Financial accountability is essential to a successful food service operation. When you create a budget you determine a standard or a goal. When you compare actual food cost to the budget you create an early warning system to potential food cost problems. When you benchmark costs such as food cost per resident day or food cost per meal you provide an opportunity for continued quality and cost improvement within the food service department. 

Budgeting is simply an estimate of future needs based on realistic goals set over a specific period of time. It provides guidelines or directions on how to manage food cost. It is not meant to limit spending but provide a basis to control food cost. Most budgets are developed based on historical information. A zero–based budget may be developed if prior budgets seem to be unrealistic.  Zero-based budgeting is a method in which all expenses are justified in detail as if there was no history of past performance. Regardless of the type of budgeting process, if actual food cost is not compared to budget, the value of budgeting is lost.

Calculating actual food cost starts with taking an inventory of all food on hand and determining its dollar value and then determining the purchases for the same time period. The following formula can then be used to determine actual food usage for a given period of time.

Actual food usage = Beginning Inventory + Purchases – Ending Inventory

Monitoring and tracking any cost variances from budget is the next step. How large a variance between actual food cost and the budget is acceptable? That’s a decision that has to be made by you. But large variances tend to point to problems with food cost. Problems such as theft, waste, under-portioning, over-portioning, poor prep procedures, poor receiving procedures, excessive waste, over production, etc.

Why benchmark? Because it is an objective management tool to improve the overall operation and services of the food service department. Benchmarking can be used to compare “internal” food cost performance over a period of time or against the financial performance of similar facilities. Benchmarking provides an opportunity to learn how to improve our own operations by examining the “bes -practices” of other successful food service departments.

The information learned from Step 5 – Accountability leads us back to Step 1 - Menu Development. Re-engineering the menu, based on the information learned from Step 5 –Accountability, begins the cycle again and the opportunity again to improve the quality and cost effectiveness of the food service program.