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Sarah Ward

The Formula for Variance: Standard Variance Steps

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We’ve gone through the process to define variance here at BinWise, and now it’s time to find the formula for variance and calculate variance for your business. When you're learning how to master your inventory, the formula for variance is a key factor to include in your restaurant business plan

When you’re able to find your variance numbers as you take inventory, you’re much more in control of your inventory management techniques. Even with the best beverage inventory software, warehouse inventory management software, and a wine tracking app to boot, there’s always room to improve. Finding your variance and mastering it is a great way to move forward. 

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How to Find the Variance

The formula for variance is one crucial step in the process of how to find the variance in your inventory. However, before we dive into the formula for variance, we’re going to take a look at some practical tips for finding variance. All of these tips will come in handy when you’re learning how to do inventory

These won’t give you the exact calculation of your variance. What they will do is help you look at your inventory in a way that shows you where variance is likely to show up. Some tips for viewing variance in a new way are:

With these plans and general viewpoints on your restaurant, you’ll start to see place variance could happen before variance occurs. Combined with the formula for variance, you’ll be able to prevent as much loss as possible. 

Formula to Find Variance

There are a few ways you can approach the formula to find variance. The standard formula will help you find the percentage of your variance count. When you search for the sample variance, you’ll find search results for standard deviation, population variance, sample standard deviation, variability, and more traditional math terms. We’ll cover variance statistic data in another article, for now, we’ll start off with a simple equation. That simple formula is a two-part equation:

Cost of goods sold (COGS) - Usage cost = Variance in monetary value
(Variance cost / Usage cost) x 100 = Variance percentage

Of course, you don’t have to rely solely on the formula and your own math skills if you don’t want to. You can also use support from Excel and Google Sheets. In Excel, the process to find variance is as simple as inputting your values from the above equations in their own columns and setting the formulas to do the computing. If you’re a Google Suite (GSuite) fan, Google Sheets can do the same work as Excel for you. 

All these options are suitable for anyone and any type of restaurant, café, or bar business. However, there is another option outside of these formula-based solutions to finding your variance. That option is BinWise, a program with all your restaurant inventory software features. When you use BinWise Pro for your inventory, you have access to the variance report. BinWise Pro, where you can take your inventory and see reports and analytics, is set up to find variance for you. 


“Key Takeaway: The formula for variance gives you the key to control over your inventory, profits, and restaurant success as a whole.”

The Importance of the Formula for Variance: 5 Benefits

When it comes to math equations, there are plenty of folks–BinWise writers included–who prefer having a reason for doing a math equation. You already know the general benefit of finding your variance. We’re going to take a look at some specific benefits you’ll find over time as you build a variance calculator into your inventory plan. 

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5. Greater Accountability

With great bar and restaurant inventory management comes great accountability–or something like that. When you put time and energy into your inventory plan and using your variance formula, the accountability and ownership you feel comes back tenfold. The ability to find your variance gives you control over everything from your safety stock needs to the deadstock meaning in your inventory. 

4. Risk Assessment

Risk assessment and forecasting–namely inventory forecasting–are vital for any business plan. When you know ahead of time what might go wrong, you can start out ahead of those issues. If you’re aware of when you will encounter low inventory levels due to supply chain fluctuations, you can plan ahead to use other resources. Planning ahead will save you from headaches and grow your profits. 

3. Improved Customer Service

Customer service is the name of the main game in a restaurant, bar, or related business. Improving your customer service tactics is one of the best ways to keep your customers happy and your restaurant booming.

Great restaurant marketing paired with innovative social media marketing for restaurants are two ways you can draw in new customers and pique their interest. Once they’re in the door, an organized restaurant with a seamless inventory program will keep them satisfied.

2. Growing Profits

While improving customer service is your front-facing goal, as a business, growing profits is always the bottom line. If you’re striving to find new takes on how to increase restaurant sales, revisiting the basics of inventory control and variance analysis will help. Making more sales with bar promotions and happy hour specials is great, but if you’re bleeding money on lost products or ingredients you won’t get ahead. 

1. Better Inventory Control

When you gain control of your variance count and shrinkage issues, you’ll have gained better control over your inventory management process. With better inventory control, not only will you find greater success in each area outlined on this list; you’ll also find that your restaurant or bar runs smoother in every way. Mastering restaurant inventory gives you control over the daily functions of your restaurant, which makes the long-term prospects of your restaurant better.

Frequently Asked Questions About the Formula for Variance

The formula for variance will make your restaurant or bar business run more efficiently. It’ll also ease the inventory burden a bit. You’ll have a lot less to worry about in terms of shrinkage when you take control of your variance. Our answers to these frequently asked questions will help you learn even more about variance and how it pertains to your business. 

What Is Variance In Math?

In math, variance is a measure of how data points are in deviation from the mean, which is a way of finding the average. The mean is the sum of all numbers, divided by the amount of numbers. The formula for variance in a business uses the same variance formula found in any math equation. In fact, the only difference is the practical application of the formula. You calculate the mean and go from there. 

What Is the Formula for the Price Variance?

The formula for the price variance is:

(Actual product cost - minus product cost) x Quantity of units of product purchased = Price variance

While the standard restaurant variance tells you the product variance amount you have, the price variance tells you the exact dollar amount in variance. The price variance formula is an important factor when it comes time to do your bookkeeping. 

What Is Product Variance?

Product variance is when the products you expect to have on hand differ from the actual product count. When you think of variance in inventory, product variance is typically the main thing you’re thinking about. That said, it’s intrinsically tied to the price variance when it comes to your overall inventory system.

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The Formula for Variance: Forming Your Inventory Counts

Finding your variance through your inventory counts and restaurant management will give you more control over all the important aspects of running a business. A restaurant or bar business can be a risky venture. It’s a saturated market with high expectations for every business.

When you take control of your inventory, you’re one step closer to a continually successful business. Come back to the BinWise blog for more advice on running your business.

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