Management Report

Date: 2/10/2020

Report Written for: Manager, Head Chef, Owner, Financial Advisor

Introduction:
A successful business relies on effective planning; the purpose of this budget is to make an estimate of business costs
for the month of October and track the progress and financial performance of the business. Profit margins in
hospitality are often margins are very slim and so managers need to manage their costs very tightly. If one cost
blows out there will be no profit and the business is not likely to survive.

Consequently, budget control and the monitoring of the budget on a regular basis is vital to ensure unnecessary
costs are found quickly and minimised for the business to ensure its’ survival.

By the end of September, the target costs for food and beverage were 35% and 28% respectively.

Body:
The following is a breakdown how Donovan’s performed against the budget for each month.

July has been provided as an example.

July
Budget $ Actual $ Variance $ Actual cost of Sales%

Beverage Sales $12,000 $11,500 -$500

37%
Beverage costs $4,200 $4,300 +$100

Food sales $19,000 $18,000 -$1,000

43%
Food costs $8,000 $7,800 -$200

Gross Profit $18, 449 $17,400 -$1,049

August
Budget $ Actual $ Variance $ Actual cost of Sales%

Beverage Sales $15,000 $14,500 -$500 32%

Beverage costs $4,531 $4,700 +$169

Food sales $22,000 $20,500 -$1500 40%

Food costs $8,500 $8,300 -$200

Gross Profit $23,994 $22,000 -$1994

Prepared by: Anna Bearsley

Management Report

September
Budget $ Actual $ Variance $ Actual cost of Sales%

Beverage Sales $17,000 $15,800 -$1,200 31%

Beverage costs $4,700 $4,900 +$200

Food sales $25,000 $23,000 -$2,000 38%

Food costs $8,700 $8,800 +$100

Gross Profit $28,176 $25,100 -$3076

Overall
Use the figures from September

Target Cost % Actual cost % at the end of % Variance

the quarter/September

Beverage costs 28% 31% 3%

Food costs 35% 38% 3%

Recommendations
For the next quarter, I recommend having new discussions with current suppliers to potentially renegotiate lower
prices or deals for current purchases. It is worth mentioning to these suppliers that targets for the business are not
being met and if new deals cannot be made, different suppliers will be sought out.

I would also recommend the implementation of loyalty programs to bring in a more reliable customer base.
Furthermore, I would recommend training current and new staff with upselling techniques and improved customer
service techniques to help boost sales.

Conclusion
Though the set targets were not met (of 28% target cost for beverage and 35% for food), the business has come very
close to achieving what was originally asked, with only 3% variation between the goals and the actual % cost.

For the next quarter, I would recommend using a Zero-based approach to budgeting to ensure maximum cost
reduction, as well as negotiating with suppliers for cheaper costs.

Prepared by: Anna Bearsley