Question About Spoilage

I stress to upper management the need to factor spoilage (excess / overproduction of food discarded each day) into our cost of food summary. I am told that since it is already expensed, that it doesn’t need to be considered. What are your thoughts on this subject and do you have any document or archive that discusses this topic.

Thank you,
Carlo M.

Spoilage should be closely monitored to make sure it stays in check. From the general ledger accounting perspective, the food cost is equal to purchases net of inventory change. Food disposed of in the garbage gets expensed just like the food consumed by guests. Your food cost results will improve if spoilage is kept to a minimum.

The main cause of spoilage is forecast errors. Forecasting of purchases and production involve demand estimates, inventory checks and safety factors. Waste tends to be higher when the menu requires highly perishable fresh fish and chicken. Management needs to weigh the cost of running out of an item vs. the cost of waste due to over stocking an item.

Often, the safety factor may be too large when ordering a perishable item. If you keep records of the spoilage, you will spot problems quicker. Chronic waste can be prevented with 10 minutes of effort each day. Simply keep a log of all items disposed of for any reason. Note the item name (ingredient or recipe), quantity wasted, cost and reason.

Once you start keeping a record of the waste, you will see trends and make adjustments. These adjustments will help you lower your cost of goods sold over time.