Your accounting period is coming to a close and it’s time to conduct your dreaded liquor inventory count. At best it’s incredibly boring, at its worst it’s time-consuming and expensive.
The thing is, it doesn’t have to be that way. By using modern technology (such as bar inventory management software) instead of manual spreadsheets, weighing instead of counting as well as following some simple best practices, you can make bar liquor inventory a seamless process.
Interested in learning more about why the use of bar inventory management software is so much more effective than manual spreadsheets? Read our blog, Bar Inventory Spreadsheet or Bar Inventory System: What’s Best?
So, with that in mind, Sculpture Hospitality has created this guide to help you count liquor inventory in your bar.
What is liquor inventory?
Bar inventory is the process of counting everything you have in stock twice, once at the start of your given accounting period and again at the end of that accounting period. You then use those numbers to calculate your inventory usage, the amount of product you have used during your accounting period.
The bar inventory process is important because poor management of your inventory is detrimental to your bar. With bar inventory you can ensure that your bar is stocked appropriately according to customer demand, and that you aren’t losing money through wasted product.
Bar inventory gives you insights and data that show you exactly how your bar is performing financially, and what changes you can make to improve profitability further.
What methods can be used to count/weigh liquor inventory?
There are a lot of methods that you can use to count your liquor inventory. But these methods aren’t all created equally. We strongly recommend that you weigh your liquor for accurate inventory counts.
With that in mind, here are the different options your bar has to count liquor inventory.
Tenthing is the traditional method in which the person conducting the inventory count picks up or eyeballs a bottle to estimate how full it is to the nearest tenth. For example, the bottle that looks a third of the way full will be recorded on a clipboard as 0.3.
The verdict: This process is slow and inaccurate. Since it’s completely subjective to the person conducting the count, the outcomes are usually inaccurate and give you false insight into your inventory usage.
Tenthing has evolved in recent years and can now be sped up by the introduction of an inventory management system. By uploading a photo of a bottle to the system, the person conducting the count can move a line to where the liquor in the bottle is and the system will determine how much is remaining.
The verdict: Electronic tenthing is an improvement on traditional tenthing, but it still results in inaccuracies within your inventory usage calculations. Products can be difficult to see in bottles that aren’t clear, and lines aren’t always easy to draw.
Weighing is the process of using electronic scales, integrated with an inventory management system, to weigh your bottles. Your employee conducting the count will simply put the bottle on the scale, and that data will be automatically entered into your inventory management system (if they are connected). If not, you can manually input the data.
The verdict: Weighing liquor bottles will give your bar true accuracy into how much product you have at both the start and end of your accounting period. It’s fast, objective and incredibly accurate.
How to calculate your bar's liquor inventory usage
The ultimate goal of weighing your inventory is to calculate your liquor inventory usage for your specific accounting period. To do this, you will need:
- Your inventory count from the beginning of your inventory period.
- Your inventory count from the end of your inventory period.
- How much stock you received during this period.
With those three things, you can make one simple calculation to determine your bar’s liquor inventory usage.
Opening inventory + purchases received - closing inventory = inventory usage.
How to determine liquor shrinkage
Now that you know your liquor inventory, you can use those insights to gain information on how your bar is performing and how you are using stock to improve profitability. One of the most important insights is liquor shrinkage (also known as liquor variance).
Liquor shrinkage gives you the information you need to see where your bar is losing money and how you can make changes that improve profitability.
To calculate your liquor shrinkage you will need:
- Your inventory usage as described above.
- Your total goods sold, which is the tally of all products/recipes that your bar sells during your accounting period.
Now you are able to calculate liquor shrinkage with one simple calculation.
Liquor shrinkage = total goods sold - inventory usage.
Bar inventory best practices
To determine accurate inventory usage, your beginning and ending inventory counts must be accurate and reliable. We’ve created a quick list of best practices to help your bar achieve consistent inventory counts:
- Take your count the same way every time.
- Make sure your inventory periods are consistent, either weekly, bi-weekly or monthly.
- Find the method of counting/weighing that best works for your team, and stick with it.
- Take inventory while the bar is closed so no products come in or out while you’re counting.
- Train your employees to properly conduct inventory counts, even consider giving them inventory performance-based rewards.
- Use a bar inventory management system instead of manual spreadsheets, to improve internal efficiencies and gain complete visibility and control over your inventory processes.
Do you want to learn how a bar inventory management system can dramatically improve your inventory counts and the profitability of your business? Get in touch with Sculpture Hospitality today for a free demo of our innovative inventory management software.