Highly functional operational systems are essential if you want to have control of your business, turn a profit and earn back some free time. Most of us choose to go into business for ourselves so we can control our income and time, but if we’re not careful, the business can take control instead. Café owners can find themselves consumed with the minutia of their businesses, working harder — and many times making less money — than they did in previous occupations. Why do some struggle to maintain control of just one operation while others seem barely involved in the successful operation of multiple units? The answer is operational systems.

Well-thought-out systems and controls will help run your operation efficiently and will greatly reduce your stress level. They will certainly help control your cash flow and provide the information necessary to plan strategies to grow your business.

Operation systems and controls are nothing more than procedures, policies, checklists and reports — most written, some communicated verbally. Their purpose is twofold: to ensure that employees execute the functions necessary for the efficient daily operation of your business (to your standards) and to help management with daily tasks, providing the information necessary to evaluate the performance of the business.

Many systems and controls are beneficial for assessing and controlling labor expenses as well as cost of goods. When combined, these two areas of expense usually consume 50 to 70 percent (ore more) of your gross business income. If you want to reap financial rewards, you must control labor and cost of goods.

Operating on a System
Operational systems for your employees are a must. They will have the majority of interaction with your customers and will prepare and deliver most of the products consumed, giving you two choices to ensure that your standards are maintained: Spending a significant amount of your time baby sitting employees or empowering them with knowledge and responsibility.

Here are some of the most simple and effective systems and controls you can create for your employees:

New employee orientation and policy checklist: Use these tools to introduce new employees to the business. You or your management support staff should include the usual things one would want to know when starting a new job: where to clock in, where the bathroom is, when pay day is, your break policy, what employees can eat or drink, introductions to their fellow employees, etc. A structured orientation will get new employees off on the right foot, reducing their feelings of intimidation and eliminating your need to inform them of your policies – as they may innocently violate them — one at a time.

Job descriptions. For each employee position, you should have a detailed checklist of information to discuss during training. It should address knowledge and proficiency in preparing all products, restocking and cleaning responsibilities, and customer service policies and procedures. This function-specific checklist will ensure that all employees understand the full scope of duties and responsibilities associated with their position. I suggest that your checklist not only have a space to indicate that the subject has been discussed but also a space that can be checked when the employee has proven to be proficient in that function.

Shift restocking and cleaning checklist. Self explanatory by name, these lists will assure that your operation is always ready for business and will greatly reduce bickering between employees. Create an opening, shift change and closing checklist for each position. Everyone should have a defined set of duties. I like to laminate these sheets and hang them o a clipboard with a grease pencil. Have employees check the tasks off as they complete them, and be sure to have a space for them to sign the sheet.

Make sure employees understand that they are to come to you for inspection when they have completed their checklist. If you inspect their work for every shift for at least a month, I would almost guarantee that the majority of your employees consistently perform at a standard that will make you happy.

Time card control. This control is initiated by a verbal request that employees bring you their time card (or POS time management receipt) as soon as they “punch in.” This lets you know you they are on time and groomed and dressed properly, and it allows you to communicate any important information before they begin work. Perhaps more importantly, it lets you know if they have punched in early so you can re-emphasize the importance of not starting before their scheduled shift time (without your prior approval).

The second half off time card control is conveying that it is the employees’ responsibility to come to you 15 minutes before their shift ends. This is when you can make sure thy have completed all assigned tasks — and still get them off the clock at their scheduled time. During the course of your busy day, you might easily lose track of when your employees are supposed to be off, but I guarantee that every employee knows when his or her shift has ended.

These simple labor policies will help keep employees from clocking in before their scheduled starting time or from running past their shift’s end, thus keeping your labor on budget.

Management Systems and Controls
Having established and implemented the above systems for employees, you can implement management systems and controls. Some are designed to keep track of your daily tasks: others will provide the necessary information to determine the financial state of your business.

Manager’s daily, weekly and monthly checklists. Like your employee’s daily check lists, theses tools will help you remember the important management functions for running your business. Some items that should be included on this list: checking employees’ to-do lists, inspecting your store (for cleanliness, needed maintenance and business readiness), placing orders with purveyors, reconciling the previous day’s sales and receipts, preparing a ban deposit and change order, going to the bank, logging invoices for orders delivered the previous day, analyzing labor expenses as compared to your budget, and selecting an area of your business for ongoing development (be it marketing, merchandising or employee training). These lists create order in your day, week and month. They will keep your focused on important goals amidst fighting the “daily fires.”

Labor controls are essential if you are to realize and/or maximize profitability. First, write a conservative but realistic weekly schedule for employees. Next, take the information from the posting copy of your schedule and transfer it to a labor budget worksheet. You might want to keep this form and all other management control forms on a clipboard hanging from a hook on your office wall. This labor budget worksheet lists your employees, their schedule for the week, the number of hours each person is scheduled to work per day and the corresponding dollar expense for that shift. Under each day, there are two columns for recording information. The first contains data transferred from the posted copy of the employee schedule. Title this column “Projected Labor.” The other column will be filled in with the “Actual Labor” recorded on your employees’ punch cards or your POS labor report. You now have the ability to know what you should have spent in daily labor and what you actually spent.

A vendor order guide and a vendor order worksheet should be used to help with ordering products. The vendor order guide form contains information about vendors such as company, salesperson, phone/fax, order days and delivery days.

The vendor order worksheet tells you which products a vendor supplies, including case or pack sizes and your inventory unit, i.e. what you’re going to count (each bottle or each case depending on the order unit). A column for reach order period provides three spaces for information about each product — how many of each item is on hand, how many are being ordered and how many were used since the last ordering day.

By analyzing exactly how much of each product was used between order periods (amount on-hand plus amount ordered minus amount on hand the following order day), you can quickly assess the minimum amount of product you will need to have on-hand without running out before your next delivery. The goal is to always have enough product — even for the busiest week — but not to tie up valuable dollars on your shelves with excess stock.

A vendor invoice log will track invoices for the products you purchase. This may be accounts set up on an accounting software program for purchases and payables or a paper record-keeping system. There should be columns for recording the date of the invoice, invoice number, invoice total, due date, date paid, check number of payment, amount paid and the running balance. Other columns should be provided so that the times on the invoice can be allocated to their appropriate cost of goods and expense categories (found on the monthly income statement).

Examples of categories that could apply to products purchased from your purveyors are: foods, beverage ingredients, paper products and cleaning agents, and perhaps retail merchandise and bulk coffee. After you have assigned the items on the invoice to their appropriate cost categories, add all the entries together to insure that their sum equals the dollar total of the invoice.

You’ll find this process easy if you take 15 minutes each day to record the information from the previous day’s invoices onto the appropriate vendor invoice logs. You will have a permanent record of the details of each invoice, and you will be able to assess your financial position with each vendor at a glance.

Monthly inventory is essential for determining your cost of goods (the amount of actual product that was used in preparing the menu items that generated your income). Because you now know what you purchased in dollars for all your vendors (the summary of information from your vendor invoice logs) and you know sales by category (food, beverages, retail merchandise, etc.) for your POS, the only remaining information you need is how much product was on your shelves at the beginning of the month and how much product was left on the shelves on the last day of the month. The inventory you take after closing on the last day of this month also will be the amount of inventory you start with the following day — the first day of the new month. Its total dollar value will be the next month’s beginning inventory.

To calculate cost of goods, use this formula: beginning inventory + purchases – ending inventory = cost of goods sold ÷ sales the produced = cost as percentage of sales. All values should be given in dollars, and only those items included within the particular cost category being calculated should be included in inventory counts and purchases.

Monthly inventory is the record of what you physically have in your store. This form should be will organized and categorized so items can be easily found during the counting process and should describe each item, specify the type of unit to be counted, show the current unit price for each item and provide sufficient space for recording the count. Once the count is complete, multiplying the total units of a specific item by its corresponding price will product an accurate dollar value for that item. Adding together the total dollar value of all items will give you the total dollar value of your inventory.

The monthly income statement is where all the pieces of the puzzle come together. It should have two columns: one for your goals for the month and one for what you actually achieve. This is where you estimate and record sales, cost of goods, and all other business-related expenses including labor, rent, maintenance, repairs and loan payments, to mention a few. This is, in essence, where you compare the highway signs to y our road map and assess your business progress.

The operational systems and controls discussed here represent just a few of the paper tools that are available to business owners. Creating effective systems takes some effort, and maintaining them requires discipline. This part of the business may not be your favorite; however, the peace of mind and clarity it provides are priceless.