One of the biggest hurdles you face is managing the costs in your restaurant, especially the cost of goods sold (COGS). COGS is the direct cost of the ingredients and supplies you use to prepare the dishes and drinks you serve. If your COGS is too high, it can eat into your profits, making it harder to grow your business.

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The good news is, you don’t have to tackle this challenge alone. With the right tools, like procurement management software, you can take control of your COGS and make smarter decisions about your inventory and purchasing. Let’s explore how this works and why it’s a game-changer for your business.

What is COGS, and Why Does It Matter?

COGS stands for Cost of Goods Sold. It’s the total cost of the ingredients and supplies you use to create the food and drinks you sell. This includes everything from the rice in your nasi lemak to the spices in your curry.

For example, if you run a mamak stall, your COGS would include the cost of flour for roti canai, chicken for curry, and tea leaves for teh tarik. If your COGS is too high, it means you’re spending too much on these ingredients, which can hurt your profits.

In Malaysia, the average COGS for a restaurant typically ranges between 30% to 40% of total sales. If your COGS percentage is higher than this, it’s a sign that you need to take a closer look at your spending.

How Procurement Management Software Can Help

Procurement management software is a tool that helps you manage your purchasing process more efficiently. It allows you to track your inventory, compare prices from different suppliers, and make smarter buying decisions. Here’s how it can help you reduce your COGS:

1. Better Inventory Management

One of the biggest reasons COGS gets out of control is poor inventory management. When you don’t know what you have in stock, you end up over-ordering or running out of key ingredients. Both scenarios can cost you money.

Procurement software gives you real-time visibility into your inventory. You can see exactly what you have on hand, what’s running low, and what’s sitting unused. This helps you avoid over-ordering and reduces waste, which directly lowers your COGS.

2. Smarter Purchasing Decisions

With procurement software, you can compare prices from multiple suppliers in one place. This makes it easier to find the best deals and negotiate better prices. Over time, even small savings on individual items can add up to significant reductions in your COGS.

For example, if you’re buying 50 kilograms of chicken every week and you save RM 1 per kilogram by switching suppliers, that’s RM 50 saved every week. Over a year, that adds up to RM 2,600 in savings.

3. Reduced Food Waste

Food waste is a major contributor to high COGS. In Malaysia, food waste is a growing issue, with millions of tonnes of food thrown away each year. This waste directly impacts your COGS because you’re paying for food that never makes it to the table.

Procurement software helps you track expiration dates and usage patterns, so you can use ingredients before they go bad. It also helps you plan your orders more accurately, so you’re not stuck with excess inventory that ends up in the trash.

4. Accurate COGS Tracking

To reduce your COGS, you first need to know what it is. Procurement software makes it easy to calculate your COGS by tracking the cost of every ingredient you buy and how it’s used.

For example, if you buy a sack of rice for RM 100 and use half of it in a week, the software will automatically calculate that RM 50 as part of your COGS. This level of accuracy helps you identify areas where you can cut costs.

How to Get Started with Procurement Software

If you’re ready to take control of your COGS, here’s how to get started with procurement management software:

1. Choose the Right Software

Look for software that’s designed specifically for the food industry. It should have features like inventory tracking, supplier price comparisons, and COGS calculations. Food Market Hub is one of the software vendors that you can rely upon. 

2. Integrate It with Your Existing Systems

Make sure the software can integrate with your point-of-sale (POS) system and accounting software. This will make it easier to track your COGS and see how it impacts your overall profitability. Food Market Hub has merged with EasyEat and it can give you the best of both worlds.

3. Train Your Team

Your staff will need to use the software regularly, so make sure they’re trained on how it works. This includes everything from entering inventory data to generating reports.

4. Monitor and Adjust

Once the software is up and running, keep an eye on your COGS percentage. If it’s still too high, use the data from the software to identify areas where you can cut costs. This will give you the power to make data-based decisions. 

FAQs About COGS and Procurement Software

1. What is COGS for a restaurant?
COGS (Cost of Goods Sold) is the total cost of the ingredients and supplies you use to create the dishes and drinks you sell. It includes everything from meat and vegetables to spices and packaging.

2. How do I determine my COGS?
To calculate your COGS, add up the cost of all the ingredients you use in a specific period (like a week or a month). Then, divide that number by your total sales for the same period. This will give you your COGS percentage.

3. What is a good COGS percentage?
A good COGS percentage is typically between 30% and 40% of your total sales. If your COGS is higher than this, it’s a sign that you need to reduce your costs.

4. How can procurement software help reduce COGS?
Procurement software helps you manage your inventory, compare supplier prices, and reduce food waste. By making smarter purchasing decisions, you can lower your COGS and increase your profits.

Reducing your COGS doesn’t have to be complicated. With the right tools and strategies, you can take control of your costs and improve your profitability. Procurement management software is a powerful tool that can help you make smarter decisions about your inventory and purchasing, so you can focus on what you do best—creating delicious food for your customers.

Start exploring your options today, and see how much you can save!

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