Fourth Analytics Adaco: Cost of Sales

Overview

This article is designed to help the user understand what the actual Cost of Sales (COS) figure is, how it is reached, and how it may differ from the Theoretical Cost of Sales figure in Fourth Analytics.

The Cost of Sales tab is populated with data only if the core Purchasing & Inventory solution has an itemised sales feed from the EPOS system, and Recipes are linked to PLUs to register individual menu item sales. 

It includes figures only for Recipes linked to PLUs. Otherwise, the tab will display no data, or incomplete data. If a period has not yet been closed in the core Purchasing & Inventory system, data will not be available for this period.

This article relates to the 'Cost of Sales' tab. For 'Cost of Sales Closed Period' please see Fourth Analytics Adaco: Cost of Sales Closed Period

Top Banner Figures 

The left-hand-side of the banner displays the actual Cost of Goods sold (COGS) as a percentage of Recipe Sales Revenue (net of tax), which is displayed in the centre. COGS is calculated based on actual consumption of Products (usage). 

The right-hand-side of the banner displays the opening and closing stock (Inventory) figures in monetary terms. Below this, the actual usage in monetary terms is displayed, and this figure is used to calculate the actual COGS percentage.
 

Fig.1 – Figures in Banner at Top of Tab

Example

During a period, if you start with 500 bottles of Coca-Cola, had 300 delivered, and finished with 690 because 100 were sold, and 10 were transferred to wastage. 

The Recipe for a bottle of Coca-Cola has a Recipe Cost Price of £1, and a Recipe Selling Price of £4 (with a PLU linked to the EPOS system). 

However, there was a promotion offering 10% discount on selling price, so Coca-Cola is being sold at 90% of normal recipe selling price. The COS headlines would be as follows:

 

Opening to Closing Bridge Value 

This graphic displays how the actual usage figure has been reached, as well as illustrating the relative size of stock holding to stock movements.  

• Orange columns show the stock increasing
• Grey columns show stock decreasing
• The size of the column reflects its value

Moving from left to right: 

• The left-most column shows the value of Opening Stock (closing Inventory from the previous Inventory period)
• The next column displays the value of Products received
• Then, the net movements of Requisitions and Transfers into/out of the chosen Location is shown
• The final orange column is the net value of stock adjustments made, minus what has actually been used to reach the closing stock value (closing Inventory for the chosen time period)

When all Locations in a Company are selected to display, the net Requisition / Transfer value should be zero. If select Locations are chosen, Requisitions / Transfers and Adjustments may be negative or positive values. 

The Receiving value would normally be positive or zero (unless returns are greater than what has been received), and Usage values would normally be negative or zero.

Typically, a Location’s Outlets will not have a COS, as no sales are registered against the Outlet, and any stock movements should come only from purchases, transfers, requisitions or adjustments (which will include Inventory variances).
 

Fig.2 – Opening to Closing Bridge – Value Graph

Actual COS % by Outlet - Value 

This report shows the 10 Outlets with the highest COS% for the chosen time period.
 

 
Fig.3 – Actual COS% by Outlet – Value Graph

Actual Usage % by Property – Value

This table displays the same opening to closing transactions as Fig.2, and categorises the data by Property (default listing in alphabetical order). 

It also displays the Net Sales value, with the COS% in the far right column.

The total figures are at the bottom of the table, which correspond to the figures in the banner at the top of the Cost of Sales tab (Fig.1)
 

 
Fig.4 – Actual Usage % by Property – Value Table

Actual Usage % by Outlet – Value 

This table displays the same opening to closing transactions as the table above, but instead categorises the results by Cost Category and Outlet (default listing in alphabetical order).   

Fig.5 – Actual Usage % by Outlet – Value Table

Actual vs Theoretical Usage / COS 

This table displays a comparison at Product Category level of the actual usage cost (calculated as above using Product consumption), compared to theoretical usage cost (using consumption of Products in recipes linked to items sold). 

It also details any recorded wastage, and calculates an ‘unexplained’ cost value. This is the difference between actual and theoretical usage values, excluding what has been recorded as wastage. 

Fig.6 – Actual Vs Theoretical Usage/COS Table

This example scenario outlines how to understand which Outlets have the highest Cost of Sales, and where there may be opportunities to improve this in terms of stock management using the graphs and dashboards outlined above. 

• Select the required time period using the Date Dimension (Business day) filter under Property Details
• Within the Property Details filters, set the Property or Outlet filter(s) as required
• Review the Actual COGS% headline figure on the top left of the tab to understand the total figure for the Properties / Outlets being viewed
  • From the Actual COS % by Outlet – Value list of Outlets with the highest COGS%, note those which are greater than the overall figure i.e. are the worst performers
  • If the user is viewing more than one Property, Outlets can be compared to their respective Property totals using the Actual Usage % by Property – Value table
• Refer to the Opening to Closing Bridge Value for an overall benchmark
• Use the Actual Usage % by Property – Value and Actual Usage % by Outlet – Value tables to understand if any stock adjustments may be contributing to the higher COGS
• Use the Actual Usage % by Outlet – Value table to drill down further by cost category
• Apply further filters within the Property Details or Product Details filter sections to focus on the areas with highest COGs, and refer to the Actual vs Theoretical Usage / COS table to see the gap between Actual and Theoretical COGS
  • This can be used to specifically target the value of wastage or unexplained differences, which may be causing a higher than expected COGS due to stock control issues

Purchasing & Inventory - Fourth Analytics