Actual Gross Profit
This is the profit made in the business in this period from the buying and selling of wet products
Gross Profit %
This is the Gross Profit (cash) expressed as a percentage of the sales
Gross Profit and Gross Margin
One of the critical pieces of information on every stock result is the gross profit/gross margin achieved as this indicates the profitability of the pub.
There are several factors that affect margins and these are:
Cost Prices, the lower the cost of goods, the higher the margin and conversely the higher the sale price, the higher the margin.
Top Tip for Cask Conditioned (Real Ales) – whilst you might get all the pints from a keg product dispensed (less cleaning, tasters and normal slops) real ales will produce less pints per container. When I price up a 9 gallon of real ale I always do it on the basis of 66 pints sold (not the full 72) and price them accordingly as you can expect to lose 6 pints per cask in cleaning, pulling off, tasters etc.
Product Mix – The higher the proportion of products and product groups with a high profit margin that are sold, the higher the GP and vice versa. For example, the more minerals that are sold (which are usually a higher Gross Margin product than draught beer) the higher the Gross Margin %.
Allowances – All businesses have allowances to provide an accurate stock result but the higher the level of allowances the lower the Gross Profit. This is because you will achieve less income with the same cost of goods sold.
The Result – This has a great impact on the GP and if there is a surplus this will increase the GP because we have more income with the same cost of goods sold. If there is a deficit this will reduce the GP because there is less income.
Analysing The Result
When analysing the result you would normally look at:
- The cause of any surplus or deficit:
If the stock consumptions remain fairly constant but the average daily income falls, then the conclusion would be that someone has stolen cash and that it is a cash problem. One thing you may consider is that with items such as spirits, especially in the larger bottles, staff occasionally have accidents and break full bottles. We are all human and all make mistakes, staff may be anxious or even frightened to report such breakages. The best way to deal with this is to make it clear to staff that breakages, whilst undesirable, do occur and that they should report them without fear of retribution.
Top Tip is, once the mess has been cleared up, that they bring you the neck of the bottle showing the unbroken seal to prove the breakage.
If the average daily takings are fairly consistent over the last four stock takes, then the deficit is likely to have been caused by an increase in the consumption of products without a corresponding increase in income. This is a problem with stock and will be identified by an increase in the daily consumption of a product in the line by line information.
You need to have a continual awareness of stock and cash security and you need to regularly review handling procedures and staff working practices. Be on the look out for and deal promptly with any concerns you may have when till shortages arise.
- The yield % will either remain stable over the longer term or show a sudden drop and whilst no pub will ever achieve full yield your aim must be to get as near to this as possible. This can be achieved by reducing allowances, wastage and ullage levels.
- Stockholding levels as identified as Days Held e.g. draught beer should not exceed 14 days. Generally I aim for an overall stock-holding of 10 days (this equates to normal stocks and nearly 50% more to allow for abnormal sales peaks or temporary shortages such as “not on lorry/van”, or the inevitable chaos that snow causes in the UK)
- Ordering levels are critical to good stock management, if you are a tied pub chances are that you will have Brulines installed, make sure you use the information these systems provide to keep track of the trends of sales/dispense in your pub as they are invaluable in maintaining ordering levels at their optimum.
- Has product been returned out of date? If you are experiencing out of date stock holding then consider de-listing that product from your pub or at the very least make sure you are ordering the minimum you can. One cause of out of date is lack of stock rotation in the cellar/store or in the fridges/shelves so ensure your staff rotates your stock regularly (preferably when stocking up/ taking deliveries). Another cause may be that you have taken advantage of a promotion with your supplier, be cautious and realistic when taking up these offers.