Purchasing Cylce and Controlling Costs Flashcards
What are the 6 stages of the purchasing cycle?
- Purchase order
- Delivery note
- Returns note
- Credit note
- Invoice
- Monthly statement
Define purchasing order.
Whether orders are to be placed over the phone or online, a list of the goods required and the quantity is needed before the order can be placed. Sometimes this includes prices. A copy should be kept by the person in charge of finance, so they can check the order, and another kept by the department ordering the goods, for their records.
Define delivery note.
When a supplier delivers, they will leave a note, which itemises the goods being delivered and the quantities. The receiving business then needs to check the list against what has been delivered to ensure the right things have been delivered in the correct quantities. It does not show prices!
Define returns note.
Details any items the business has rejected and wants to return to the supplier. Both the business and the supplier need to keep track of what has been purchased and returned so that a credit can be made to the account.
Define credit note.
If goods are returned, the supplier may issue a credit note. This document explains that the business will not be charged for these goods and if money has been taken, that amount will be credited back to the account.
Define invoice.
Itemises what has been delivered and lists how much the business owes the supplier and often gives a date by which the goods need to be paid for.
Define monthly statement.
Sent monthly by a supplier, this document lists all the transactions that have taken place over a month. It clearly shows the business and the supplier what has been paid for already and what monies are still owed.
What is a revenue?
The income (money) made by a business from selling its products and providing its services.
What is a profit?
Money that is left over after all costs are paid. It belongs to the business owner.
What are the 2 types of profit?
- Gross profit
- Net profit
What is a gross profit?
It is calculated as revenue minus all costs related to those sales (e.g. ingredients)
What is a net profit?
The amount of money left after all of a business’s expenses (e.g. taxes) have been paid out of the revenue.
What is the gross profit margin?
It represents what is left of the income from the sales after all costs have been paid. This is expressed as a percentage.
How can a business reduce costs?
- Do not order things you don’t need and do not over-order perishable goods.
- Check use-by-dates on delivery of perishable goods.
- Keep food stored correctly so it does not go off.
- Rotate food in fridges (stock rotation) so the oldest is used up first.
- Prevent pilferage (petty theft by staff members, either of money of products).
- Do not over-staff. Only use the number of staff you really need.
- Minimise breakages and breakdowns. Have equipment serviced regularly.
- Control the size of portions of food and drink being served (portion control).
- Buy in bulk from a wholesaler, or negotiate cheap prices with a nominated supplier.
- Reduce energy use and recycle (e.g. not washing towels every day).
- Appraise staff annually to ensure everyone is being as productive as possible.
- Pay invoices early. Companies may give a small discount for early settlement.
- Adhere to all legislation to avoid possible prosecution and subsequent fines
How can pilferage (theft) be reduced?
- Hire trustworthy staff and train effective supervisors to keep an eye on things.
- Install CCTV security cameras.
- Create a positive work environment and treat employees fairly.
- Control which staff have access to cash, alcohol or other desirable goods.
- Adopt a ‘whistleblowing’ policy so staff can report employs in secret.
- Deal with any cases of theft firmly, so it sends a message out to others.
- Carry out random searches of employees’ bags.
- Restricting access for customers (customers should never be back of house)
