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Bar Inventory Basics: How to Take Liquor Inventory

By
Scott Schulfer
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.

There’s bar management software that makes it about a thousand times easier with a perpetual inventory system, sure. But getting the most out of a bar inventory app requires understanding what the software is doing.

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

What is Bar Inventory?

At its most basic, taking bar inventory is the process of counting everything you have twice. Then, you figure out how much of it you used over that period of time. That's known as calculating inventory usage.

That’s really the point of bar inventory: to calculate your inventory usage over a specific timeframe.

How to Do Bar Inventory

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, liquor storage rooms, walk-ins, refrigerators, and cellars.

Liquor Storage Room Inventory Count

It's vital that your inventory count moves beyond the front of house into your liquor storage room. While a simple front-to-back solution may work at the bar, your storage room is likely a bit more complicated. The best way to handle this area is to create a map and flowchart of all storage shelves and the order to count them. Then train your staff to always take inventory is the same order to ensure the most accurate and consistent counts.

Starting Bar Inventory

When you’re done with the first count, that’s your starting inventory. This number defines your current amount of inventory and will be vital with your calculations going forward. That's why it's so important that you get the most accurate count. Otherwise, your next count may be inconsistent and show that you have used more or less liquor than you actually have. This can cause issues with ordering more alcohol and will ultimately hurt your bottom line.

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.

5 Tips for How to Manage Liquor 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.

Bar Inventory Analysis

Based on your inventory usage, you calculate your inventory variance, pour cost, and par levels. All crucial metrics to making profitable decisions and a bar or restaurant manager.

What, exactly, does taking bar inventory tell you about your bar?

A lot:

  1. The sustainability and opportunities for your bar or restaurant profit margin, along with opportunities to enhance both
  2. Your bar's variance, AKA your shrinkage or loss or excess inventory
  3. What your par level and reorder point for each product should be
  4. What your pour cost is and ways to decrease it
  5. Which products are in demand and which aren't. With implications for strategic alcohol pricing and what you should order from your vendors going forward.

In fact, taking bar inventory is the single most effective way to optimize your bar and restaurant operations and profitability. Here’s why.

How Taking Bar Inventory Saves Money

Let’s talk about everyone’s favorite subject, money.

Specifically:

All the ways liquor management can make you piles of it.

You can now put your inventory usage levels to work for you. There are three metrics that use inventory usage that affect bar profitability. Variance, pour costs, and par levels.

Helps Identify Product Variance

Calculating variance shows the difference between the amount of product sold and the amount of product used. It's also called shrinkage or loss.

In a perfect world, those two amounts are the same, but this is not that world.

If a product's variance is 20%, it means that, of all the product used, 20% is lost and not sold.

The cause of high variance is varied. It's often some combination of getting away from standard liquor pours and standard wine pours. But mistakes, breakage, and theft, too.

Calculating variance for every product will give you a precise picture of where money might be slipping through the cracks.

It’s one of the best ways to use alcohol inventory (40) usage rates to boost your profits, but not the only way.

Helps Calculate Pour Cost

A product’s liquor cost (see liquor cost calculator) is one of the key insights into its profitability. And, all products taken collectively, into a bar’s overall profitability.

Pour cost, or liquor cost, is the amount of a drink’s selling price it takes to create the drink. That includes wholesale purchase price, labor cost, etc.

Most bars shoot for an average pour cost of 20%, with target liquor pour costs dipping even lower, to around 15%.

Whatever products have the lowest pour cost are most profitable. Knowing your profitable products helps you make informed decisions. From where bars get their alcohol to profitable drink menu engineering.

But there’s still one more important way to use your inventory usage rates to save money and boost profit. Par levels.

free bar inventory management ebook

Helps Set Par Level Inventory

Finally, you set par level inventory. The par level definition: the minimum amount needed to keep it in stock at all times. You can apply it to every item on your full bar liquor list. It’s based on historical usage data, which is easy to generate with a bar management software.

It also helps cut down on sitting inventory. This is where consistently calculating inventory usage comes in handy. Because par level is set on your past inventory usage trends. That ensures you’re meeting demand but not sitting on too much unused product.

Cuts Down on Sitting Inventory

Sitting inventory, or dead stock, is product on your shelf that you’re not selling … yet. It could even be spoiling and going bad. It’s taking up valuable space from other products you could be selling, and it's tying up your money. Here’s a look at the benefits of decreasing your sitting inventory and how to do it. The benefits of reducing your bar’s sitting inventory are many.

You'll:

  • Free up more cash for operations and profit
  • Free up more space on your shelves for products that are selling
  • Save money on distributor delivery costs, because you’re ordering less
  • Save time taking when taking inventory, because you’ve got less inventory to manage
  • Reduce your shrinkage; the less product you have, the less you stand to lose (learn more about how to stop shrinkage)

Here’s how to reduce your bar’s sitting inventory:

  • Set the right par levels. This can’t be stressed enough. This is the reason par level inventory exists.
  • Don’t be swayed by bulk discounts from your distributor. Unless you know, based on usage levels, that you'll use all the product you order.

Knowing how to calculate this stuff is half the battle. The other half is mastering the process.

Bar Inventory Template

If you’re taking physical inventory, you’ll need a bar inventory spreadsheet. Either print one out and record your counts on it IRL or carry a laptop around with you while you count and use a spreadsheet.

Either way, you can download a free bar inventory spreadsheet from the link above.

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. It 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