KlaritiSculpture Hospitality Gold Coast · Guide
Purchases are not your food cost
Purchases divided by sales tells you what you bought as a share of what you sold. Food cost tells you what you used. Food cost needs a stock count at each end of the period: opening stock plus purchases, minus closing stock, gives the cost of the food used, and that is divided by food sales. Over a single week the two figures can be far apart, even when nothing in the kitchen has changed.
Why the difference matters
A cost figure is usually read to decide whether something needs attention. If the figure is really a purchases ratio, that decision can rest on the wrong evidence.
Deliveries don’t arrive in step with sales. A large dry-goods order, stocking up before a long weekend, or buying for an event all bring a lot of stock through the door in one week. The purchases ratio jumps that week and drops the next, even if the kitchen used the same amount of food relative to sales in both.
Food cost allows for this because the count catches stock that was bought but not yet used.
The two measures
- Purchases ÷ sales: food purchases for the period ÷ food sales for the period.
- Food cost: (opening stock + purchases − closing stock) ÷ food sales.
In both, stock is valued at cost ex GST, purchases are ex GST, and sales are ex GST. Dividing ex-GST costs by GST-inclusive sales is one of the easiest ways to get a misleading result. Supplier credits and stock transferred to or from another venue adjust purchases, so they need to be recorded in the period they happen.
Illustrative example
Illustrative example. One kitchen over two consecutive weeks, in round numbers. All figures are Australian dollars ex GST. Food sales are $20,000 ex GST in each week.
| Figure (AUD, ex GST) | Week 1 | Week 2 |
|---|---|---|
| Food sales | $20,000 | $20,000 |
| Opening stock | $6,000 | $7,500 |
| Purchases | $8,000 | $5,000 |
| Closing stock | $7,500 | $6,000 |
| Food used | $6,500 | $6,500 |
| Purchases ÷ sales | 40% | 25% |
| Food cost | 32.5% | 32.5% |
The working:
- Week 1 food used: $6,000 + $8,000 − $7,500 = $6,500.
- Week 1 food cost: $6,500 ÷ $20,000 = 32.5%.
- Week 1 purchases ÷ sales: $8,000 ÷ $20,000 = 40%.
- Week 2 food used: $7,500 + $5,000 − $6,000 = $6,500.
- Week 2 food cost: $6,500 ÷ $20,000 = 32.5%.
- Week 2 purchases ÷ sales: $5,000 ÷ $20,000 = 25%.
Read on purchases alone, week 1 looks like a problem and week 2 like a turnaround. Neither happened. The kitchen used $6,500 of food against $20,000 of sales in both weeks. Stock on hand rose by $1,500 in week 1 ($6,000 to $7,500) and was used in week 2 ($7,500 back to $6,000).
Now take the two weeks together. Opening stock is $6,000, purchases are $8,000 + $5,000 = $13,000, and closing stock is $6,000. Food used is $6,000 + $13,000 − $6,000 = $13,000, on sales of $40,000: $13,000 ÷ $40,000 = 32.5%. Purchases ÷ sales over the same fortnight is also $13,000 ÷ $40,000 = 32.5%, because stock finished where it started. Over a longer window the lumps tend to even out, but they only cancel exactly when closing stock equals opening stock.
The common misreading
We often see a purchases ratio treated as food cost. One high week turns into a conversation with a supplier about prices, or with a chef about portions, when the only thing that changed was the timing of a delivery.
Two recording issues make it worse:
- Invoices dated differently from delivery. If goods arrive before the closing count but the invoice is recorded in the next period, the stock is in the count but the purchase is not. Food cost reads low in one period and high in the next.
- Credits and transfers not recorded. A supplier credit for a short delivery, or stock sent to or borrowed from another venue, changes what the kitchen actually had. If it isn’t recorded, purchases are overstated or understated, and so is the result.
A difference is a question. Not an accusation.
A high figure is a reason to check the records. It is not, on its own, a finding about a supplier or a person.
When purchases ÷ sales is still useful
It’s quick and needs no count, so it has a place between stocktakes, used with care:
- Over a longer window. Four weeks, or the whole stocktake period, gives lumpy deliveries time to even out. A single week rarely does.
- As a trend. A purchases ratio that keeps rising period after period is worth a look before the next count. One high week on its own is not.
- Labelled for what it is. Call it purchases ÷ sales, or purchases to sales, on every report and in every conversation. Klariti, the software our service uses, labels it Purchases to Sales, not food cost.
When the stocktake comes round, the count gives you the food cost for the period. That is the figure to act on.
A practical checklist
- Count at a consistent time: the same day of the week and the same point in trade each period.
- Value stock consistently: at cost, ex GST, on the same pricing basis every count.
- Record transfers between venues, supplier credits and wastage as they happen, so usage can be explained.
- Date invoices to the delivery, so each purchase lands in the same period as the stock it brought in.
- Compare over whole stocktake periods, not single weeks.
- Investigate differences before drawing conclusions. Check timing, transfers, credits and recording first.
Start with the count
Food cost starts with a count at each end of the period and records that line up with it. Whether your team counts or ours does, we can help you put that routine in place. See food inventory and cost control.