Shared services increases efficiencies in the F&B Industry

Shared services increases efficiencies in the F&B Industry

Restaurants and other f&b outlets should stay focused on food. That is what they do best and that is what attracts repeated visits from customers. The three main planks that draw customers to these eating-places are the quality, quantity and price of the servings. Any attempts to tamper with these can lead to disastrous results. However, in the cut-throat competition arena of the QSR industry keeping the price offerings attractive can lead to managements tampering with the other two planks in an attempt to cut costs and in the process doing irreparable damage to brand reputation.

Over the last decade, many QSR managements have discovered that focusing on their core competencies of food and beverage and outsourcing the back end operations have not only increased profitability but also efficiencies and compliance.  Legacy QSRs may have developed back offices over the period, but management needs to ask if throughput is in sync with the changing technology environment and how much will be the cost to revamp such operations to suit and meet current industry demands.

While it makes operational sense for chains to outsource, small chains, by using shared services, can avail the benefits of state-of-the-art technology and expertise at a fraction of the price. Any which way one looks, using shared services makes economic sense. Shared services have a positive reflection on both the operational expenditure as well as the capital expenditure, ultimately reflecting in a healthy bottom line.

Finance & Accounts Outsourcing can enable QSR managements to save over 30% cost of the operation in house department.  Human Resource Management Outsourcing saves more than 30% as against having an in-house HR department.

F&B chains that are spread over multi-locations have a mammoth task of managing accounts and sustaining timelines for posting and documenting the same. This in turn leads to delayed vendor payments resulting in possible disruption of supplies across locations, procurement of substandard material at high cost from local suppliers negatively impacting customer experience and ultimately impacting brand reputation. In addition, managing rental & utility pay-out is equally critical for restaurants as delay in payment does not only attract late payment surcharge it also lead to shut down of premise which impacts profitability as well as the profitability and above all the major impact is on the customer experience.

A similar situation was being faced by a leading multi-brand restaurant company with a presence in more than 200 locations pan India. Lack of unstandardized process and delays in the backend operations of accounts was resulting in cash flow & working capital issues compounded with increased risk of revenue & inventory pilferage. The lack of transparency & visibility on invoice processing lifecycle was impacting vendor relationships and the company’s credit worthiness in the market. Delays in vendor payments was resulting in sales receipts being used to procure material at outlet level from unauthorized vendors at higher price and lower quality.

The management weighed the options of upscaling their in-house department viz using shared services. Having done that, they approached us to streamline the process. We first did due diligence of the process they used.

The issues were multi-fold. There were non-standardised process at the store level, a high dependency on the store staff for making GRN in the system without any defined accountability and a lack of a structured MIS for tracking the movement of Invoice and GRN. Financially too, there were lapses, revenue was being used petty expenses and material procurement , this compounded with delay in submission of Petty cash expense vouchers to the head office led to lack of integration between point of sale and Accounting system. Another major revelation was an unstructured revenue reconciliation process, especially with food aggregators — an area which accounted for 10% of their total revenue. In short, lack of financial discipline and delay in vendor payments was affecting the operations of the company

Post the due diligence we not only submitted a detailed plan but also went a step ahead to propose a governance model for review and steering of the transition and change management.  The plan outlined three key initiatives that covered Process, Technology and Governance.

The Process centric solution took into consideration each and every activity for Invoice processing and revenue reconciliation including the process for GRN, Submission of Invoice, and standard checklist for processing and maker checker concept. This solution also introduced a structured MIS on all deliverables. This was used to monitor the life cycle of Invoice, Revenue reconciliation, short and excess in cash/ card and debtors status. The MIS helped in addressing the issues and streamlining the operations across outlets.

On the Technology front we introduced in house developed proprietary tool “PEARL”, which is a strong workflow management and document repository tool for movement of Invoice digitally for approval and tracking of the life cycle of Invoice. We integrated PEARL with the POS system to fetch the PO and GRN details for seamless approval of the Invoice and matching of the GRN and Invoice, approval or rejection for any deviations. In addition to PEARL, we also introduced “PCMS” which is another proprietary tool specially designed to cater to the requirement of the retail Industry. This tool was deployed, to monitor track and control the petty cash expenses at store level. Both the tools have dynamic workflow, which can be configured according to the requirement of the business.

We streamlined governance by introducing a three layered process to monitor the progress of the assignment. The first two levels of governance were at the project management level and the third level of governance was at senior level to engage on the strategy.

While the management gained in an approximate cost saving of 30% of the overall cost of the department through automation and outsourcing, the greater gains were from additional cost saving and improved P&L in terms of price negotiation with the vendors, better credit period, reduction in the late payment charges. It was indeed a win-win situation for them.

About the Author:

Vivek is the co-founder of Mynd Integrated Solutions. He is a successful entrepreneur with a strong background in Accounts and Finance. An Alumni of Modern School and Delhi University, Vivek has also undertaken prestigious courses on accountancy with Becker and Business 360 management course with Columbia Business School, US.

Having over 22 years of experience in setting up shared service centers, and serving leading companies in the Manufacturing, Services, Retail and Telecom industries – his strong industry focus and client relationships have enabled the Company to build credibility with 300+ clients in a short period of time.

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