How To Do Your Bar Inventory: Bar Inventory Basics

At best, it’s boring. At worst, it’s mind-numbing tedium that costs lots of money. It’s manually taking bar inventory. Yes, we are talking about taking a physical count of your bar inventory,

Whichever way you cut it, it’s not ideal.

There are 2 aspects to consider when learning how to take bar inventory:

• Counting what you have.
• Analyzing the numbers from the counts.

There’s several different bar management software out there that makes it about a thousand times easier with an inventory system. But getting the most out of your bar inventory software requires understanding what the software is doing.

Here’s the rundown on how to do bar liquor inventory, wine inventory and all the rest of it.

What is Bar Inventory?

At its most basic, taking bar inventory is the process of counting everything you have twice. Then, you figure out how much of it you used over that period of time. That's known as calculating inventory usage.

That’s really the point of bar inventory: to calculate your inventory usage over a specific timeframe.

How to Do Bar Inventory

The general idea behind physically taking bar inventory is that you count all the stuff you have. Then, in a little while, you count it again. The first time you count, it’s the starting inventory number. And the second is the ending inventory number.

The difference between those two numbers is used to draw a lot of useful conclusions for the operation of your business.

Here’s how to go about the counting process of doing bar inventory.

Step 1: Make a Plan

Learning how to do liquor inventory successfully is a matter of organization and consistency. Namely, you need to know exactly where all your alcohol is stored, in what order you’ll tackle each area, what information you’ll be recording, and with what frequency you’ll be inventorying liquor in a bar.

Decide Where to Start

You’ll typically want to start at the front bar. Then move on to any back bars, beer coolers, wine room, and liquor storage areas.

But it all depends on your bar layout design, or wherever your inventory is located. Do whatever makes sense for your bar or restaurant. But make sure you know exactly where all your stuff is and in what order you’ll be counting it.

Because you’ll need to do it in exactly that same order next time so as to save you time.

Decide What to Record

You need to figure out what information you’re going to record.

Most bars tend to capture the following in their inventory counts:

• Product category (This can be as detailed as it needs to be based on the size of the inventory. Whiskey, Scotch, Tequila, Wine, Beer, IPA, etc.)
• Product brand or name (Smirnoff, Crown Royal, etc.)
• Format (liquor, beer, and wine bottle and keg sizes)
• Level (Full, half, etc. How much liquor is left in the bottle)

Again, you’ll need to record the exact same things during both starting and ending inventory counts. If you don't, you won't get an accurate count reading.

Decide How Often to Take Liquor Inventory

How much time will elapse between each inventory count? This is, again, important to be consistent with. Without consistent historical data, you won’t be able to draw conclusions confidently.

Most bars and restaurants go with bi-weekly or monthly inventory counts. The more often you count, the better. But not every bar has the bandwidth to commit to weekly inventory counting.

That's why using an Inventory Auditing and Management Service such as F&B Serve can make the process easier and reliable, as we recommend doing inventory on a weekly basis.

This whole question is irrelevant, though, if you’re using an outside inventory auditing and managment service to keep track of your inventory.

Step 2: The First Count

Time to count. Every. Single. Thing.

We’ll come right out and say it: physically taking inventory is a glorified manual counting process. Any way you cut it, you’re going to have to repeatedly count individual amounts in individual bottles. That's the only way how to count liquor bottles if you don't automate it.

Automate?

Yep, you could use an inventory scanner tied to a beverage inventory platform, but that's not what we at F&B Serve recommend. Our very own Inventory Auditing and Managment system allows us to weigh each and every bottle and keg, giving you a more accurate inventory accessment than the traditional "point counting." It speeds everything up by magnitudes. Otherwise, it’s countin’ time.

Start at the the Front Bar

Start at your front bar, note how many liquor bottles of all sizes and types you have.

How to Measure Liquor Bottles for Inventory: Tenthing

This is the old school method that is still used by many bar and restaurant owners, although we DO NOT recommend it. 

Using this method is not very accurate as you can't tell by looking at the bottle exactly how much product has been used.

To gauge levels, visualize each bottle divided in 10 parts. That's how to measure liquor bottles for inventory. Then have them estimate how many tenths of the bottle is still left. If the bottle is half full, they’ll record 0.5. If the bottle is 9/10ths full, they’ll record 0.9. And so on.

Then, move from the front bar to any back bars, liquor storage rooms, walk-ins, refrigerators, and cellars.

Liquor Storage Room Inventory Count

It's vital that your inventory count moves beyond the front of house into your liquor storage room, as this is where most bottle thefts will occur.

While a simple front-to-back solution may work at the bar, your storage room is likely a bit more complicated. The best way to handle this area is to create a map and flowchart of all storage shelves and the order to count them. Then train your staff to always take inventory in the same order to ensure the most accurate and consistent counts.

Starting Bar Inventory

When you’re done with the first count, that’s your starting inventory. This number defines your current amount of inventory and will be vital with your calculations going forward. That's why it's so important that you get the most accurate count. Otherwise, your next count may be inconsistent and show that you have used more or less liquor than you actually have. This can cause issues with ordering more alcohol and will ultimately hurt your bottom line.

That is one advantage to using F&B Serve as your Inventory Auditing and Managment service. Our system not only weighs your bottles for a more accurate count, but also can set your par levels and notify you as to when and how much product to order. And with the push of a button, can do your ordering for you. Making your life easier and freeing up your time for other important tasks.

Step 3: The Second Count

Now is the time for consistency. Do everything you did for the first count again, exactly as you did it before.

And shoot for going through this process every week. Though, as we stated earlier, some beverage programs take their liquor inventory every month. Longer than that and you're missing out on the chance to react to sales patterns and optimize for profitability.

After you count a second time, that’ll be your ending inventory. But keep in mind that this is a continuous process. So when you take inventory a third time, this becomes the starting inventory and your newest count your ending inventory. And on and on.

Step 4: Calculate Inventory Usage

The whole idea behind taking inventory is to calculate how much inventory your business has consumed over a set time frame.

And to calculate it you need:

• Starting inventory
• Ending inventory
• Received inventory

The only piece you’re missing is the received inventory. Gather up all your invoices from the time period you’re measuring and add ‘em up. This is much easier with bar inventory managment software like we use at F&B Serve, which could supply you with a record of all your received inventory in seconds.

Once you have your three inventories, use them to find your usage rates. Our system handles everything, so you don't even need to know how many ounces in a pint.

And once you have your usage rates, you’ll use them to calculate par level, variance, and pour cost.

Step 5: Calculate Par Level, Variance, and Pour Cost

Your inventory usage allows you to calculate three other very important metrics for your bar:

• Par level inventory acts as a de facto reorder point for your inventory. Based on your historical inventory usage, you’ll know the minimum you need to have on-hand to optimize shelf space and lower carrying cost. And you’ll know when to place orders to replenish your stock.
• Your inventory variance is the amount of inventory that’s been sold compared to the amount that’s been used. Basically, how much was used without being sold? By identifying certain alcohols with high variance, you’ll be able to clamp down on inventory theft, overpours, and comps. Having standard pour sizes is a great way to reinforce consistant recipes that reign in variance.
• Pour cost is the percentage of a drink’s selling price that it costs to acquire the drink’s ingredients and prepare it. The lower the better, then. Inventory counts allow you to identify your most- and least-profitable drinks. Then you can put those profitable drinks front-and-center with a little menu engineering. Or you can work on various alcohol pricing strategies for your less-profitable drinks.

That’s it. The only thing left to do is internalize these five steps. Prep, count, count, calculate, calculate. Get in the habit of doing this every week and you’ll generate reams of valuable data.

You can also offload the entire responsibility of it to an industry-leading beverage inventory service like the one offered by F&B Serve. By automating your liquor inventory, you don’t just automate counting. You give yourself an inventory with real-time accuracy based on every transaction and all the above data with just a few clicks.

The amount of time spent manually doing inventory dwarfs the initial cost investment in hiring a service like F&B Serve .

5 Tips & FAQ's For How to Manage Liquor Inventory

Regardless of how you take bar inventory (manually or automatically), these tips help make it as smooth as possible.

How Often Should a Bar Take Inventory?

Ideally, a bar takes inventory every week. That gives the bar manager the most accurate data. And the ability to react to the data to make the most positive impact possible.

Most bars tend toward somewhere between two weeks and a month. But definitely don’t go longer than a month.

Be Consistent

Conduct your first and second counts identically. You may be asking, “Why must they be executed identically if I’m counting the same stuff?”

Because your job as an inventory taker is to remove every variable that may corrupt your inventory data. It’s wiser to do the same exact thing twice and compare the numbers. Then you know for sure that the numbers you’re comparing are apples to apples.

Start from the same place, end at the same place. Use the same people. Record the same data, use the same method of tenthing, if that's the system you're dead set on using. 

Take Liquor Inventory After Close Or Before Opening

Trying to count inventory while sales are being made is too difficult. There will be loads of distractions and inaccuracies. And you’ll also probably miss out on recording some of the stuff that’s sold during the inventory session. Almost all bars take inventory after or before hours and yours should too.

Bar Inventory Analysis

Based on your inventory usage, you calculate your inventory variance, pour cost, and par levels. All crucial metrics to making profitable decisions for a bar or restaurant owner and manager.

What, exactly, does taking bar inventory tell you about your bar?

A lot:

1. The sustainability and opportunity for your bar or restaurant's profitability margin, along with opportunities to enhance both.
2. Your bar's variance, aka your shrinkage, loss or excess inventory.
3. What your par level and reorder point for each product should be.
4. What your pour cost is and ways to decrease it.
5. Which products are in demand and which aren't. Which allows you to implement strategic alcohol pricing and what you should order from your vendors going forward.

In fact, taking bar inventory is the single most effective way to optimize your bar and restaurant's profitability. Here’s why.

How Does Taking Bar Inventory Save Money?

Let’s talk about everyone’s favorite subject, money.

Specifically:

All the ways liquor management can make you piles of it.

You can now put your inventory usage levels to work for you. There are three metrics that use inventory usage that affect bar profitability. Variance, pour costs, and par levels.

Helps Identify Product Variance

Calculating your variance percentage opposed to your cost percentage shows the difference between the amount of product sold and the amount of product used. It's also called shrinkage or loss.

In a perfect world, those two amounts are the same, but this is not that world.

If a product's variance is 20%, it means that, of all the product used, 20% is lost and not sold.

The cause of high variance is varied. It's often some combination of getting away from standard liquor and wine pours. But mistakes, breakage, and theft, occur too. You can also figure out how many shots are in a bottle and use that to keep track going forward.

Calculating variance for every product will give you a precise picture of where money might be slipping through the cracks.

It’s one of the best ways to use alcohol inventory usage rates to boost your profits, but not the only way.

Helps Calculate Pour Cost

A product’s liquor cost is one of the key insights into its profitability. And, all products taken collectively, into a bar’s overall profitability.

Pour cost, or liquor cost, is the amount of a drink’s selling price it takes to create the drink. That includes wholesale purchase price, labor cost, garnish cost, etc.

Most bars shoot for an average pour cost of 20%, with target liquor pour costs dipping even lower, to around 15%.

Whatever products have the lowest pour cost are most profitable. Knowing your profitable products helps you make informed decisions. From what distributors to use to profitable drink menu engineering.

But there’s still one more important way to use your inventory usage rates to save money and boost profit. Par levels.

Helps Set Par Level Inventory

Finally, you set par level inventory. The definition of par level: the minimum amount needed to keep it in stock at all times. You can apply it to every item on your bar liquor list. It’s based on historical usage data, which is easy to generate with bar management software.

It also helps cut down on sitting inventory. This is where consistently calculating inventory usage comes in handy. Because par level is set on your past inventory usage trends. That ensures you’re meeting demand but not sitting on too much unused product.

Cuts Down on Sitting Inventory

Sitting inventory, or dead stock as we call it, is product on your shelf that you’re not selling … yet. It could even be spoiling or going bad if there is a shelf live to it, like beer. You don't want to find out the hard way what happens to your profits when alcohol expires. It’s taking up valuable space from other products you could be selling, and it's tying up your money. Here’s a look at the benefits of decreasing your sitting inventory and how to do it. The benefits of reducing your bar’s sitting inventory are many.

You'll:

• Free up more cash for operations and profit
• Free up more space on your shelves for products that are selling
• Save money on distributor delivery costs, because you’re ordering less
• Save time taking when taking inventory, because you’ve got less inventory to manage
• Reduce your shrinkage; the less product you have, the less you stand to lose.

Here’s how to reduce your bar’s sitting inventory:

• Set the right par levels. This can’t be stressed enough. This is the reason par level inventory exists.
• Don’t be swayed by bulk discounts from your distributor. Unless you know, based on usage levels, that you'll use all the product you order.

Knowing how to calculate this stuff is half the battle. The other half is mastering the process.

Bar Inventory Template

If you’re taking physical inventory, you’ll need a bar inventory spreadsheet. Either print one out and record your counts on it IRL or carry a laptop around with you while you count and use a spreadsheet.

Use Bar Inventory Software

And, finally, the best conceivable tip for any bar owner or manager on how to inventory liquor in a bar. Use an inventory auditing and management service. We will calculate inventory quickly, automate everything, and make the most of what this article covers irrelevant.

Contact us today to setup your FREE Consultation and Demo.