Managing inventory is one of the most important tasks in running a restaurant. Knowing what ingredients you have, how much you've used, and when to reorder helps keep food costs under control and prevents waste. But tracking inventory can be time-consuming, especially when you're focused on daily operations.

A periodic inventory system is a simple way to stay on top of inventory without checking stock levels every single day. Instead, you count everything at set times - such as once a week or at the end of the month. This system helps you figure out how much food and supplies you've used and how much is left. It's also useful for calculating your cost of goods sold (COGS)a key number that shows how much you're spending on food compared to what you're earning from sales.

Using a periodic inventory system can save time and money. Since you're only counting inventory at scheduled times, you don't have to track every single item in real time. This makes it easier for small and mid-sized restaurants to keep records without investing in expensive software. It also helps prevent over-ordering or running out of key ingredients, both of which can hurt your bottom line.

A periodic inventory system is a simple and practical way for restaurants to keep track of their food and supply inventory. Unlike a perpetual inventory system, which updates inventory levels in real-time, a periodic system only records inventory at specific intervals, such as weekly, bi-weekly, or monthly. This means that instead of constantly updating stock levels every time an item is used or received, you take a full count at the end of a set period.

Many restaurant owners prefer this method because it is less time-consuming and does not require complex technology. By counting inventory periodically, you can still get an accurate picture of your food costs and stock levels without having to track every item daily. This system works especially well for smaller restaurants or those that do not have the resources to invest in real-time tracking software.

One of the main purposes of a periodic inventory system is to calculate the cost of goods sold (COGS). This is a critical metric that helps you understand how much you are spending on ingredients compared to your sales. The formula for COGS in a periodic system is -

COGS = Beginning Inventory+Purchases Ending Inventory

This calculation helps you determine how much food and supplies were used during the period, allowing you to make better purchasing decisions and reduce unnecessary expenses.

While a periodic inventory system is simple, it requires consistent tracking and organization. Without a structured approach, it's easy to miscount items or overlook important details, leading to inaccurate financial reports. To make this system work effectively, you need to set up a clear schedule, train staff on proper counting methods, and maintain organized storage areas.

The first step in setting up a periodic inventory system in your restaurant is to establish a consistent inventory schedule. Since periodic inventory relies on taking stock at specific intervals, setting a regular schedule ensures that you always have an accurate record of your food and supply levels.

How Often Should You Take Inventory?
The frequency of inventory counts depends on the size of your restaurant, the volume of food you go through, and how much detail you want to track. Here are some common options -

1. Weekly Inventory Counts Ideal for restaurants with high food turnover, such as fast-casual and quick-service restaurants. Weekly counts help catch inventory discrepancies and prevent food waste.
2. Bi-Weekly or Monthly Counts Suitable for smaller restaurants or those with more stable inventory levels. While less frequent, this approach still provides useful cost tracking.
3. Daily Counts for Key Items Some restaurants count high-cost or perishable items daily (e.g., meats, seafood, dairy) while doing full inventory less frequently.

Choosing the right schedule depends on your restaurant's needs, but weekly or bi-weekly inventory counts tend to be the most effective for balancing accuracy and efficiency.

Assigning Responsibility
To keep the process smooth, assign specific staff members to handle inventory counts. Ideally, the same people should perform inventory each time to maintain consistency. Train them on how to count correctly and record numbers properly to avoid errors.

To stay organized, use a standardized inventory sheet or template that lists all food items by category. Common categories include -

-Dry goods (flour, sugar, rice)
-Refrigerated items (dairy, meats, vegetables)
-Frozen foods
-Beverages (sodas, juices, alcohol)

Keeping an organized list helps speed up the counting process and ensures that nothing is missed. Once you set your inventory schedule, stick to it consistently. Taking inventory at the same time and day each week helps create a habit and improves accuracy.

Once you have a set schedule for taking inventory, the next step is to organize and categorize your stock. A well-organized inventory makes counting easier, reduces mistakes, and ensures that nothing gets overlooked. Proper organization also helps prevent food waste by making it clear which items need to be used first.

Group Items by Category
To make inventory tracking more efficient, divide all your stock into logical categories. This helps you locate items faster and makes counting more systematic. Some common restaurant inventory categories include -

Dry Goods Flour, sugar, rice, pasta, spices
Refrigerated Items Dairy, fresh produce, eggs, meats
Frozen Foods Seafood, frozen vegetables, pre-made items
Beverages Soft drinks, juices, alcohol, coffee
Paper and Cleaning Supplies Napkins, to-go containers, detergent

If your storage space allows, keep similar items together in designated areas. For example, all dairy products should be stored in the same refrigerator section, while dry goods should have their own shelves.

Label and Arrange Stock for Easy Counting
A simple but effective way to stay organized is by labeling everything clearly. Use labels with item names, expiration dates, and purchase dates to track inventory rotation. Arrange products so that the oldest stock is in front (first-in, first-out method) to prevent spoilage.

For quick counting, store inventory in standard unit sizes whenever possible. For example -

-Keep flour and sugar in 10 lb bags instead of loose storage.
-Store canned goods in cases of 12 instead of single cans.
-Use clear containers for prepped ingredients to see contents easily.

Use an Inventory Sheet or Digital Tracker
An inventory sheet or digital tracker helps maintain consistency. Your list should include -

-Item name
-Storage location
-Unit of measure (pounds, cases, gallons, etc.)
-Quantity on hand
-Cost per unit

By keeping your inventory organized, you'll save time during counts and reduce costly errors.

Once your inventory is organized, the next step is to standardize the counting process to ensure accuracy and consistency. A clear system for counting inventory helps reduce errors, prevents discrepancies, and ensures that your financial records reflect the actual stock levels in your restaurant.

Follow a Consistent Counting Method
To keep inventory counts accurate, follow a consistent method each time you conduct inventory. Here are a few best practices -

1. Count items in the same order every time Start with dry goods, then move to refrigerated and frozen items, and finish with beverages and non-food supplies.
2. Use the same units of measurement If you measure flour in pounds one time and in bags another, it can cause confusion. Standardize units (e.g., pounds, cases, gallons).
3. Always count unopened and opened items separately For example, if you have five full cases of chicken and one open case with five pieces left, note the open case separately.

Assign the Same Team Members for Inventory
To maintain consistency, assign the same people to handle inventory counts whenever possible. If multiple staff members are counting, ensure they are trained on how to measure and record items correctly. If responsibilities must rotate, provide clear guidelines and checklists to follow.

Use a Digital or Paper Inventory Log
A standardized inventory sheet or digital inventory tracker helps keep records consistent. Your inventory log should include -

-Item name
-Storage location
-Unit of measure
-Quantity counted
-Date of inventory count
-Employee initials

Using a digital inventory tool can further reduce errors and save time by automatically calculating totals and generating reports.

For expensive ingredients like seafood, meats, or alcohol, have a second team member verify the counts. This extra step helps prevent theft, miscounts, and incorrect reporting. By following these steps, you can ensure that inventory counts are accurate, efficient, and reliable.

After taking inventory, the next step is to calculate inventory valuation and determine your cost of goods sold (COGS). These numbers help you understand how much you're spending on ingredients and how they impact your restaurant's profitability.

How to Calculate Inventory Valuation
At the end of each inventory period (weekly, bi-weekly, or monthly), you need to determine how much inventory is still on hand. This is known as your ending inventory. To calculate this, follow these steps -

1. Take your beginning inventory This is the total value of all inventory from the start of the period.
2. Add purchases Include all food and supply purchases made during the period.
3. Subtract your ending inventory This is the total value of all remaining stock after inventory counts.

The formula looks like this -

COGS = Beginning Inventory + Purchases Ending Inventory

For example, if your restaurant started the month with $5,000 in inventory, purchased $3,000 worth of food, and ended the month with $4,000 in inventory, your COGS would be $4,000 -

COGS = 5000 + 3000 - 4000 = 4000

Why COGS Matters for Your Restaurant
COGS is one of the most important financial metrics in restaurant management because it shows how much you are spending on food relative to sales. If COGS is too high, it may indicate waste, over-ordering, or price inefficiencies.

Tracking COGS regularly allows you to -

-Identify high-cost ingredients and adjust purchasing habits.
-Reduce food waste by monitoring usage patterns.
-Set profitable menu prices based on ingredient costs.
-Make better decisions on portion sizes and inventory purchases.

Avoiding Common Mistakes in Inventory Valuation
To ensure accuracy in your COGS calculation, avoid these common mistakes -

Not counting inventory properly Skipping items or miscalculating quantities can lead to incorrect numbers.
Forgetting to record purchases Every food order must be included in the calculation.
Not using consistent valuation methods Always use the same method for tracking inventory value, whether it's FIFO (First In, First Out) or weighted average cost.

By regularly calculating inventory valuation and COGS, you gain better control over your restaurant's food costs and overall profitability.

Once you have calculated your inventory valuation and cost of goods sold (COGS), the final step is to use that data to improve purchasing decisions, reduce waste, and control costs. Analyzing periodic inventory reports helps ensure that you order the right amount of stock, avoid shortages, and prevent unnecessary expenses.

Review Inventory Trends
By tracking inventory over time, you can identify patterns in food usage and adjust orders accordingly. Ask yourself -

-Which ingredients are running out too quickly?
-Are there certain items that are frequently overstocked and wasted?
-Do some menu items have higher food costs than expected?

If you notice that certain ingredients are being wasted, it may be a sign that you need to adjust portion sizes, update menu pricing, or change ordering habits.

Set Par Levels for Smart Ordering
A par level is the minimum amount of stock you should always have on hand for each ingredient. Setting par levels prevents over-ordering while ensuring you don't run out of essential items.

To calculate par levels, look at historical inventory data and determine how much of an ingredient you use within an ordering cycle. For example, if you use 50 pounds of chicken per week, your par level should be slightly above that amount to cover unexpected demand.

Order Based on Actual Usage, Not Guesswork
Using periodic inventory data to guide ordering decisions ensures that you only buy what you actually need. Instead of placing orders based on estimates, check your most recent inventory count and adjust purchases accordingly.

-If usage is lower than expected, reduce your next order to prevent spoilage.
-If an item is selling faster than usual, increase orders to avoid stockouts.

By making data-driven purchasing decisions, you can significantly cut down on food waste and unnecessary spending. This leads to better profit margins and more efficient restaurant operations. With a well-managed periodic inventory system, you'll have better control over stock levels, reduce financial losses, and improve overall efficiency.

A periodic inventory system is a simple yet effective way for restaurant owners to keep track of stock levels and manage food costs. By conducting inventory counts at scheduled intervals, you can accurately assess your inventory value, calculate cost of goods sold (COGS), and make informed purchasing decisions without the need for constant real-time tracking.

Implementing this system in your restaurant requires a structured approach. First, establish a clear inventory schedule to ensure consistency in tracking stock. Next, organize and categorize your inventory to make counting easier and reduce errors. Standardizing inventory counting procedures ensures accuracy, while calculating inventory valuation and COGS helps you understand how much you're spending on ingredients. Finally, analyzing inventory data allows you to optimize purchasing decisions, set proper par levels, and reduce food waste.

By following these five steps, restaurant owners can gain better control over inventory, prevent unnecessary expenses, and improve profit margins. Having a clear understanding of how much stock you have on hand and how quickly it's being used allows you to make smarter financial decisions and adjust menu pricing or portion sizes as needed.

While the periodic inventory system may not provide real-time tracking like a perpetual inventory system, it is a great option for restaurants that need a cost-effective and manageable way to monitor inventory. The key to success is consistency - sticking to your inventory schedule and regularly reviewing your data will help you make adjustments that improve efficiency and profitability.

Start implementing these steps in your restaurant today, and you'll soon notice better control over food costs, reduced waste, and a more streamlined inventory management process.