Club Management - January/February 2008 - (Page 16) “Given today’s more sophisticated members and their demand for answers to tough questions, it may be necessary to add someone to the accounting staff who can receive for a few hours and use the remaining hours to help free up the controller to look under rocks.” Michael Wheeler, CCM, COO General Manager Cherokee Town and Country Club, Atlanta have to provide the purchaser with detailed specifications for all items to be ordered, which will come in handy for receiving as well. Jeff Martin, CHAE, CHTP, is the controller for Lakeside Country Club in Houston. “Centralized purchasing solves numerous problems,” Martin says. “Vendor selection, price negotiation, managing rebates, consolidating orders and supplying cost information for accounting and F&B are just a few of the advantages. Multiple department heads placing orders would be a huge problem for us.” The overall objective of the purchaser should be to collect order requirements from the department heads each day and order the required quality at the best price and in the lowest possible quantities (just enough to get to the next delivery). The purchaser should be charged with achieving the fastest possible inventory turnover and should be held accountable for spoilage, misuse or theft caused by oversupply. Finally, and perhaps most importantly, the purchaser creates purchase orders for every order placed. Without a purchase order, all bets are off. Structural Challenge 2: Receiving Reports to Accounting The receiving function is the true check and balance for the purchasing process and the final defense against higher-than-necessary F&B costs. Risks associated with this function include collusion with suppliers, acceptance of incorrect quantities, goods or prices, and outright theft of inventory. Receiving is actually an accounting function, since its purpose is to confirm the proper result of actions already taken. Receiving personnel should therefore report to the accounting department. Under no circumstances should receivers be reporting to F&B managers or purchasing managers, since it defeats the check and balance entirely. There must be no advantage for the receiver to establish a 16 • CLUB MANAGEMENT friendly relationship with the vendors or to benefit from the actions of those determining order quantity or purchasing the goods. Another advantage of using an accounting person to perform the receiving function is the discipline required to pull it off. In order for someone who is not involved with ordering or purchasing to perform the receiving function, it becomes necessary to have purchase orders and written specifications available. In addition, quality can be checked by the chef or other culinary staff, and the accounting person can learn what to look for in that regard. Overages are refused and shortages or substitutions are brought to the attention of the purchaser for action. Since the accounting department is responsible for paying the invoice, it makes sense to have the receiving person in the loop of correcting and confirming the validity of the invoice. They also would be responsible for distributing amounts on the invoice to the appropriate G/L accounts. But how do small and mid-sized clubs afford a receiving specialist? The first step is to limit receiving hours. The receiving process for most clubs should happen in the morning hours. Allocating four hours for receiving should be sufficient. Schedule deliveries between those times and enforce that policy with all suppliers. Over time they will comply, especially if the purchaser makes it a condition of the purchase and the club follows through by refusing deliveries after these hours. Once that is accomplished, it becomes necessary to find someone in the accounting department to allocate half their time to receiving. Assuming someone is currently performing the receiving function, and they were not part of the F&B department, it may be possible to simply reassign that person to the accounting department. Alternatively, if they were hourly kitchen staff, it may be possible to simply reduce their hours. More than likely, it will require hiring a new person for the accounting department who can receive goods part-time and help out in accounting the rest of the day. Michael Wheeler, CCM, COO, and general manager of Cherokee Town and Country Club in Atlanta, said, “Some club accounting departments in the smaller clubs are doing well just to close the books and produce financial statements. Given today’s more sophisticated members and their demand for answers to tough questions, it may be necessary to add someone to the accounting staff who can receive for a few hours and use the remaining hours to help free up the controller to look under rocks.” Wheeler is convinced that overtaxed accounting departments are a bad idea. “It’s amazing what you can fi nd when you challenge the norms,” he said. “You can’t have someone who is overwhelmed by the business of the day planning for the future. Things controllers can find looking under rocks can be invaluable, and they will never have the opportunity if they are buried in the daily routine.” Up to the Challenge? The two structural challenges presented here could make a huge difference in club profitability. They hinge on purchase orders, written specifications and the time to do the job properly. Of course, to get the prize, club managers need to overcome the objections and historical approaches. ❚❘ About the author Bill Schwartz is CEO of System Concepts, Inc. (SCI). Based in Scottsdale, Arizona, SCI specializes in food cost management consulting and is the developer of the FOOD-TRAK System, which is widely used in private club operations around the country. Schwartz can be reached at (480) 951-8011 or bills@foodtrak.com.
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