You Can Conquer the Challenge of Cinema Inventory Management
In Part 1 of cinema inventory management, we recommended you refrain from sales and inventory reconciliations once a month. Rather, have two employees conduct it Thursday night or Friday morning for one to two hours, comparing the concession sales week to the box office sales week.
The Final Touch On Inventory Counts
After the last inventory period, on Thursday, print out a report showing total POS sales for the same inventory period. The next step is accounting for combo sales. Recall that you’re counting combos as single items, such as cups and large bags of popcorn. Let’s say a large combo costs you $1.00. Your POS report tells you that 78 combos were sold. Actually you sold 78 large cups and 78 large bags that are not indicated in the register count. So subtract $78 dollars from the register total. In order to match the combo register sales report, you add 78 large cups and 78 large bags to the total. Notice that adjustments are not made to the inventory count.
[Note: The assumption is that your register prints a report indicating the numbers of each separate item sold. If the system counts on a daily basis, you’ll have to print out seven reports. If you don’t have a POS system in your theater, get one and join the 21st Century. Please contact us for recommendations that will fit in your budget.]
It goes without saying to make sure your storage area is sufficient to house and to see all of your inventory so there are no miscounts. With non-sales inventory, such as lids, straws, napkins etc., just look and see if the quantity makes sense. Lids should be about 125% of cup use, straws 150%. Napkin use averages two or three per guest. Watch for counts that are way off. A full five-gallon bag-in-the-box yields maybe 300 16oz sodas, depending on ice fill.
At this point your inventory counts and register sales reports should match. They seldom do. Here are some reasons and solutions:
- Spoiled and damaged goods not put in the Big Box. All damaged and spoiled products must be put in the Big Box: Repeat!, Repeat! Repeat to your staff. Comp items should be a supervisor/manager function with a password and they should have to press a register key for accounting purposes. While on the subject of comps and discounts, think carefully about the need for comp or flat dollar-off keys on the concession registers because they are easily misused through error or intention.
- Employees give stuff away. Comp items should be a supervisor/manager function with a password and they should have to press a register key for accounting purposes. While on the subject of comps and discounts, think carefully about the need for comp or flat dollar-off keys on the concession registers because they are easily misused through error or intention.
- Employee operator-error on the register. For example, the key was pressed for Reese’s Cups rather than Reese’s Pieces. If the items are priced the same, then the cash report will be correct, but the inventory count will be over and under. This can happen between the 15 candies priced the same. There are 225 possible permutations. An employee could get frazzled while there are so many keys to choose from and for an impatient guest.
- Employee theft. Allow employees to gorge on soda and popcorn Have them use the cups that guests are given for water and popcorn bags that are for a large family to separate out a large corn. There’s no need to count these “courtesy” containers. If you notice a guest with a courtesy container, ask the staff why. It could be that someone didn’t ring the sales through the register.
- “The Big Kahuna.” The worst employee theft case scenario is when he or she sells an item, doesn’t perform the transaction on the register and pockets the money. The most effective way of dealing with this is a customer-facing display on all the terminals so the guests can see the transactions. If the employee isn’t ringing an item, the display should read “No Sale” or “Incorrect Amount”. You set the choice of words in the POS software. About one out of three guests will speak up if the total doesn’t match. Most of the other concession staffers will hear the conversation and should call the manager. The guest may do so as well. Such stand-alone displays run about $249.00 and are easily connected to most existing terminals. But the primary solution to this problem is the guests’ credit and debit cards themselves. Such a transaction cannot happen during this sale process.
- Listen to your staff members. You can’t flag a potentially problem employee by looking at them, but you can get a good indication by what they say in conversation. Be friendly and engaging with your staff, and they’ll feel more comfortable talking to you when something isn’t right. Take the time to really hear what they have to say. If you discover an issue that borders on letting an employee go, you make the call. It’s more common that they’ll be fired on the spot. Some managers will give them a second chance.
In Conclusion, what is an acceptable inventory error? One half of 1% is OK. That means for every $10,000 of concession sales you make, you have $50 to reconcile. A bigger hit on the cash flow may require some digging—you may have to recount or ask some questions. Discover a plausible answer to explain the problem and keep your eyes on it. Many theaters pay a bonus to the manager if the “shrink” is within one-half of 1%. Our advice? Be careful, understand the numbers and train your staff well.