Bar Management, Bar Inventory, Bars, Inventory

Bar Inventory 101: How to Keep Track of Your Stock

By Lightspeed

Lightspeed

May 19, 2022

If you run a bar, you know inventory is the backbone of your business. It’s what keeps you serving or what stops a sale if you don’t have enough of an ingredient on hand. While running out of stock can sometimes be a sign of good business, continuously over or under ordering can create big problems for bars and increase costs and customer dissatisfaction. 

The hospitality business can be a challenge, and highly competitive, which means bar owners need to always be on top of costs and stock. This is where inventory management comes in. Proper inventory management can mean the difference between long-term success and profit or big time losses. It’s time to take control of your inventory with everyday essentials that will keep you stocked and serving.  

Why is inventory management important?

Inventory management is an essential component of any food and beverage establishment. For bars, this means keeping track of both food (if offered), and liquor. With inventory management, bar owners and managers can have a better understanding of how much inventory they need to order, how much they have on hand and left over and how much is wasted or spoiled. The more actionable data you have, the better your purchasing decisions will be. 

Keeping track of your inventory 

Inventory tracking isn’t just a one-time thing, it’s a continuous part of restaurant management.  How often you keep track can have a big impact on everything from customer satisfaction to sales. 

Inventory management basics

From how much inventory you’ve used in a certain time period to how much each individual drink ingredient costs, there are several important formulas and concepts to keep in mind when starting your bar’s inventory management. 

  • Variance
  • Usage
  • Sitting inventory
  • Pour cost
  • Par level 
  • Safety stock 

Variance

Variance, also known as shrinkage, is the difference between your product’s cost and the usage (more on that later). Some variance is common in every establishment. However, if the number is too high you’ll need to take a closer look at your operations to understand where your products are going missing. 

The formula to calculate Variance is: 

Variance = Cost of Goods Sold – Inventory Usage 

Usage

Usage refers to the amount of inventory that’s been used up during a specific timeframe. This formula gives you a good idea of how much product you’re going through during a set period of time, allowing you to better understand which products you need to make sure you restock. 

The calculation is as follows: 

Usage = Starting inventory + Inventory added – Ending inventory 

Sitting inventory 

This refers to the amount of inventory you’re carrying at any given time. This can be tracked by product amount or dollar value. When counting your sitting inventory, choose one unit of measurement at a time and use that continuously. 

Pour cost 

Pour cost takes a close look at the cost of each ingredient in a specific drink, and the price of the drink. By looking at the cost of each ingredient, compared to the overall price of the drink, you’ll have a good idea of how profitable your drinks are. Doing an analysis of your pour cost with all your menu items will give you a clear idea of which drinks to keep and which to remove from your menu.  

The formula to calculate pour cost is as follows: 

Pour cost = Usage / Total Sales 

Par level 

Par level is the amount of inventory you need to have to meet your usual demand. How you calculate this will depend on the amount of deliveries you receive in a specific time period. While inventory levels should be based on your par level calculation, bars will likely have higher inventory levels during busy seasons or holidays. For example, a sports bar would likely stock above their par level during Superbowl weekend. 

If you want to calculate it on a weekly basis, the calculation would be as follows: 

Par level = (Weekly usage + Safety stock) / Number of deliveries in a week

Safety stock

Safety stock is the additional stock you keep on hand for emergencies or in case you have unexpected demand. While having a lot of inventory on hand for emergencies might seem like a good idea in theory, it could end up costing your bar a lot of money if it isn’t used. Generally speaking, safety stock should be around 20-30% of your weekly usage. 

Automating your inventory tracking 

Thankfully, inventory tracking doesn’t need to be a manual process anymore. By opting for an cloud-based point of sale system with inventory management tools, inventory can be automated and can provide you with actionable insights that help you make better purchasing decisions. 

An automated inventory management system lets bars and pubs: 

  • Eliminate manual stock counting 
  • View existing inventory and inventory value
  • See real-time deductions when drinks or other menu items are ordered
  • View automatic replenishments when inventory is received
  • Reduce waste and manage costs
  • Calculate recipe costs and margins by tracking every ingredient

Opting for the right point of sale partner can mean the difference between a cumbersome, highly manual process and a simple, automated one. For example, Lightspeed’s integration with Bevspot lets bars track things like variance and product loss by item, as well as costs and pricing with user-friendly graphs. 

Take control of your inventory with automated inventory management  

Running a bar is a huge undertaking, but managing your inventory doesn’t have to be. The right tools that give you data you can act on and insights that help you handle costs will let you focus on what you do best and keep serving no matter what. 

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