ATO benchmarks for caterers

The ATO's catering group supplies food and drinks, along with wait staff and serving equipment. Left out are firms that sell or repair catering equipment, those that only hire it out, suppliers of food to caterers, and food consultants. For catering, the ATO's key range is cost of sales measured against turnover, which it sees as forecasting a caterer's turnover more accurately than any other ratio. A caterer reporting little or no cost of sales uses total expenses instead.

Caterers are grouped by main activity. The ATO leaves out businesses under or over its turnover limits, those reporting a mix of activities and those that had not completed a year of trading when the year opened, and drops results well away from the pack.

Turnover is what a caterer earns from functions, orders and other sales, excluding GST. The ATO's total expenses figure is the whole cost base without payments to associated persons, relatives working in the kitchen among them.

Cost of sales carries the produce, meat, ingredients and drinks bought to prepare and serve. The ATO takes salary and wages out of cost of sales, so chefs, cooks and wait staff appear only in total expenses. That figure also picks up agency staff, marquee and equipment hire, van running costs, kitchen rent, power and gas, cleaning and insurance.

The space between the figures is labour and overheads. A caterer sending full wait staff to each event can carry a much higher total expenses share than one dropping off platters, even when their food costs look alike.

Every band is a slice of caterers gathered close to the mean for their turnover range, not a cut-off at either end, and its ends are whole numbers. Catering's turnover ranges come from this industry's results alone.

Cost of sales barely shifts with size. In 2023-24 its lower end stays almost level across the turnover ranges, while its upper end eases between the lowest and middle ranges and then holds, so food and drink take a similar share of sales in small and large caterers. Total expenses is the opposite: in both years both ends rise at every step up in turnover, and the band narrows, most of all in the top range.

Between the years, cost of sales in 2023-24 is lower or unchanged at every end: the lowest band dropped at both ends, the middle band is identical and the top band slipped at its upper end. Total expenses moved both ways, rising at the lowest band's upper end, falling at both ends of the middle band and rising at both ends of the top band.

Most causes the ATO lists for a high ratio have a catering version. Over-ordering for an event and binning what is left is wastage. Buying produce and drinks at higher prices than competitors, or quoting a lower mark-up per head, lifts cost of sales against turnover. Wait staff and kitchen hours that run high for the events booked lift total expenses. Food taken home for personal use but left in the stock figures, and event income not fully recorded, push the ratios up as well.

A low ratio can come from food bills filed under another expense heading, which shrinks cost of sales, from costs such as cash wages for casual staff left unrecorded, or from a business that prices higher or wastes less.

Before reading anything into the result, rule out recording slips: every supplier invoice entered, each event invoiced and its payment traced to the bank, and the food and drink still on hand counted at year end.

Work from a whole financial year's profit and loss. Divide cost of sales by turnover excluding GST and compare it with the band matching the business's turnover range, then do the same for total expenses with payments to associated persons left out.

Figures from less than a full year, from a caterer's opening year or from a year with a big one-off cost read differently, since the ATO's group leaves out new businesses and trims extreme results. A caterer that also runs a cafe, or sells or hires out equipment as a separate line, may be reporting a mix of activities, also outside the group. Reading both ratios together can point to whether a gap sits in food costs or in staff and overheads.