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How to Calculate Usage: Inventory Usage Formula

October 23, 2019
BinWise Staff

One of the most important tasks in ensuring your restaurant's or bar's profitability is understanding inventory usage—the amount of product that your bar has used over a given time period—and being able to calculate it. After taking bar inventory, calculating usage helps determine your pour cost, variance, inventory shrinkage, pars, and even identify which products aren't so popular. This process works with draft beer inventory and wine inventory, too.

4 Steps to Calculate Inventory Usage

Let's start with this handy formula to calculate inventory usage:

Inventory Usage = Starting Inventory + Received Product Inventory – Ending Inventory

Let's break down how to calculate usage in four easy steps with our formula. The process is easier and smoother if you are already using a bar pos system, but works without one as well.

Step 1: Determine your starting inventory

If you want to know how much vodka your bar used over a period of three months, start by counting the number and size of liquor bottles that you have in your storage areas. Let’s assume you currently have 4 750ml bottles in the liquor room, 2 bottles in the back bar, and 4 more in the main bar. In this example, your starting inventory is 10 bottles of vodka.

Step 2: Find the received product inventory

Received product inventory is the number of products you ordered and received from your distributor during the time between your starting and ending inventory period. In our example, if you ordered 5 more bottles of vodka in that period of three months, then 5 bottles of vodka is your received inventory.

Step 3: Write down your ending inventory

Finally, you need to take the ending inventory for the product at the end of the inventory period. In our example, we make the rounds one more time and count up all the bottles vodka in the same places you counted before: liquor room, back bar, and main bar. After counting, you're left with 3 bottles of vodka at the end of the three months. This is your ending inventory.

Step 4: Calculate using the inventory usage formula

Now that you have the three key numbers you need, simply plug them into the formula above to calculate your inventory usage for the last three months:

Starting inventory: 10 bottles
Received inventory: 5 bottles
Ending inventory: 3 bottles
Inventory Usage = 10 + 5 - 3 = 12 bottles of vodka

This number can also be expressed in dollars. If one bottle of vodka costs $20, then we will have:  

($20 x 10) + ($20 x 5) - ($20 x 3) = $240

This means that, over a period of 3 months, your inventory usage rate for bottles of vodka was 12 bottles of $240. While this seems quite easy and simple to do, keep in mind that you must repeat the process of taking liquor inventory for every product in your bar by category, brand, item type, and sometimes even by the supplier. Even if you know the formula by heart and have all the numbers you need, calculating your inventory usage manually can still waste lots of time and be error-prone.

Thankfully, a liquor inventory software like BinWise Pro can help automate this process, saving you time and eliminating counting errors.

Book a demo to learn more about how BinWise Pro can help you save all kinds of time managing your bar inventory, including doing all the heavy lifting when it comes to calculating inventory usage rates, liquor variance levels, par inventory levels, alcohol ordering, and more.