Basic Financials

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  Interviews: Financial Advice

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  What financial information should you have knowledge of?

  • Food costing
  • Operational costs

  What skills are key to good financial management?

  • Cost control
  • Wastage
  • Understanding profit

  What sort of records do you need to keep?

  • Receipts and invoices
  • Wage documents
  • Incomings and outgoings - recorded in spreadsheet or MYOB

  You must have a good filing system.

  What advice would you give to someone opening a hospitality business?

  You must have a business plan:

  • what the business looks like
  • cash flow
  • costs - set up, advertising, employment, stock
  • projected incomes
  • pay bills, pay borrowed money
  • availability of money to use
  • show that you have the experience to run the business

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  Key Terms

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  food and beverage cost	cost of purchasing ingredients to make dishes and drinks
  rack cost	base cost of an accommodation room
  cost of goods	base cost of anything that is not food or beverage, eg a souvenir
  overheads (general expenses)	all the outgoing expenses linked to a business, such as rent, power, materials, equipment, maintenance and repairs
  labour cost	monies paid in wages for work done by employees
  balance sheet	a financial overview of the business that summarises what they own and what they owe at a particular moment in time
  profit and loss statement	a statement that shows the profit (money that has been made) and/or loss for a given time period
  gross profit	gross profit = income minus food and beverage costs
  net profit	net profit = income minus food and beverage costs and overheads
  GST (goods & services tax)	a tax charged on all goods and services within a business and then paid to the taxation office
  income (sales or revenue)	money that is generated by a business, eg by selling food and beverages, or for providing accommodation
  fees and charges	additional costs attached to a booking or for providing a service or product

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  Financial Statements

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  Financial statements are like the report card of a business.

  Being able to understand financial statements will tell you:

  • how much money there is
  • how much money is owed
  • income
  • expenses

  A financial statement is made up of four main areas:

  • income
  • gross profit
  • overheads
  • net profit

  Gross Profit = total income (or sales) minus Food/Beverage costs

  • helps you know how much money you have spent on food
  • this should not be more than 30%

  Net Profit = gross Profit minus total overheads

  • this gives an understanding of how much money you have made

• Say It

  There are 2 parts in this section.

  1. The Glossary

  The glossary lists the more difficult words related to the topic in alphabetical order. The glossary also gives the meaning for each word.

  2. Look, Cover, Write, Check!

  This activity gives you practice at remembering and writing the words from the glossary.

• The Glossary

• Do It: Basic Financials

  Jump to Activities

• Do It: Basic Cost Terms and Concepts

  food and beverage cost	cost of purchasing ingredients to make dishes and drinks
  labour cost	monies paid in wages for work done by employees
  balance sheet	a financial overview of the business that summarises what they own and what they owe at a particular moment in time
  profit and loss statement	a statement that shows the profit (money that has been made) and/or loss for a given time period
  gross profit	gross profit = income minus food and beverage costs
  net profit	net profit = income minus food and beverage costs and overheads
  GST (goods & services tax)	a tax charged on all goods and services within a business and then paid to the taxation office
  income (sales or revenue)	money that is generated by a business, eg by selling food and beverages, or for providing accommodation

  Within the hospitality industry, there are a range of terms you will need to be familiar with when measuring costs. We will focus on a few of the basic ones in this activity.

  Let's have a look at the terminology table which highlights these important terms and their definitions. Read the information carefully.

• Do It: Finding out the Cost

  Below is a Standard Recipe Card with the ingredients listed for an Orange Tequila Margarita cocktail.

  

  Double-click on the image to view a larger version.

• Do It: Financial Statements: Net Profit and Gross Profit

  

  Financial statements are like the report card of a business. In order to keep track of the finances in any business, you need to understand how to read them.

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