Hospitality Industry Manager's Reference Library Page

5-4-4 Accounting Can Save You A Ton of Cash

By Ray Ford--Hospitality Industry Resource Center

We received this note from Pat Devney, MWR--Subase Bangor—Silverdale, WA in which he commented: "In your seminars here at the base, you strongly favor the 5-4-4 accounting system. Can you give me an overview of the advantages as you see them?"

Good question: The 5-4-4 explained briefly is this: Drop the concept of calendar month accounting for weekly accounting. Everything is uniform. Each quarter has 13 weeks, the first month, 5 weeks, the second & third months of the quarter, 4 weeks each. That’s the 5-4-4. Every week, month & quarter begins on Monday.

Advantages:

If you rely on an accountant for your monthly P & L, (profit & loss statement) you generally don’t get your statement until somewhere between the 5th & the 10th of the month. By the time you get your data, it could be as much as 5 weeks old. (if you want to look at the 1st weeks recap from the previous month.) This means that if your pour cost or labor was high in the 1st week, chances are that it trended that way for the entire month. That’s way too much time & the loss to you is hundreds, perhaps even thousands of dollars.

You now look at sales & costs by the 7-day period, not the 30-day period. Objective: tighten up your systems so you can produce a weekly P & L statement complete with labor & pour costs. (Using the process actually lets you calculate these stats daily if you like)

More emphasis is placed on daily sales. Part of this process includes looking at each day as a stand-alone time period. Example: Picking a day like Wednesday & beginning to isolate that days sales trend over a period of time, (say, 6 to 8 weeks) then creating a specific program designed to increase sales for that day over the next 13 weeks.

This system can save an operator tens of thousands of dollars each year by allowing you to have more control, stay closer to your business. There's an old saying that goes, "The closer you watch your money, the more you get to keep".

When comparing historical data, it's far easier now to compare "apples to apples". (It's a fairly simple task to go back a year or two & convert the numbers)

There’s a very good chance that your present POS system has the capability of producing a 1-week, 7-day report for you. If not, it’s a slam dunk to produce a 7-day template using a spreadsheet program like Microsoft Excel that you or your bookkeeper can transpose each day from the previous days numbers.

Source: The 4-Part Manager's Survival Guide, "Bar/Nightclub Management & Marketing" , a powerful tool for creating traffic & increasing sales using proven marketing, promotions & improved operations techniques.

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