Every business needs to analyze past performance to identify trends and make improvements. If you operate a food and beverage business, you can generate better financial data by changing your fiscal year.

4-4-5 accounting calendars make it easy to compare performance between months and years. Each accounting month will have the same number of weeks from one year to the next, and the same is true of a 4-5-4 calendar. Use these calendars to produce a more useful budget, assess employee performance, and increase profit margins.

Understanding the 4-5-4 and 4-4-5 calendars

Here is the National Retail Federation’s definition of the 4-5-4 calendar: “The 4-5-4 calendar is a guide for retailers that ensures sales comparability between years by dividing the year into months based on a 4 weeks – 5 weeks – 4 weeks format.”

The 4-4-5 calendar includes two 4-week periods, followed by one 5-week period. Both types of calendars use a 13-week system, and the fiscal year consists of four periods of 13 weeks each (52 weeks total).

The calendars provide several benefits that improve comparability:

• The calendar lines up holidays.
• This format ensures that each month has the same number of Saturdays and Sundays, and the accounting weeks are standardized from year to year.

Weekends and holidays can generate spikes in revenue, and these calendars allow you to compare sales with more accuracy.

For fiscal year 2020, both calendars start on Feb. 1, 2020, and end the year on Jan. 30, 2021. The difference is seen in the number of weeks per month:

• 4-4-5 calendar: February (4), March (4), April (5)
• 4-5-4 calendar: February (4), March (5), April (4)

Each calendar has 13 weeks in the first three months of the year. To use these calendars, you need to change your fiscal year.

How to change your fiscal year

You must fill out an application with the IRS to change your fiscal year. Businesses may need to file Form 1128, Application To Adopt, Change, or Retain a Tax Year, or Form 8716, Election To Have a Tax Year Other Than a Required Tax Year. Check with an accountant to determine which form applies to your business.

You also need to change your accounting system, so that the software generates financial statements based on the new fiscal year. If you make the change effective in the year 2020, your fiscal year end will be Jan. 30, 2021, not Dec. 31, 2020.

If you use QuickBooks® Online Advanced, you can change your fiscal year and post transactions with confidence. Using one of the calendars explained above is particularly useful in the food and beverage business.

How the calendars improve comparability

To explain how comparability can be improved, we’ll use Hilltop Restaurant. Hilltop does 25% of its annual business in December of each year, and the owner uses a 4-4-5 calendar. Here are the 2018, 2019, and 2020 calendars for December:

• 2018: The December calendar starts on Dec. 2, and ends on Dec. 29.
• 2019: The month starts on Dec. 1, and ends on Dec. 28.
• 2020: This month starts on Nov. 29, and ends on Dec. 26.

Each month includes four weekends.

Now consider actual calendars for December 2018, 2019, and 2020. The December 2018 calendar has five weekends, while the December 2019 and 2020 calendars list four weekends each.

If Hilltop’s December 2018 revenue was 20% higher than 2019, the reason may be the extra weekend. The owner should use a 4-4-5 calendar each year to generate accurate performance comparisons.

The food and beverage industry is changing, and business owners need accurate financial data to manage change.

How industry trends impact financial management

Shifting customer preferences, along with varying business and cultural trends, have an impact on how food and beverage businesses serve customers. Restaurants are changing their menus, and serving food in new ways.

These changes lead to more complicated financial reports, and using fiscal week calendars generate more useful financial data. Forbes lists a number of food service and restaurant trends:

• Increased demand for delivery: DoorDash and Grubhub were both growing before COVID-19, and delivery demand has increased in the spring and summer of 2020.
• Lowering costs using commissaries : A lease or mortgage payment is typically the largest cost for a bar or restaurant. Restaurants make a big investment in renovating the space and installing equipment. A commissary describes a restaurant that rents cooking space on a short-term basis, in order to create a delivery-only business. Cloudkitchens provides delivery-only kitchens for restaurants, which lowers start-up costs.
• Competition from grocery stores : Your local grocery store may now offer traditional grocery shopping, along with dine-in and take-out food services. All three services are offered at the same location, which makes these “grocerants” appealing to consumers.

Other trends, such as sustainable food products and fast-casual dining, continue to grow.

If a restaurant decides to add a new service or change menu options, the owner needs data that’s comparable between periods. Owners must review financial data and make changes quickly, in order to control expenses and generate profits. A fiscal week calendar system provides consistent information.

Every business should create an annual budget, and fiscal week calendars improve the planning process.

Using fiscal weeks to budget more effectively

Business owners can use fiscal week calendars to assess performance in past years, and use that information to build an annual budget.

Hilltop Restaurant generated $500,000 in revenue in 2018 and 2019, and the two biggest expenses are food costs (30% of sales) and payroll (25% of sales).

Most customers pay using a debit card or credit card, and a small percentage of diners pay with cash. Hilltop collects cash quickly, and does not carry any accounts receivable balances.

As mentioned above, Hilltop does 25% of its annual business in December of each year. The owner’s biggest challenge is planning for food purchases and payroll costs to serve customers in December. Hilltop uses a line of credit to pay for some of the early December costs, and repays the loan in January.

The 2018 and 2019 fiscal week calendars report that Hilltop generated $100,000 in sales in December, and that $60,000 of December sales were generated over the four weekends in December. The remaining $40,000 was posted on weekdays.

Planning and assessing employee performance

An owner can use financial data to choose metrics, and to measure employee performance. Here are some examples:

• The December data includes daily sales, and the number of servers that generated the sales. The owner can set a goal of revenue generated per server, and monitor how the servers are performing.
• To control food costs, the owner can set a goal to minimize food spoilage and waste. The goal may be to reduce the expense by 10% during 2020. If the restaurant orders the right amount of food each week, and the kitchen staff prepares meals correctly, spoilage and waste can be reduced.
• Hilltop has two restaurant managers, and the owner can assess management performance by reviewing the sales and profitability generated by each manager. If one manager is outperforming the other, the owner can find out why and use the data for training purposes.

Well-managed businesses analyze profits margins in detail, and make changes during the year.

Improving profit margins

Profit is calculated as sales less all expenses, and profit margin is defined as the profit generated by each dollar of sales. The owner should calculate the profit generated by each menu item, and monitor the sales generated in each category.

The owner can reduce costs by negotiating lower prices for food ingredients, and by training the kitchen staff to eliminate waste in food preparation. The restaurant can also promote dishes that generate a higher profit margin. These steps help the business increase profitability.

Reducing the financial impact of seasonality

The restaurant business is a seasonal industry, and this variable makes managing the operation more difficult. Hilltop’s slowest time of year is January and February, the owner creates a monthly cash flow forecast to cover expenses when traffic slows in the winter.

Restaurants may also change their menus, depending on the season. If customers prefer dishes with more fruit in the spring and summer, Hilltop must change the food items purchased to meet the seasonal demand.

By using a fiscal week calendar, the owner can review activity in past years, and create a plan to address seasonal changes in demand.

Use QuickBooks Online Advanced to get the most out your fiscal week calendar analysis.

How Advanced can improve your restaurant business results

QuickBooks Online Advanced offers the most customization and power of any QuickBooks Online plan. Get reports with deeper insights and save time with batch transaction processing. Your data is protected, and the software is easy to use.

Use the system to generate more useful data and increase profits.