Managing a bar can be a lot of work. The good news is, you can keep your bar well stocked, organized and profitable by implementing the right inventory management processes.
This article will take a look at everything you need to know about bar inventory, including signs that you have an inventory problem, best practices, how to conduct inventories, important metrics and so much more. We hope this guide can help give you the foundation you need to become more profitable.
What to include in your bar inventory
Your bar inventory should include everything you need to serve your customers. This includes alcohol, mixing ingredients, garnishes, and even your glassware.
5 signs you have a bar inventory problem
Here are 5 common signs that you have bar inventory issues that could be impacting your profitability.
- Inconsistent stock levels without a change in sale – This is a sign that you are not recording inventory data correctly. This is often due to manual inventory processes, which we will talk about shortly.
- One or two servers with much higher tips – If you have a couple of servers with significantly higher tips than others, it could be a sign they are out performing their peers or it could be a sign of employee theft.
- Too much stock on hand – Not having enough inventory can seriously impact your customer experience, but having too much inventory on hand will affect your profit margins. If you consistently have too much stock on hand it could be a sign of poor ordering processes, dead stock or slow moving inventory.
- Not updating menus and pricing – If you aren’t updating your menu and prices in a fairly regular manner (at least once a year), it could be a sign that you aren’t getting the inventory data you need to truly determine how your business is performing.
- High pour costs – If you have high pour costs compared to other similar businesses, it’s likely a sign you have a bar inventory problem. We will talk about calculating this important metric (and others) later on.
Tips for organizing bar inventory
Before you can start managing and tracking your inventory, you must first organize it. When your bar is organized efficiently, you not only reduce the time it takes to count your bar inventory, you’ll also be able to gain better insights on how to boost your profits.
To help keep your inventory organized, consider these important rules:
- Place perishable items at the front
- Avoid carrying too much stock
- Make sure products always go in the same place
- Use labels
- Do frequent inventory counts
- Conduct counts outside of business hours
- Organize by category
For more information on these rules, as well as additional tips, read our blog on 10 Rules for Successful Organization of Your Bar Inventory.
How to store alcohol
To help increase the shelf life of your alcoholic beverage inventory, you want to be sure it is stored correctly.
Firstly, be sure to store it away from light. Sunlight and artificial light can break down the molecules in your liquor bottles. While this mostly impacts colour, over time, it can affect the taste as well.
You also want to reduce the amount of air the alcohol is exposed to. When your alcohol is exposed to air (or more specifically the oxygen in the air), it can cause oxidation. Oxidation speeds up the aging process and reduces the quality of the alcohol and degrades the flavour.
If you have multiple bottles open, always use the bottle with less alcohol in it first. Similarly, you want to avoid leaving small amounts of alcohol in the bottom of the bottle. That’s because the less liquid there is in the bottle, the higher the risk of oxidation.
Extreme temperature changes are also bad for alcohol. Being too hot or too cold can severely affect the quality of your alcohol. But the right temperature is dependent on the type of alcohol.
Liquor: Can be stored at room temperature, however, the ideal temp is 13°C to 16°C
Wine: 11°C to 14°C; white wine can handle temperatures as low as 7°C
Crème liquor: Store in the fridge once opened
Fortified wine: Store in the fridge once opened
Beer: 7°C and 16°C, with light beers being stored in cooler temperatures and strong beers at higher temperatures
Lastly, keep bottles stored the right way. When storing wine, it is recommended you store it on its side to prevent oxidation. Liquor and beer should be stored upright.
The importance of standard pours
At your bar, over pouring means losses to your bottom line, and under pouring can result in frustrated customers. Standard pours are what bars use to ensure consistency. It also helps with bar inventory management and can help boost your overall success.
Standard pours depend on the type of alcohol being served:
Red or white wine: 5 ounces
Dessert wine: 2 ounces
Fortified wine: 3 ounces
Wine tastings: 2 to 3 ounces
Champagne: 4 ounces
80 proof mixed drinks: 1.5 ounces
On the rocks or neat: 2 ounces
Beer: 12 ounces
How to count bar inventory
To count your bar inventory, you first want to count the number of full bottles. You must then determine how much is left in any partial bottles. There are several different methods you can use to inventory liquor at your bar, each with its own pros and cons.
- Tenthing – Eyeball the bottle to estimate how much liquor is still in the bottle to the nearest tenth.
- Electronic tenthing – A computer estimates how much alcohol is left in a bottle using pictures of the bottles.
- Weighing – Use electronic scales to determine exactly how much alcohol is in the bottle.
When choosing an inventory counting method, it is best to use weighing. This method provides the most accurate inventory count, is objective and takes much less time. It also makes counting alcohols in opaque bottles easier.
What is inventory shrinkage?
Inventory shrinkage happens when you have less inventory on the shelf than is recorded in your records. It is calculated by subtracting actual inventory from recorded inventory and then dividing the answer by recorded inventory.
The most common causes of inventory shrinkage are:
- Theft: While this can be done by someone externally, internal theft (employee theft) is also a major problem. Some of the ways staff can steal inventory from you is by overserving friends and family or giving away free dishes, over pouring drinks for higher tips, taking food and alcohol home with them and recording false spills only to sell the drink later for cash and pocketing the tender.
- Waste: Alcohol, mixers, garnishes and food can all go bad over time, some much faster than others. If they aren’t used by their best before dates, they will have to be disposed of, which can increase inventory shrinkage.
- Spills: Accidents happen, which is why inventory shrinkage will never truly disappear. Dropping bottles, toppling trays, or replacing a customer’s spilled drink all increase your level of shrinkage.
- Over pouring: When it comes to serving alcohol, many drinks are poured by eyeing the pour. This leaves room for staff to accidentally pour more into a glass than standard.
- Admin error: There is a lot of alcohol and food moving in and out of your bar or restaurant, which means there are lots of opportunities for administrative errors. This may include inputting incorrect quantities per case counts or receiving inventory based on the packing slip without verifying the right amount was actually shipped.
Important bar inventory metrics
Bar analytics is the process of collecting and analyzing the data points related to all areas of your business, and using them to build meaningful insights that help you improve your restaurant or bar.
There are several different metrics you should be aware of when managing your bar inventory. Here are some of the most important ones:1. Inventory usage – the amount of bar inventory that has been used in a specified period
Inventory Usage = Opening Inventory + Purchases Received – Closing Inventory2. PAR level – Periodic replacement level, commonly referred to as PAR level, is the minimum supply of each product your bar needs in stock to meet the demands of your customers.
Inventory Usage = Opening Inventory + Purchases Received – Closing Inventory
3. Pour cost percentage – Your bar’s pour cost is how much your drinks cost compared to your bar’s resulting sales from those products. It is usually expressed as a percentage.
Pour Cost Percentage = (Wholesale Price Of The Product / Retail Price) X 100
Why your bar inventory spreadsheet is failing you
Spreadsheets are a seemingly simple tool for managing bar inventory – they can be organized by storage locations, data is easy to enter, the software does the math for you, and you can quickly produce charts and graphs to aid in decision making. Not only that, but they can be free to use as well.
But spreadsheets also have a number of flaws. If you are still using an inventory spreadsheet, here are some reasons you may want to look for a new solution:
- You have to know which formulas to enter to get the right information and you must ensure they aren’t accidentally changed, otherwise it could send your whole inventory calculation into disarray
- They aren’t designed for your bar inventory which means they are missing important features
- They don’t provide real-time data
- Spreadsheets don’t integrate with other systems to streamline processes
- They don’t scale well as your inventory grows
- There’s lots of room for human error
- It’s hard to find errors in spreadsheets
This is just a brief summary of why you shouldn’t be using spreadsheets for bar inventory. For more detailed information, check out our article on 7 Ways Your Bar Inventory Spreadsheet is Failing You.
What is bar inventory software?
Bar inventory software, known as a bar inventory management system, is a technology that helps automate and centralize the processes associated with managing your bar inventory.
Why should you use it?
Manual spreadsheets are time-consuming and typically lead to errors, resulting in inaccurate insights into your inventory. Bar inventory management software eliminates these issues. It also helps you:
- Save time so you can concentrate on delighting your customers
- Gain visibility and control over your inventory
- Improve ordering processes
- Reduce labour costs and make better use of staff’s time
- Minimize errors
- Find out where you are losing money
- Optimize sales by identifying products that bring in the most and least amount of money
- Automates data collection, analytics and reporting
What to look for in a bar management software
When looking for a bar inventory management software, there are some key features and functions you should look for:
- Direct POS integration
A POS provides several inventory management functionalities, from data forecasting, order planning reports, integrated accounting and much more - but a POS doesn’t give you complete inventory insights like a bar inventory management system will.
Instead, it’s crucial to integrate both systems. This will allow you to pull sales data directly from your POS system into your inventory management system, giving you greater insight into inventory losses.
- A large database of products to make inventory counts more seamless
Counting your inventory should be easy. Look for a liquor inventory management system that has a large database of different types and brands of alcohol to choose from during your counts.
This will speed up the entire process and make it more efficient, allowing you to focus on tasks that drive real value to your bar.
- Expert on-hand advice when needed
A bar inventory management system is incredibly helpful, but to truly use your system to maximize ROI and optimize your inventory expert support is crucial.
Technology should be combined with expert advice from specialists who understand exactly how the software works and what specific features will help your bar become more profitable.
What is a bar inventory app?
A bar inventory app is a mobile phone application, typically available on iOS and Android devices, that has been specifically created to give bar managers improved insights into their inventory usage.
It differs from inventory management software by giving you the ability to access your inventory information from anywhere. It can also help improve inventory counts using innovative technologies to automate this process, with barcode scanning, huge databases of products and electronic weighing to make the entire process more efficient.
Interested in learning more about bar inventory management? Contact Sculpture Hospitality today.