss Account This is to pre-determine in the respect to a particular trading period all the income and expenditure of a business as well as the net profit to be carried. E.g. departmental gross profit, labour cost percentage, overheads percentage and net profit percentage. Murage Macharia
  22. 22. Labour Cost Budget Labour cost budget are budgeted for in relation to the budgeted volume of sales, the higher the volume of sales the higher the total cost of labour. NB// A given increase in the volume of sales must not necessarily result in a proportionate increase in labour cost. When sales arising many components of the total cost of labour remain fixed e.g. management and supervisory salary. Labour costs are fixed and others tend to vary in the same direction as the volume of sales. Murage Macharia
  23. 23. Factors considered in Preparation of labour cost budgeting The number and grade of each staff in each department. The budgeted rate of paying for each grade of staff. Casual and part time labourers. Cost of national health insurance. All accommodation, holidays with pay, bonuses and commission. Murage Macharia

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