Guide to Bar Management →
Successful bar managers will tell you that efficient inventory management is the key to maintaining a profitable bar. To do this, you must understand inventory usage, or how much product a business has used over a time period.
If your bar management software or inventory spreadsheets are set up correctly—we’ve got a template for you if they’re not—you should be able to access an inventory usage report. That may sound simple, but this report is the first step in almost every measurement of a bar’s performance: helping you calculate profit margins or pour costs, detect over-pouring or theft, calculate pars, and find which products are performing poorly.
How to Calculate Inventory Usage
Let’s start with the inventory usage formula. Your inventory usage in a time period is equal to your starting inventory plus any received product orders minus your ending inventory:
Inventory Usage =
+ Received Product Orders
– Ending Inventory
Step 1: Take a ‘Beginning-of-Period’ Inventory
The first step for calculating inventory usage is recording your starting inventory for every item at the bar.
For example, if there are 4 bottles of Absolut Vodka in the liquor room, 1 bottle in storage, and 1.3 bottles at the main bar, then total starting inventory is 6.3 bottles.
Step 2: Add Any Received Product Orders During the Time Period
Next, we add in any received product inventory.
If 5 bottles were ordered and received from your distributor in the time between your starting and ending inventory, then this would represent your received inventory.
Step 3: Subtract Your ‘End-of-Period’ Inventory
The final step is to record an ending inventory for every item at the bar at the end of a time period (usually weekly or monthly).
For this example, let’s say we finished with an ending inventory of 3 bottles of Absolut Vodka.
So, Inventory Usage =
6.3 bottles (Starting Inventory)
+ 5 bottles (Received Product Orders)
– 3 bottles (Ending Inventory)
= 8.3 bottles
This can also be expressed in dollars. If Absolut Vodka costs the bar $15/bottle, then 8.3 bottles of inventory usage in dollars equals ($15 x 6.3) + ($15 x 5) – ($15 x 3) = $124.50.
In this basic example, it seems very straightforward, but factor in the big picture of inventory usage and you’re looking at much more than just Absolut. Inventory usage will need to be broken down by category (spirits, wine, and beer), item type (vodka, whiskey, rum, etc.), and brand/supplier in order to get the best look at your bar’s performance.
That’s a lot of different calculations to be making on a regular basis!
And no matter how long you’ve been doing it and how much you understand the formula, without software automation, calculating inventory usage will always be a time-consuming and redundant task. Counting each bottle, recording it on paper, entering it into Excel, tracking and entering your received product from dozens of paper invoices and distributors, and keeping track of all of this on a weekly, monthly, quarterly basis…it’s never-ending!
Luckily, it doesn’t have to be so hard. [Shameless plug] BevSpot will automatically calculate your item-level usages over any time period for you—simply place your alcohol orders across all of your product through our application, and complete your inventories in half the time directly on your phone or tablet.
Now for the real question…what will you do with all that extra time on your hands?