How to Take Your Bar Inventory – The Right Way!

November 6, 2017

|Dave Allred

For starters, if you have just Googled “How to take a bar inventory” I’m going to assume you are dwelling somewhere in the neighborhood of beginner to moderate bar management skills and knowledge.

And that’s ok. I’m not insulting you. Not at all. Everyone has to start somewhere and the fact that you’re doing your research is a very good sign that you care enough to take inventory, which puts you way ahead of a lot of owners and managers I’ve met.

By the way, this isn’t “Wiki-How. I’m not just going leave you with an obtuse, condescending list of how to count shit and add it up. I’m going to tell you how you should actually be managing your entire inventory like a boss.

Now, I’m not one of those ride-the-fence, try-to-make-everyone-happy sort of guys, so even though you can use an Excel inventory template or count sheets printed off so you can make tally marks and add up your totals, I’m not going to tell you that it’s ok to do that.

It’s not. Not if you’re trying to run your bar like a real business. Time is money and the time spent on sheets of paper and re-entering data all over the place is a black hole that will suck your time and energy dry. It’s time for you to get an inventory.

If technology scares you, I want you to picture your life still using a flip phone instead of a smart phone or standing in line at the bank instead of using the ATM. Or dial-up Internet. Christ! Do you remember trying not to dig your eyes out with a fork waiting for your computer to connect? Am I the only one old enough to remember that?

The point is, bar inventory systems are worth every penny, and right after I tell you how to take inventory below, you need to do some serious research on getting a quality bar inventory app.

It doesn’t need to be a huge monthly expense either. Bar Patrol Inventory App is $1.63 per day and it is cutting-edge. That’s half the price most places charge for a Coke at their bar. No excuses. Get it done.

Now, on to why you came here before I started scolding and lecturing you.

Remember, I’m giving you an entire inventory management plan here, not just how to count your bottles and figure PC%. Don’t just go through the motions. Use the information you’re gathering to run a rock star business.

7 STEPS TO MASTERING YOUR BAR INVENTORY

STEP 1: DETERMINE HOW MUCH INVENTORY YOU HAVE ON-HAND

This is the counting phase. Start in your storage room, start in your bar, start wherever you’d like and start counting. Using an inventory app, you should be able to move through this very fast.

Make sure you have all of your products priced out, meaning what you paid for them. Each product should have its own individual price, including bottled beer. You’re not entering the case price you paid. You’re taking the price of the case and dividing it (in this example) by 24, the case size.

So if a case of Corona costs $26.45, one bottle will be $1.10. You need to attach a wholesale price to every product.

For partial bottles of wine and liquor, you can point count or weigh the bottles. Point counting has about a 10 – 15% margin of error. Weighing about 2%, but I’ll leave that one up to you.

To learn more about the important differences between point counting vs. weighing your liquor bottles, check out the video:

Bar Inventory: Should You Weigh or Point Count Your Bottles?

Once you have everything counted and added up (the app will add it all for you), you should be able to determine your total Wholesale (WS) value of sitting inventory you have on-hand.

STEP 2: USE THE 15% RULE TO DETERMINE HOW MUCH DEADSTOCK YOU HAVE

The 15% rule is something I developed a few years ago while bar consulting to determine how grossly overstocked a bar was on their sitting inventory. 9 out 10 times they have WAAAY too much on-hand.

Here’s the formula:

Total Inventory On-Hand ÷ Total Monthly Bar Sales

EXAMPLE:

Total Inventory On-Hand (WS) = $12,959

Total Monthly Bar Sales = $50,000

$12,959 ÷ $50,000 = 25.92%

Way too much in this example, but I’ve seen worse.

For a more in-depth look at the 15% rule and why it’s such an important metric check out the video below.

Do You Have Too Much Bar Inventory? Use the 15% Rule to Find Out

To find out how much you SHOULD have on-hand, take your monthly bar sales and multiply it by 0.15.

$50,000 x 0.15 = $7,500

That’s how much this bar should be carrying. Not $13,000.

STEP 3: SET YOUR PARS

Setting your pars is the discipline you use to keep your inventory at that 15% ratio.

To properly set your pars, you need to figure out your WEEKLY usage for each product, and then simply multiply by 2.

Example:

Bottles of Jack Daniels used per week = 5.2

5.2 x 2 = 10.4

Jack Daniels Par = 10

Again, if you have an inventory system, all you have to do is run a usage report to find out your weekly usage. Very simple. If you have count sheets, good luck (don’t mean to sound cruel, but come on already!).

STEP 4: TAKE A ROUTINE INVENTORY COUNT

What I really want to say is take a weekly inventory count. Daily is even better, but also tough to keep up on. Weekly is fine. Monthly is common but way too long in between counts. It’s the equivalent of taking a shower once a day or once a week. They will both get you clean at some point, but the results are very different.

You want to see on a weekly basis how much inventory you have on-hand, and you need to be able to spot-check your bartenders as well.

The other advantage of once per week is you can use those numbers to order your products based on your par-level to keep everything neat and tidy.

STEP 5: ENTER YOUR INVOICES

That means every single product that comes in, the day they come in, otherwise your usage reports won’t be accurate. Don’t worry, it’s not that bad. It will take you 5 minutes per week. 10 minutes tops. You can always delegate this job to someone beneath you.

In the app, you simply look-up the product and enter how much came in (2 bottles, 3 cases, 2 kegs, etc.).

While entering your invoices, it’s important to keep up on the price changes as well so your numbers will be accurate. Again, very easy to do in the app.

STEP 6: COUNT YOUR RECURRING INVENTORY

Whether you do it daily, weekly or monthly, once you get a 2nd inventory, you can start plugging in your numbers to determine your pour cost percentage.

What numbers do you need to figure pour cost %? So glad you asked.

STEP 7: PLUG IN YOUR NUMBERS

In order to figure your weekly or monthly pour cost %, you just need to follow this formula:

BEGINNING INVENTORY + PURCHASES – ENDING INVENTORY

____________________________________________________

TOTAL SALES

Purchases, of course, are simply all the invoices you enter for the week/month.

When you break it down, Beginning + Purchases – Ending = Usage, so the simpler version of the pour cost formula is:

USAGE ÷ TOTAL SALES

EXAMPLE:

Beg. Inventory (April 1st) = $11,564

Purchases (April 1st – April 30th) = $10,640

End. Inventory (April 30th) = $11,238

Total Bar Sales for April = $49,259

THE MATH:

$11,564 + $10,640 – $11,238

________________________

$49,259

Pour Cost % = 22.26%

I hope this was helpful.

If you have any more questions about how to help your bar succeed, leave me a message by CLICKING HERE TO CONTACT .

Or if you’re interested in seeing how Bar Patrol App can help streamline your business and save a ton of time and money, you can CLICK HERE TO SCHEDULE A SCREEN SHARE DEMO.

Cheers, until next time,

Dave

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