A well-run bar depends on two things: customer satisfaction and efficient inventory management. The latter can be a challenge, especially for busy bars that are constantly stocking new products and dealing with customer requests. At a certain point, keeping track of liquor inventory is considered one of the least liked tasks in the restaurant and bar industry. It's a time-consuming and stressful process that needs the participation of numerous team members.
There are different ways to approach this, but utilizing a systematic and consistent inventory process is key. This will help to avoid over-purchasing or losing track of what needs to be restocked. While it may seem like a daunting task, breaking it down into manageable steps can make it much easier.
Here is a guide to help streamline your bar inventory management process and make your life as a bar manager a little bit easier. Continue reading!
An Overview of The Bar Inventory Basics
Taking physical inventory is simply the process of counting everything you have twice. It's no surprise that bar inventory is crucial for keeping enough booze in stock, but it also allows bar managers to accurately assess valuable data and turn it into actionable insights such as:
- Evaluate the bar's financial performance
- Calculating shrinkage
- Maintain a minimal inventory
- Determine beverage costs so that you can price effectively
- Identifying the best-selling and most profitable drinks in your bar
The main purpose of taking bar inventory is to calculate your inventory usage within a certain time period so you can compare it to your beverage sales.
5 Steps To Manage Bar Inventory
The general idea behind bar inventory management is to keep a running tally of everything you have. Then, after a while, do a recount. The beginning inventory number is determined by counting the first time while the final inventory is represented by the ending inventory counts. The difference between these two values is used to draw a slew of useful business conclusions.
Here's how to go about doing the bar inventory counting process.
1. Make a Plan
As a bar manager, one of your important responsibilities is to keep proper bar inventory control. Inventory control systems are important for any business that needs to keep track of what products or materials it has on hand. By knowing how much is available, businesses can order the right amount of supplies and avoid too much stock or running out of items.
It takes time and planning to learn how to do liquor inventory correctly. Definitely, you must first know where all of your alcohol is kept, in what order you'll go through each area, what information you'll be recording, and how often you'll perform bar inventory.
Creating a system that works for you and your bar, and the entire process will be much smoother. It's understandable that you may keep using pen and paper inventory and spreadsheets, but it's worth considering an inventory system at some point.
Choose a starting point
This is just the beginning of the liquor inventory process. It's critical to figure out where to begin. The front bar is generally a good place to start. Then, go to any back bars, beer coolers, wine rooms, or liquor storage locations as needed. But it all depends on the design of your bar floor plan. Do whatever is appropriate for your bar space. But make sure you know where everything is and in what order you'll be counting it.
Because you'll have to repeat the procedure again the next time, it's ideal to be more consistent.
Determine What to Record
Decide what information you will record. In general, most bars keep track of the following in their inventory counts:
- Product classification (this can be as granular as it needs to be based on the size of the inventory. I.e. Whiskey, Scotch, Tequila, Wine, Beer, IPA, etc.)
- Product name or brand
- Format (liquor bottle sizes, wine bottle sizes, beer keg sizes, etc.)
- Measurement (How much liquor is left in the bottle: full, half, etc.)
To record inventory, the same items must be included during each inventory's beginning and ending counts.
Determine how often you should do your liquor inventory
How long will it take between your inventory periods? This, once again, must be followed consistently. You won't be able to draw confident insights to determine how much you generate sales unless you have consistent historical data.
The majority of bars and restaurants conduct bi-weekly or monthly inventory counts. The more frequently you count inventory the better. However, not every bar has the time to commit to weekly inventory counting. Also take note, that if you use a perpetual inventory system as your bar inventory software, this entire question is entirely insignificant.
2. Count your Beginning Inventory (The First Count)
Arrange the spreadsheet to correspond with how your alcohol is displayed on the bar. This saves you from having to arrange all of the bottles alphabetically on top of the bar.
Taking inventory is, in essence, a time-consuming manual counting operation. In any case, you'll have to count individual amounts in each bottle numerous times. That's the only way to do it if you don't automate it. Count everything carefully.
If you want to automate the counting, consider using an inventory scanner linked to beverage inventory software. With Wisk Bar Management System's inventory solution, you may speed up your operations and gain access to a comprehensive database of 200,000 bottles with 99.7 percent accuracy. This will assist you in running an efficient business.
Begin with the front bar
Begin at your front bar and count how many liquor bottles of various sizes and types you have.
It is ideal to count the bottles in the order they're arranged on the inventory spreadsheet and, if necessary, sort them alphabetically. Include the alcohol's type, brand, name, and bottle size. Include a column for your bar's back, storeroom, walk-in, or any other area of the bar where alcohol is kept.
Measuring Liquor Bottles for Inventory: Tenthing a bottle
Bar managers must have a thorough understanding of how to inventory tenthing liquor bottles.
To perform this, divide each bottle into ten equal parts to determine levels. This is how you measure liquor bottles for inventory purposes. You must also estimate how many tenths of the bottle remain. They will record 0.5 if the bottle is half full. They will record 0.9 if the bottle is 9/10ths full, and so on. Repeat the "tenthing" process for each bottle, entering the numbers onto the sheet and categorizing them as spirit, wine, or beer.
After that, proceed from the front bar to any back bars, liquor storage rooms, walk-ins, refrigerators, or cellars.
Bottle inventory counting in storage rooms
It is crucial that your inventory count extends outside of the front of the house and into the liquor storage room. Although a simple front-to-back solution might work at the bar, your storage room is most likely more intricate. To give you an idea, the best way to handle this situation is to make a map and flowchart of all storage shelves and the order in which they should be counted. Then, to ensure the most accurate and consistent counts, train your employees to always take inventory in the same order.
Successful beverage program like WISK allows bar managers to make important decisions quickly and inexpensively. Bar managers may use their phones to track inventory using a Bluetooth scale connection. WISK also combines inventory in order to assist bars in detecting stock loss and seeing what they have on hand quickly recording what is available and what needs to be purchased.
Beginning Bar Inventory
Your starting inventory data defines your on-hand inventory amount and will be critical for future calculations. That is why it is highly important that you obtain the most accurate count. Or else, your next count may be inconsistent, indicating that you used more or less liquor than you actually did. This can lead to problems ordering more alcohol, which will negatively affect your bottom line.
After you've completed the first stages of inventory counting, it's time to progress to the second. You'll be selling and receiving alcohol during this period. Keep track of how much product you receive or your total bar's stock (this should be included in your previous week's invoices) and your sales data or how much you sell (this should be in your POS system).
3. Count your Ending Inventory (The Second Count)
It all comes down to consistency. At the end of the inventory period—whether it's a week, two weeks, or a month—you'll take all of these counts again, repeating the exact same process. This gives you a starting and ending inventory count.
How Often Should a Bar Take Inventory?
It is ideal to repeat this process every two weeks. To gain the most from the inventory process, some bars even conduct inventory once a week. Based on its functionality and size, you can choose the right frequency for your bar.
However, if you wait any longer, you will lose the opportunity to respond to sales patterns and optimize for revenue growth.
4. Inventory Usage Calculation
The entire point of taking inventory is to calculate inventory usage. That is the amount of inventory consumed by a company over a specific time period.
Enter the totals for all of your liquor categories into three columns in your bar inventory spreadsheet:
- Starting inventory
- Received inventory
- Ending inventory
These three most important inventories are keys to determining your inventory usage. It will be a lot simpler if you use a bar management software like Wisk to keep track of your inventory record.
Additionally, It's critical to monitor how much stock you've received at all times. You can accomplish this by combining all your invoices and purchase orders from the time period you're tracking your received inventory.
Here's the formula for calculating your inventory usage:
Usage = Starting inventory + Liquor Purchased – Ending Inventory
To calculate your bar's inventory usage over time, you'll need to know how much inventory you had at the start of the period, how much you had at the end of the period, and how much you received during the period.
It makes sense that you know your usage so you can get meaningful data to manage your bar. You may compute your par level, variance, and pour costs once you've determined your consumption rates.
5. Calculate Par Level, Variance, and Pour Cost
Let's start by defining some terms that are commonly used in bar inventory. The following metrics can be calculated using your inventory usage.
Par level inventory
The bare minimum of a product that a bar or restaurant should keep on hand in order to meet demand until additional inventory arrives. This serves as a de facto reordering point. Based on your previous inventory usage, you'll know the bare minimum you need to keep on hand to maximize shelf space and reduce carrying costs. You'll also know when to place orders to replenish your inventory.
Inventory variance is the difference between the amount of inventory sold and the amount used. In other words, how much was used but not sold? You'll be able to reduce inventory shrinkage, theft, overpours, and comps by identifying specific alcohols with high variance. Standard pours are an excellent way to bolster standardized recipes that control variation.
The majority of hospitality businesses incur variances of 20 to 25 percent. Any variance that is less than 20% is considered beneficial.
Pour cost is the portion of a drink's selling price spent on acquiring and preparing the ingredients. As a result, the lower the better.
Pour cost is calculated by dividing the amount of alcohol you had when you started, plus the amount you spent, by the amount you still have on hand. To calculate the pour cost, multiply that number by 100 and add a percent sign at the end.
Pour cost = Inventory Usage/sales
You can use a pour cost calculator to determine which drinks are the most and least profitable based on inventory counts. Then, with a little menu engineering, you can highlight those profitable drinks. You could also work on alcohol pricing strategies for your less profitable beverages.
Now that we've established some key terminologies, the only thing left to do in taking bar inventory is to internalize these processes. Repeating once every few weeks will help you accumulate a large amount of useful data.
Bar Inventory Analysis
Inventory usage is the main factor. You calculate your inventory variance, pour cost, and par levels based on your inventory usage. For bar owners and bar managers, these all essential indicators are beneficial for making solid judgments.
Absolutely, a good bar inventory may provide you with a number of important viewpoints. Let's take a look at what your bar's inventory has to say about it and its benefits.
How does Performing Bar Inventory Saves You Money and improves your bottom line?
It is obvious that keeping a close eye on your bar inventory records can help you streamline your operations and maximize profits. Let's drill down into the following benefits of taking bar inventory control.
Identifying your bar's variance, sometimes known as shrinkage or loss, or excess inventory is essential.
The variance calculation reveals the discrepancy between the quantity of product sold and the quantity used. They may sound the same, but it differs from each other in reality.
For example, if a product's variance is 20%, it indicates that 20% of all items used are lost and not sold.
High variance is caused by a variety of factors. It's typically some combination of getting away from normal alcohol pours and regular wine pours. Mistakes, breakage, and theft can all contribute to the problem as well. You may also figure out how many shots are in a handle and use it to track progress going forward.
You may get a clear picture of where money might be falling through the cracks by calculating the variance for each product. Although it's one of the most effective methods to increase your profits by employing alcohol inventory (40) usage rates, it isn't the only option.
Additionally, figuring out which products are in and which are out of demand has implications for future alcohol orders from your vendors and strategic alcohol pricing.
WISK can help you reduce bar spillage by 90% and provides clear data on inventory variance, so you always know where you stand. It can also help anticipate lead times for making the next purchase order.
Calculating your pour costs and identifying strategies to cut them
Take note that in bar inventory basics, one of the primary indicators of a product's profitability is its liquor cost. The profitability of a bar as a whole is determined by all of its goods.
Pour cost, often known as liquor cost, is the portion of a drink's selling price that goes on making it. This comprises the cost of labor, wholesale buying price, etc.
Most bars aim for an average liquor cost of 20%, with a target of roughly 15% pour costs for alcoholic beverages.
The most profitable items are those with the lowest liquor costs. Making wise decisions requires that you are aware of your profitable products. Where most bars acquire their alcohol to the engineering of profitable cocktail menus.
Setting your par level and reorder point for each product and reduce sitting inventory
Every item on your full bar liquor inventory list is subject to par level which is needed to maintain your stock at all times. This can be determined based on historical data usage.
Dead stock is inventory that you have on hand but aren't currently selling. It could be spoiling and getting worse. Learn the hard way what happens when alcohol spoils. It ties up your money and takes up valuable shelf space from other items you may be able to sell.
Because the par level is determined by trends in your past inventory usage, keeping track of inventory usage is useful as it lessens the need for sitting inventory. This makes sure you're supplying customer demand without having an excessive amount of unsold product on hand.
The following are just a few of the benefits of how to decrease your sitting inventory.
- Increase your cash flow by reducing the amount of money you spend on operations and profitability.
- Clear out more spaces on your shelves for items that are selling.
- You can save money on distributor delivery fees by ordering less.
- Take inventory more quickly by having less stock to supervise.
- Reduce shrinkage; the less product you have, the lower your risk of losing money.
Here’s how to reduce your bar’s sitting inventory:
- Set the correct par levels. This cannot be overstated. Par level inventory is essential for this reason.
- Don't be fooled by bulk discounts offered by your vendor. Unless you know, based on usage levels, that you'll use all of the goods you purchase.
5 Best Practices to Maintain Proper Inventory Records
1. Consistent Inventory Schedule
- Count your items before shipments arrive.
- When the business is closed, take an inventory.
- Weekly scale calibration
- Cost Your Drinks
- Track Usage Rates
3. Shelf inventory using the first-in, first-out FIFO method
4. Task a pair of employees to take an inventory count
Train and assign employees in inventory counting. This involves noting particular concerns or recording significant spills or breakages of entire bottles, among other things.
5. Standardize your system
- Standardize inventory count sheets
- Use bar inventory apps such as inventory scanners or other types of stock counting technologies
Bar Inventory Template
If you're doing everything physically, you'll need a spreadsheet. We've got a free one available for your convenience. It may be used to keep track of liquor inventory, brew beer inventory, and other things.
Importance of Automation for your Bar Inventory
Taking inventory manually is a tedious process and bar inventory control is no joke. If you do it yourself, entering the data into a spreadsheet might take time away from other responsibilities. Before handing it off, ensure that the person to whom you are giving it is reliable and knowledgeable about the process.
With bar inventory software or spreadsheet integrated into your bar pos system, you can move toward automating the process. This liquor software can link with your accounting, order, and inventory tracking, and help you establish your pricing points appropriately. It can also assist you in counting, managing, and valuing your inventory effectively.
Wisk bar inventory management software is a leading solution that is designed to help bars and restaurants manage their inventory more efficiently and accurately. With its artificial intelligence-powered technology, businesses can track their inventory levels in real-time, receive alerts when stock is running low, and make more informed decisions about ordering and pricing.
Interested? Check out our savings calculator to see exactly how much cash WISK could save your operation or get right to it and book a demo. Or, be our friend on Facebook and Instagram first until you’re ready to make the commitment. No matter what, we promise you’ll like what you see. Visit https://wisk.ai/bar-restaurant-inventory-software/.