Proper inventory management can make or break a business. As a bar owner, it’s vital that you understand what comes in and what goes out of your bar. A good inventory system can help keep your liquor inventory up to date, your profit margins high, your shrinkage down, and your customers happy.
We’ve compiled this handy guide to help streamline your bar inventory system. Continue reading to learn everything you need to keep your bar running smoothly.
At base, keeping inventory in a bar consists of counting all of the unused alcohol on hand. In an ideal world, you could take your latest inventory figures and subtract your total sales to find your current inventory.
However, this usually isn’t the case. Breakage, theft, spillage, and over-pouring can all contribute to off numbers. This is called variance, and it’s usually expressed as a percentage of your total sales revenue. Ideally, you should aim for no more than a 2% variance.
Performing inventory counts is a great way to find out how much alcohol is being lost. This can help you take preventative measures. It also makes it easier for you to keep your stock up to date.
A physical inventory check is exactly what it sounds like. You’ll have to go through the entire bar counting how much alcohol you have on hand. During this process, you’ll need to examine both the front bar and your storage room.
You should also measure partially empty bottles. Best practices dictate that you mentally divide each bottle into tenths, a process known as tenthing. With tenthing, you record a bottle’s volume to the nearest tenth. For example, you might record a bottle as being 0.6 full.
Once you’ve tallied up your inventory, you’ll subtract it from your starting inventory plus any shipments that you’ve received during this period to find your ending inventory.
This is a time-consuming and error-prone process. For greater accuracy and efficiency, consider using perpetual bar inventory.
This method uses real-time sales data to automate inventory tracking using inventory management software. Typically, these systems integrate into your bar’s point-of-sale (POS) system. Every time you make a sale, the drink is automatically deducted from your digital inventory tracking system.
Not only does this alleviate much of the need to conduct lengthy, manual counting, but you’ll also have easy access to metrics that can offer important insights into your bar’s inventory usage.
While a perpetual bar inventory method can never entirely replace physical bar inventory due to variance, it can bolster the day-to-day running of your bar by providing helpful, real-time updates to your current stock.
A bar inventory management system can help you maintain just the right amount of inventory for your needs. It also provides helpful information that you can use to drive greater efficiency in your business.
Inventory data can provide helpful insight into the inner workings of your bar. You can use this information to find out which menu items have the biggest impact on your bottom line, sales trends, usage rates, spoilage data, and more.
With this information in hand, you can reduce purchase orders for drinks that aren’t selling. Keeping accurate inventory can also help you identify drink items you can eliminate from your menu or reduce shipments on.
Pour cost refers to the amount of money spent on the drink itself versus the price you sell it for. If you price a beer for $4 but it cost you $1 when purchasing, then your pour cost is 25%. Conducting an inventory analysis can help you identify which drinks have the lowest pour cost. Once you know what these drinks are, you can promote them to boost your bar profits.
We’ve already taken a high-level overview of tracking bar inventory. Now let’s dive into the nitty-gritty of effective inventory process best practices. Use the following tips to set up your business for success.
Overstocking your bar essentially means that you’re tying up cash that could be used elsewhere. Understocking your bar can lead to drink shortages and unhappy customers. The happy medium is known as your par level.
Calculate your par level by taking your average inventory usage for a particular item over the past three-month period. Let’s say you sold 1,200 bottles of red wine over the last quarter. Divide 1,200 by three to get 400 bottles.
You’ll want to establish a safety margin by adding 25% to this number (a safety margin protects against an unexpected surge in orders). So, you’ll need 500 bottles per month because 25% of 400 is 100, and 400 plus 100 equals 500.
Finally, divide this number by the number of deliveries you’ll get over this time frame. If your bar receives two deliveries per month then your par level will be 250 bottles. This is how much red wine you’ll want to have on hand after each delivery.
It’s important to strike a balance when deciding on your inventory periods. Waiting too long can lead to spoilage and shortages. On the flip side, too frequent counting can eat up precious time without adding any meaningful insights.
You should aim to take inventory between one to four times a month. Whatever you land on, make sure that you’re consistent. Keep to the same day and time for the most accurate results.
Don’t take inventory during store hours, or when you’re expecting a delivery. You may have to come into work before opening or stay late after you’ve closed up shop.
Many bar owners choose to take stock of their inventory on their off days. Tackling the task with a clear head and no distractions ensures the process goes smoothly.
When manually counting, you should align your bottles with your bar inventory spreadsheet. That means sorting your liquor bottles, draft beer, and other alcohol items so that you can easily scan and input them into your spreadsheet.
Use these inventory management best practices to take your business to the next level:
Stay consistent: One of the best things you can do when manually taking stock is to minimize deviations to your inventory process. That means taking stock at the same time of day and using the same processes to avoid introducing uncontrolled variables into the process.
Set up stock shortage alerts: Modern POS systems like KioskBuddy let you automate alerts for your beverage inventory management. When it detects that you’re running low on a particular type of alcohol, it lets you know that it’s time to restock.
Serve the oldest stock first: It might seem intuitive, but you’d be surprised at how many bartenders ignore this long-standing restaurant management tip. Alcohol has an expiration date, and oxidation and light exposure can speed this along. Finishing up a half-empty bottle before you open a new one helps you cut down on spoilage and clutter.
Get creative with unsold stock: If you’re having a hard time selling those last few liquor bottles or emptying that stubborn keg of draft beer, consider running a limited-time promotion. Whether it’s a happy hour special or a holiday-themed two-for-one deal, the key here is to offload unused stock before it goes bad.
Provide staff training: At some point you’re going to need assistance. Providing inventory management training early in employment ensures that when it comes time for staff to step in, you’ll have a seamless transition. You can ask your bar staff to come in early or stay late for the hour or so it should take to train them on your inventory software system. It’s also a good idea to go over best physical inventory counting and recording practices to cover all of your bases.
The right inventory tracking system can save you time and money while enhancing your business’s overall efficiency. If you’re currently relying on a bar inventory spreadsheet like Excel, you should consider upgrading to a bar inventory software system.
KioskBuddy is a powerful yet simple tablet-based POS system that integrates directly with your Square Inventory System. Automatically retrieve and update your stock count in real-time for the most accurate inventory management possible.
Want to try it before you buy it? Take advantage of our complimentary 30-day free trial when you sign up for KioskBuddy today!