What Is a Variance Report and How to Calculate Bar Variance

Do you ever wonder why your bar’s inventory doesn’t match what your bar POS system says you sold? If this sounds familiar, you may have a variance problem. If you’re not properly tracking your inventory as a bar owner or bar manager, you’re likely losing money. 

Understanding your bar’s variance is the first step to your bar’s success. Tracking it through a variance report can be extremely beneficial in helping you reduce shrinkage and stay on top of your inventory. But what is a variance report, exactly? 

What Is a Variance Report?

A variance report compares what you counted in your physical inventory with the inventory that your POS counted, while highlighting any variances, also known as discrepancies. Variance reports ensure users account for everything they sell, break, or otherwise deplete from their inventory. It helps minimize loss and grow profits. 

To put it simply, variance reports are the math of everything pertaining to your inventory and your business as a whole. With this report, if you find any differences or discrepancies, you can investigate. Maybe you forgot to enter an invoice, something was stolen from your inventory, etc. 

An inventory variance report can tell you what you counted vs what you actually have. If the numbers don’t match, you have a variance, or a potential problem with your inventory. 

Why Is Inventory Variance a Problem for Bars and Restaurants?

Inventory variance is a problem for bars and restaurants because it can lead to inventory shrinkage. These variances can be caused by theft, overpouring, breakage, unrecorded comps, lost invoices, etc. 

Any form of inventory variance isn’t just a minor discrepancy, it’s also a sign of a deeper issue that can quietly drain profits. Regardless of the reason for the difference in inventory, small variances can add up quickly, especially in high-volume environments.

‍Here’s why identifying variance matters:

• Lost revenue: Inventory shrinkage that goes unaccounted for will directly impact profit margins. This is especially true with high-cost items such as liquor and wine. 
• Inaccurate reporting: If your usage data is off, you can’t trust your menu pricing, inventory forecasting, or cost of goods sold (COGS).
• Poor decision-making: It’s easy to overorder inventory, run out of key items, or misidentify your best-selling products, especially with a lack of reliable data. 
• Increased waste: Inventory spoilage and over-pouring often go unnoticed without a clear system for tracking inventory variance. 
• Internal theft and fraud go unchecked: It’s common for bars and restaurants to lose thousands of dollars before realizing there is a recurring issue.

The bottom line is that inventory variance is a profitability killer. But it’s also a problem you can solve.

An inventory variance report from BinWise can help thousands of bars, restaurants, and similar establishments take back control of their inventory. 

How to Calculate Variance in Bar Inventory

To understand what your variance is, you need to know how to calculate bar variance. It starts with a simple formula: 

Variance = Expected Inventory – Actual Inventory

Let’s break that down: 

• Expected Inventory is what inventory stock should be based on, including starting inventory, purchases, and recorded sales.  
• Actual Inventory is what you have physically counted during your inventory audit.
• Variance is the difference between Expected and Actual Inventory and it shows overages or shortages. 

Take the following scenario as an example: You start the week with 20 bottles of vodka, purchase 10 more bottles, and sell a total of 15 bottles. You expect to have 15 bottles of vodka left. However, if your inventory count only shows 13 bottles, your variance is -2. In other words, your variance shows you’re missing two bottles. 

Common Variance Types

After you learn how to calculate bar variance, it’s important to understand the different variance types. 

These include negative variance and positive variance. 

Negative Variance means you’re missing product. This is often due to overpouring, theft, spillage, or unrecorded comps. 

Positive Variance means you have more product on hand than what is expected. This is often caused by data entry mistakes or miscounts. 

Counting inventory and calculating variance by hand is time-consuming and is a process prone to human error, especially when dealing with large volumes of product. 

Tools and platforms like BinWise and BinWise Pro automate these processes, allowing bars and restaurants to sync with POS systems, purchase orders, and inventory counts and flag variances instantly. 

With BinWise, you get real-time visibility into where and why losses are happening. This way, you can act quickly and do something about the variance before it’s too late. 

What Causes Variance in a Bar Inventory Report?

Inventory variances can occur due to a number of reasons. However, many of these reasons are hard to track without a system in place.

6 of the most common causes of variance are:

1. Overpours: Bartenders pouring more than the standard serving size or standard pour.
2. Theft: Internal (staff) or external (customers or vendors) product theft.
3. Spills and breakage: Accidents happen, but they often go undocumented.
4. Unrecorded comps: Drinks given away for free, but not entered into the POS.
5. Vendor delivery discrepancies: Missing items or short shipments not logged properly.
6. Missed or duplicate invoices: Leads to inaccurate inventory and usage records.

Just one of these issues can impact your bottom line, and most bars and restaurants deal with several of these issues at once. 

With a platform like BinWise, you can track every drop of alcohol and catch discrepancies before they turn into revenue loss. 

Why Your Bar Needs a Variance Report Tool Like BinWise

Instead of wondering how to calculate bar variance manually, which is time-consuming and prone to error, you can use a tool like BinWise. The BinWise platform simplifies the process and gives users actionable insights that protect profits.

How BinWise Can Help With Inventory Variance:

• Automates the math. There’s no need for spreadsheets or manual calculations.
• Instantly highlights problem areas. Users can spot discrepancies before they become costly.
• Reduces loss and protects margins. Know exactly where products are going missing.
• Streamlines inventory audits. Faster counts, cleaner data, fewer headaches.
• Supports accountability. Easily flag staff issues, vendor errors, or training gaps.

With BinWise, users don’t just track inventory, they have the ability to manage it with confidence.

Do you want to see how BinWise can help you calculate variance instantly and reduce inventory loss? Schedule a demo today!

Final Thoughts: Don’t Let Inventory Variance Drain Your Profits

Inventory variance in bars and restaurants is normal, but unmanaged variance is dangerous. Utilizing a good reporting tool like BinWise’s variance report will turn confusion into clarity and profit. 

Frequently Asked Questions About Variance Reports and How to Calculate Bar Variance

Calculating bar variance can be tricky, but it doesn’t have to be with BinWise’s variance reporting tool. The following questions will help you better understand all there is to know about variance and variance reports. 

1. What is a variance report in a bar or restaurant?

A variance report compares your bar’s physical inventory count with what your POS system says was sold. The report highlights any discrepancies, also known as variances, to help bars and restaurants reduce shrinkage, prevent loss, and improve inventory control.

2. What does a variance report show?

A variance report shows the difference between expected inventory and actual inventory. Variance reports help bar and restaurant managers identify missing or extra stock and uncover the causes for any discrepancies. These can include overpours, theft, or data entry errors.

3. How do you calculate variance in bar inventory?

To calculate inventory variance, use this formula: Variance = Expected Inventory – Actual Inventory.

Expected inventory includes your starting inventory plus purchases minus sales. Actual inventory is what you physically count. If the numbers don’t match, you have a variance.

4. What causes inventory variance in a bar?

Common causes of inventory variance in a bar include overpours, internal theft, spillage, unrecorded comps, vendor delivery issues, and missed invoices. These issues can quietly impact profit margins if left undiscovered.

5. Why is understanding inventory variance important?

Understanding inventory variance is important because it helps bars make better business decisions. Identifying and reducing variance can protect your margins, improve menu pricing accuracy, and reduce waste,  especially when using a tool like BinWise.