Food Fair Contributing Business Editor
Lopolito Hospitality Consultants, Corp
EXPENDITURE BEHAVIOR MANAGEMENT
EBM is a put-in-place set of procedures that define the goals of your organization's values in keeping expenses under an umbrella of monitoring using foresight, rather than reactive conclusions.
January 5, 2020
𝐂𝐨𝐩𝐲𝐫𝐢𝐠𝐡𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 𝐓𝐗𝐮 𝟐-𝟏𝟕𝟑-𝟓𝟓𝟕
Expenditure Behavior Management “EBM” is an awareness driven decision-making practice. The method impacts the controlling of business expenditures with an understanding of how all decisions affect current and future operations. EBM means having a plan in place and followed on how expenses are decided upon, managed and monitored.
EBM encompasses a twofold composition with:
1. An ongoing sense of demand, as well as, knowing the differences in the marketplace of the prices and quality available on the item or product being purchased, verifying delivery with price accurate to the purchase.
2. An equal balance of observing forward-minded conclusions where the outcome of decisions made and/or procedures put into place includes the understanding of how it may impact future revenue and profits.
An example of EBM understands the demand or knows the necessity for an item or product within your marketplace or business, comparing pricing and quality across a broad field to select the best outcome, verifying the delivery along with the price is as expected, and the considered results from all procedural decisions made alongside expenses now and for the future against revenue and profit-building. The alternative to having an effective EBM process in place would be a failure of one process in these procedures.
EBM is a put-in-place set of procedures that define the goals of your organization's values in keeping expenses under an umbrella of monitoring using foresight, rather than reactive conclusions. The behavioral process of EBM must be consistent, practiced, and monitored on a regular basis, and trained upon the management teams. Having the knowledge of how your company is processing expenditures and setting standards and procedures to follow creates a fiscally responsible system of accounting and will improve a business’s performance levels.
Associated and working in conjunction with EBM is Expense Loss. Expense Loss is defined by a value that is determined lost by uncovering the variance between money that is currently unsystematically expensed on product, services, or equipment and the achievable amount of expense reduction that is possible or interpreted through a review and fiscally applied methods of spending behavior and forward-thinking decisions. Expense Loss begins with a review of the business to determine where loss has occurred or is ongoing, or where an unnecessary expense is occurring.
The thought of having a mindful decision-making process when addressing expenditures is nothing new but certainly necessary, however, there are few outlines like EBM available or that are tied into another expenditure evaluation process like Expense Loss.
In Review, EBM begins with an understanding of current procedures and practices in place for expenditure decisions and follows with implementing any that are missing:
1. Knowledge of the need or demand for the product.
2. Knowing or researching the differences in the marketplace prices and quality available on an item or product considered for purchase.
3. Purchasing with overage waste considerations.
4. Verifying all deliveries with a practical and procedural receiving process in place that include all afterthoughts to storage and processing.
5. Observing forward-minded conclusions on all business procedures and decisions where the outcome from the initial consideration and throughout the thought process has included the understanding of how profits will be impacted today and in the future.
Decisions must constantly be made in managing operations and not having a clear understanding of the outcome beforehand is uncaring behavior and should be concerning. The foundation for having an EBM process reduces overspending or knee-jerk reactions which can be a cause for business struggles that can go on for a long time when unnoticed. Long term loss or struggles becomes especially concerning in times of difficulty when what to deal with first causes indecision, incorrect forward-thinking, and other problems and this becomes overwhelming when you fear troubles or failure is on the horizon. Combine this with a noticeable reduction in guests, dissatisfaction growing among staff, and less cash flow to pay bills and the ground quickly becomes quicksand beneath you.
Cost Side and Lost Side spending behavior in correlation to an EBM methodology:
A common viewpoint by managers in the spending decision process is the “cost side” mentality. The Cost Side Spending Behavior is: What will this cost me in making this decision?
When observing expenditures the cost side viewpoint most often presents a one-time decision that did not include forward considerations or continuous monitoring practices and is counterproductive to EBM. You become complacent into the thought that you made the decision on an amount of money to spend and there is no need to revisit this, especially if you are comfortable with your decision and the same expense is expected to come up again. In these situations, you and your managers or administrative subordinates may no longer question the cost of the item or service provided no matter how much further reduction may be available in the marketplace, or how much you may be losing by following this cost side methodology. Everyone is on board with the cost from the vendor and no further determinations are necessary, until revenue drops below costs and a red flag goes up. This is a reactive based behavior pattern.
Instead, I propose the “lost side” in spending behavior.
The Lost Side Spending Behavior is: The specific amount determined or interpreted as overspent and gone from your profits.
The end determination is to evaluate what your additional profits can be when considering alternatives to your decisions, and is a segment in the Expense Loss and EBM methodology. The goal is to get you to look closely at the amounts lost and add them up, and then have you look at your operations as a whole in service standards, cleanliness and appearance, purchases, receiving procedures, inventory management, maintenance and repairs, and renovations, or anything else your company deals within its entirety and how each decision you make in each of the categories of your business may be participating to generating profits or not and where the Expense Loss condition exists in each category.
Looking at expenses with a lost side mentality keeps you informed and attentive to future decisions that will not follow the same outcome. This is a preemptive knowledge-based behavior pattern.
There is a foundational relationship to EBM with Expense loss, which is the amount that can be determined lost and gone as a result of current decisions and how this is impacting upon or reducing profits. The decisions that affect Expense Loss can be direct monetary disbursements, operational processes, and/or decisions that both, directly and indirectly, affect costs. Everyday decisions can generate a constant to loss from procedures in the business that has become overlooked and common behavioral practices. In addition, the common practices that generally follow in evaluating end-of-month reports with implementing next month's cost controls or spending adjustments are old school and an afterthought process. This method fails in having current cost controls considerations in place, therefore continuing to perform this monthly ritual will only result in forever gone profits.
An Expense Loss analysis along with an effective Expenditure Behavior Management process in place provides assessment and decision making ability concurrent with daily activity and offers much more valued end-of-month reports that are current to the analysis date. Furthermore, with an effective EBM process in place, there is less knee-jerk expense cutting necessity as the decisions you make are knowledge based on the results you can expect.
This form of Expenditure Behavior Management is one of the breakouts developed by James Lopolito from the foundation of his Expense Loss (Copyright Number TX 8782436) as a method to implement the results of this review method. EBM was formed as a management behavior process to supplement an Expense Loss Review because there was nothing in the marketplace that offered any close similarity to implement results. While the abbreviation or Synonym of EBM exists with other applications and definitions and especially in the medical industry, Expenditure Behavior Management in the marketplace is defined differently than created and written by James Lopolito in this material. You will find the Synonym EBM and definition for Expenditure Behavior Management by James Lopolito under his editor submission with Synonyms.com as JimLop at: https://www.synonyms.com/synonym/EBM.
𝑨𝒍𝒔𝒐 𝑹𝒆𝒂𝒅 "𝑬𝒙𝒑𝒆𝒏𝒔𝒆 𝑳𝒐𝒔𝒔": https://www.linkedin.com/pulse/concentrating-expense-loss-jim-lopolito/
𝑾𝒂𝒕𝒄𝒉 "𝑬𝒙𝒑𝒆𝒏𝒔𝒆 𝑳𝒐𝒔𝒔" 𝑽𝒊𝒅𝒆𝒐: https://youtu.be/Bvy1XazC3g0
Lopolito Hospitality Consultants, Corp. (LHC) is a New York based consulting firm that provides forward-thinking review and solutions to businesses in the hospitality industry. Concentrations in advisory services are available to restaurants, golf and country clubs, caterers, and other foodservice businesses. Jim Lopolito, President of LHC is also an active consultant with Cayuga Hospitality Consultants (CHC). Being an active member with CHC further enhance LHC’s portfolio offerings.