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Finding the formula for variance and being able to define variance are two parts of the vital three-part variance system for any business. The third part is the analysis of variance and the understanding of variance statistics. From restaurant inventory to accounting, analysis of variance and its effects is crucial.
Finding your variance is only as important as your analysis of your variance statistics makes it. The better you understand it, and the more ways you apply your knowledge to your business, the better off you will be.
Understanding the analysis of variance and what it means for your restaurant or bar business will help you grow and support your business. Today we’ll cover the benefits and outcomes of a quality analysis of variance. Once you’ve read this article, you’ll have a better understanding of variance statistics and what they mean to you.
Analysis of Variance
A statistical analysis of variance in your business will help you understand and improve your inventory management process, customer service, and restaurant business plan. Of course, that phrase applies to understanding every aspect of your inventory process and business factors with equal importance. Variance analysis, however, is one of the most important parts of understanding your business, since it deals directly with shrinkage and growth potential.
These 13 benefits, features, and potential outcomes of an analysis of variance and variance statistics are all things you can look forward to. They may not all come together at once, and you may find that some aren’t applicable to your business needs. If you keep an eye out, however, you’ll see how they all play a role in the understanding of variance in your business. From the factor of variance in a sample of data, to a model you can rely on month to month, studying your variance selection out of your total inventory gives you powerful insight into your business.
13. Overall Efficiency
Overall efficiency sits at number 13 on the list. While it’s not a specific difference you see in one area, it is an overall benefit of a thorough analysis of variance in your inventory audit. When you understand your variance statistics, you’ll see greater efficiency possibilities in every facet of your business.
12. Materiality Threshold Analysis
The materiality threshold is the level of loss or variance you can have in a business without cause for concern. Effectively, it’s the acceptable level of variance. The ability to analyze this threshold and maintain it gives you greater control over your variance levels and business needs.
11. Menu Refinement
Your menu is one area where you can apply variance analysis to individual meal offerings. If you see a place in your ingredients inventory with a huge variance, menu planning and design and menu pricing can help you balance that variance. Even switching up menu types to offer different types of meals can come in handy.
10. Business Assessment
Getting to know your business better is always a positive move, and analyzing your variance can help you move in that direction. Variance is one small piece of the puzzle of your business, but understanding it can affect every other aspect of your business plan. From knowing your books better to refining your ordering system, variance analysis is key to your success.
9. Customer Service
Customer service shows up consistently as a benefit when you learn how to do inventory with better practices. Your customer service standards will benefit directly from an understanding of variance. When you have a handle on your variance, you can focus more time and energy on your customers.
8. Risk Management
Risk management is a key part of any business plan. Your threshold for risk management goes up substantially when you have a firm grasp on your variance statistics. When you see where things are going wrong, you can plan for the future and make them better. Effectively, you can see your risks and find ways to make them less risky.
“Key Takeaway: When you see where things are going wrong in variance statistics, you can plan for the future, to make them better and find new ways to succeed.”
7. Room for Growth
When you can see your risks and potential gaps in your bar or restaurant inventory process, you’re also able to see the other side: room for growth. Your variance analysis will show you where things are struggling. You can take that information and find ways to improve those areas, and improve aspects of your business you weren’t necessarily looking at before.
6. Managerial Concerns Identification
When you’re analyzing your variance, one area that will be well worth taking a specific look at is your managerial practices. Issues can come from anywhere in a business, but if they’re coming from management for restaurant systems, they can be particularly difficult to overcome. If you’re seeing signs in variance that show issues in management, you can more effectively fix those root causes.
5. Improved Forecasting
Inventory forecasting can be one of the greatest tools in your inventory arsenal. Understanding your variance can take forecasting from good to great. Your variance statistics will show you where things have been going sideways in the past. You can use that information to plan ahead and change your inventory for the better.
4. Competitive Advantage
As a bar, restaurant, or similar business, you’ve got a lot of competition with other businesses. You can stock the best beer brands and serve the tastiest prix fixe menu items. Your budget, however, is one thing that really has the power to put you above the rest. Having control of your variance–and by extension your budget–will help you keep going forward with new, unique ideas.
3. Theft Management
While theft is a small portion of the reasons behind variance, it is a vital portion of variance to keep an eye on. The better you understand your variance and everything causing it, the better you can be about preventing theft. This will mean something different for each kind of theft–internal, or external theft like dine and dash. However, finding the theft factors of your variance gives you an edge on the thievery.
2. Promotional Planning
There are two potential sides to your quantity in variance. You can either be running through products faster than expected, or you can have a surplus causing a higher count that you would like. In both cases, planning restaurant marketing and bar promotions around items you have too much or enough of, can help you build profits in spite of your variance.
1. Costs Control
Costs control is music to the ears of anyone in charge of budgeting for a business. It’s hard to maintain complete control over your costs. However, when you have a solid understanding of your variance, you can budget in the average necessary expenses to maintain inventory control. If you track your variance month over month with regular variables, this cost advantage can become a regular part of your budget.
Variance Statistics
Studying variance statistics, both your own and industry-wide statistics, can be helpful in getting even more from your analysis of variance. There are different areas of variance analysis where you can look into the variance statistics. Those four areas are:
- Accounting
- Food products and ingredients
- General and cleaning supplies
- Basic kitchen needs and restaurant equipment
These four areas represent the basics of any bar, restaurant, or similar type of business. From the most technical business standpoint, your accounting variance statistics will have a high level of importance. Your variance statistics from the other three categories will all feed into your accounting variance analysis.
There’s no discounting the importance of your accounting variance statistics. There are, however, benefits to looking specifically at your variance analysis with food products, general supplies, and basic kitchen needs.
Getting up close and personal with those counts will give you a more hands-on approach to your business. Additionally, if you’re ever stuck on why your accounting variance is a certain way, checking the specific variances will help you figure it out.
Frequently Asked Questions About Analysis of Variance
The proper analysis of variance will give you greater insight into the needs of your business. Considering the importance of the analysis of your variance statistics and counts, you can’t overestimate learning more about the analysis of variance. Our answers to these frequently asked questions will give you some more background, and a launchpad for learning more.
What are the Uses of Analysis of Variance?
The uses of analysis of variance are greater control over your inventory, potential losses, and profit points. Additionally, an analysis of variance will also provide you with an in-depth view of your company from an internal perspective. That will drive you to keep learning more and growing your business.
Why Is It Called Analysis of Variance?
Analysis of variance is so named because a close-up analysis of a subject is the process of seeing and understanding more about that subject. That’s the exact goal when examining your variance. Analysis of variance encompasses the scope of what you’re processing as you go through the variance formula process.
What are Examples of Variance Analysis?
Examples of variance analysis include:
- Examining your accounting records for the last month, side-by-side with projected finances for that month, to find areas where you might be bleeding money.
- Taking a close inventory of ingredients at the beginning of the month, then again at the end. This will help you see where you used what you expected and where things went awry.
Of course, there are many more examples. These two, however, are two of the most common facets of variance analysis in a bar, restaurant, or similar business.
Analysis of Variance: Analyze That!
When you master the analysis of your variance, you’ll be able to plan ahead, make good changes, and keep your business moving upward. All facets of inventory are important for your business, but understanding your variance statistics is one of the central facets. Knowing where you’re losing out is one of the best ways to find where you can improve.
If you’re ever looking for more insight on inventory management techniques, variance statistics, and running a restaurant, come on back to the BinWise blog. You can also check out our sister site at the BlueCart blog.