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How to Do Liquor Inventory | Easy-to-Follow Guide for Bars

November 22, 2019
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Scott
Table of Contents
Bar inventory management software



At best, it’s boring. At worst, it’s mind-numbing tedium that costs lots of money.

It’s manually taking bar inventory. Yep, taking a physical count of inventory.

Whichever way you cut it, it’s not ideal.

There are two aspects to consider when learning how to take bar inventory. The first is counting what you have. The second is analyzing the numbers from those counts.

Here’s the rundown on how to do liquor inventory, wine inventory, and all the rest of it.

How to Do Bar Inventory: Step by Step

The general idea behind physically taking bar inventory is that you count all the stuff you have. Then, in a little while, you count it again. The first time you count, it’s the starting inventory number. And the second, the ending inventory number.

The difference between those two numbers is used to draw a lot of useful conclusions for the operation of your business.

Here’s how to go about that counting process.

Step 1: Make a Plan

Learning how to do liquor inventory successfully is a matter of organization and consistency. Namely, you need to know exactly where all your alcohol is stored, in what order you’ll tackle each area, what information you’ll be recording, and with what frequency you’ll be inventorying liquor in a bar.

Decide Where to Start

You’ll typically want to start at the front bar. Then move on to any back bars, beer coolers, wine room, and liquor storage areas. But it all depends on the bar layout design. Do whatever makes sense for your space. But make sure you know exactly where all your stuff is and in what order you’ll be counting it.

Because you’ll need to do it in exactly that same order next time. 

Decide What to Record

You need to figure out what information you’re going to record. Most bars tend to capture the following in their inventory counts:

  • Product category (This can be as granular as it needs to be based on the size of the inventory. Whiskey, Scotch, Tequila, Wine, Beer, IPA, etc.)
  • Product brand or name (Smirnoff, Crown Royal, etc.)
  • Format (liquor bottle sizes, wine bottle sizes, beer keg sizes, etc.)
  • Level (Full, half, etc. How much liquor is left in the bottle)

Again, you’ll need to record the exact same things during both starting and ending inventory counts.

Decide How Often to Take Liquor Inventory

How much time will elapse between each inventory count? This is, again, important to be consistent with. Without consistent historical data, you won’t be able to draw conclusions confidently.

Most bars and restaurants go with bi-weekly or monthly inventory counts. The more often you count, the better. But not every bar has the bandwidth to commit to weekly inventory counting. 

This whole question is irrelevant, though, if you’re using a perpetual inventory system as your bar inventory software.

Step 2: The First Count

Time to count. Every. Single. Thing.

We’ll come right out and say it: physically taking inventory is a glorified manual counting process. Any way you cut it, you’re going to have to repeatedly count individual amounts in individual bottles. That's the only way how to count liquor bottles if you don't automate it.

Automate?

Yep, you could use an inventory scanner tied to a beverage inventory platform. It speeds everything up by magnitudes. Otherwise, it’s countin’ time.

Start at the the Front Bar

Start at your front bar, note how many liquor bottles of all sizes and types you have.

counting bar inventory


How to Measure Liquor Bottles for Inventory: Tenthing

To gauge levels, visualize each bottle divided in 10 parts. That's how to measure liquor bottles for inventory. Then have them estimate how many tenths of the bottle is still left. If the bottle is half full, they’ll record 0.5. If the bottle is 9/10ths full, they’ll record 0.9. And so on.

tenthing for bar inventory counts


Then, move from the front bar to any back bars, storage rooms, walk-ins, refrigerators, and cellars.

When you’re done with the first count, that’s your starting inventory.

Step 3: The Second Count

Now is the time for consistency. Do everything you did for the first count again, exactly as you did it before.

And shoot for going through this process every two weeks. Though, as we stated earlier, some beverage programs take their liquor inventory every month. Longer than that and you're missing out on the chance to react to sales patterns and optimize for profitability.

After you count a second time, that’ll be your ending inventory. But keep in mind that this is a continuous process. So when you take inventory a third time, this becomes the starting inventory and your newest count your ending inventory. And on and on.

Step 4: Calculate Inventory Usage

The whole idea behind taking inventory is to calculate inventory usage. That’s how much inventory a business has consumed over a set time frame.

And to calculate it you need:

  • Starting inventory
  • Ending inventory
  • Received inventory

The only piece you’re missing is the received inventory. Gather up all your invoices from the time period you’re measuring and add ‘em up. This is much easier with bar management software like BinWise Pro, which could supply you with a record of all your received inventory in seconds.

Once you have your three inventories, use them to find your usage rates.

And once you have your usage rates, you’ll use them to calculate par level, variance, and pour cost.

Step 5: Calculate Par Level, Variance, and Pour Cost

Your inventory usage allows you to calculate three other very important metrics for your bar:

  • Par level inventory (see par level definition) acts as a defacto reorder point. Based on your historical inventory usage, you’ll know the minimum you need to have on-hand to optimize shelf space and lower carrying cost. And you’ll know when to place orders to replenish your stock.
  • Inventory variance is the amount of inventory that’s been sold compared to the amount that’s been used. Basically, how much was used without being sold? By identifying certain alcohols with high variance, you’ll be able to clamp down on inventory shrinkage, theft, overpours, and comps. Standard pours are a great way to reinforce standardized recipes that reign in variance.
  • Pour cost is the percentage of a drink’s selling price that it costs to acquire the drink’s ingredients and prepare it. The lower the better, then. Inventory counts allow you to use a pour cost calculator to identify your most- and least-profitable drinks. Then you can put those profitable drinks front-and-center with a little menu engineering. Or you can work on the alcohol pricing strategies for your less-profitable drinks.

That’s it. The only thing left to do is internalize these five steps. Prep, count, count, calculate, calculate. Get in the habit of doing this every few weeks and you’ll generate reams of valuable data.

You can also offload the entire responsibility of it to an industry-leading beverage inventory platform like BinWise. By automating your liquor inventory, you don’t just automate counting. You give yourself an inventory with real-time accuracy based on every transaction and all the above data with just a few clicks.

The amount of time spent manually doing inventory dwarfs the initial cost investment in automated bar inventory software. That’s why every successful bar today uses software.

How to Do Liquor Inventory Example

Here’s an end-to-end example of how all these pieces fit together. Let's look at BinWise Saloon*, a lovely old bar that sells only one kind of whiskey: Old Boondoggle**.

*Sadly, not a real place. **Sadly, not a real whiskey.

Step 1: Count Inventory

It’s Sunday, 10 a.m. The barkeep at BinWise Saloon counts—using the rule of tenths—8.5 bottles of Old Boondoggle behind the bar. They then make their way to the back storage room and count 10 more bottles. The bar paid $20 for each bottle.

Starting Inventory = 18.5 Bottles or $370

Next Sunday at 10 a.m. the barkeep counts—again using the rule of tenths—2 bottles of Old Boondoggle behind the bar. Then they make their way to the back storage room and count 7 more bottles.

Ending Inventory = 9 Bottles or $180

Over the course of the week, they received 10 bottles of Old Boondoggle from their distributor.

Liquor Received = 10 Bottles of $200

Step 2: Calculate Inventory Usage Rate

These numbers are all based on when liquor inventory was taken, so they’re weekly. We’ll use the same formula for inventory usage that we used earlier:

Inventory Usage = Starting Inventory  + Inventory Received - Ending Inventory
Inventory Usage = 18.5 Bottles (or $370) + 10 Bottles (or $200) - 9 Bottles (or $180)
Usage = 19.5 bottles (or $390)

BinWise Saloon used 19.5 bottles or $390 worth of Old Boondoggle that week.

Step 3: Calculate Variance (Using Usage Rate)

How much Old Boondoggle is dripping through the cracks every week? We need to find out how many bottles we sold during the week. I just asked the barkeep and he said 15. Now we need to figure out the cost of goods sold. That's the number of bottles sold multiplied by how much each bottle cost the bar, $20.

Variance ($) = Cost of Goods Sold ($) - Usage ($)
Variance = $300 - $390
Variance = -$90

To figure out the % variance, we use:

Variance (%) = Variance ($) / Usage ($)
Variance (%) = -$90 / $390
Variance = -23%

BinWise Saloon is unable to sell 23% of the Old Boondoggle used because of breakage, spillage, overpouring, comps, and maybe even theft.

Step 4: Calculate Pour Cost (Using Usage Rate)

Now let’s see how profitable Old Boondoggle is. We’ll need to sort out how much money we brought in selling it. There are 25 shots in a bottle, and each shot sells for $4. Remember from above, we sold 15 bottles. That’s 375 shots at 4 bucks a piece.

Pour Cost (%) = Usage ($) / Total Sales ($)
Pour Cost (%) = $390 / $1,500
Pour Cost = 26%

Eek. 26% is a high pour cost. 20% is what most professional bars shoot for, with liquor and spirit pour cost being even lower, on average.

Step 5: Calculate Par Level Inventory (Using Usage Rate)

As we found, our usage for the first week was 19.5 bottles. Now let’s say our usage for the following week was 15 bottles, and our usage for the week after that was 22.5 bottles.

Par Level Inventory = (19.5 Bottles + 15 Bottles + 22.5 Bottles) / 3 (Weeks)
Par Level Inventory = 19 bottles

That’s an average liquor inventory usage rate of 19 bottles per week over 3 weeks. That's a 3-week par level inventory of 19 bottles.

Step 6: Put it All Together

Here’s a snapshot of BinWise Saloon based on this example. They can use this information to improve their liquor inventory control. And their profit margin.

  • Variance is high at 23%. They should train their barkeeps on standard pours, the comp policy, and their bar inventory management process.
  • Pour cost is high at 26%. If they increase the price of Old Boondoggle by $1 per shot, pour cost will go down to 20%. Alternately, they can look for a cheaper whiskey from their distributor. Or negotiate the price of Old Boondoggle down.
  • Par level inventory is 19 bottles per week. So they need at least 19 bottles of Old Boondoggle on their shelf at the start of every week. This minimizes the amount of money tied up in excess inventory. That money that can go straight into their pocket or be reinvested into their business.

This will all get you well along the road to improving your beverage inventory management system.

But there’s a shortcut: using bar inventory software. That's how to calculate inventory quickly. See the final tip below.

5 Tips for How to Manage a Bar Inventory

Regardless of how you take bar inventory (manually or automatically), these tips help make it as smooth a process as possible.

How Often Should a Bar Take Inventory?

Ideally, a bar takes inventory every week. That gives the bar manager the most accurate data. And the ability to react to the data to make the most positive impact possible.

Most bars tend toward somewhere between two weeks and a month. But definitely don’t go longer than a month.

Be Consistent

Conduct your first and second counts identically. You may be asking, “Why must they be executed identically if I’m counting the same stuff?”

Because your job as an inventory taker is to remove every variable that may corrupt your inventory data. It’s wiser to do the same exact thing twice and compare the numbers. Then you know for sure that the numbers you’re comparing are apples to apples.

Start from the same place, end at the same place. Use the same people. Record the same data, use the same method of tenthing. You get the idea.

Take Liquor Inventory After Close

Trying to count inventory while sales are being made is too difficult. There will be loads of distractions and inaccuracies. And you’ll also probably miss out on recording some of the stuff that’s sold during the inventory session. Almost all bars take inventory after hours and yours should too.

Use a Bar Inventory Spreadsheet

If you’re doing this all physically, you’ll need a spreadsheet. Thankfully, we’ve got a free one you can download. It can be used for wine inventory, draft beer inventory, and more.

Use Bar Inventory Software

And, finally, the best conceivable tip for any bar manager learning how to inventory liquor in a bar. Use a bar inventory app. It's how to calculate inventory quickly. t automates everything and makes most of what this article covers irrelevant.

Automated bar inventory software like BinWise Pro uses a perpetual inventory system. That means that with every sale and every purchase, your inventory database is updated. It’s real-time, up-to-date inventory hooked up to your bar pos system.

And just by virtue of using BinWise Pro, you’ll be recording and tracking all of your inventory usage data. That means that with just a few clicks, you can get all the numbers you need to start making consistent, profitable decisions for your business.

Couple that with how much faster inventory goes when you’re using a tool like BinScan, and it’s a no brainer.

Beverage inventory software