How to Do Bar Inventory in 6 Steps

Counting your bar inventory—the total supply of beer, wine, spirits, mixers, and other beverages your restaurant or bar has on hand—is the most critical aspect of running a bar business. Understanding what alcohol you have on hand, where the product is going, how much it costs you, and where you can gain savings helps your bar grow profits.

The cost you calculate from this liquor inventory can be known as either bar cost, liquor cost, or pour cost. Whatever term you use, they all refer to the cost associated with the goods purchased to resell in your bar operation.

There are two main ways to manage your bar inventory: using an inventory app or using spreadsheets. This article will break down how to perform your bar inventory counts using either system, giving you the foundation you need to start managing your bar cost and the goods you serve. If you plan to use a spreadsheet, download our free bar inventory template to get started.

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Step 1: Decide What to Track

Deciding what to track depends on the different types of liquor you have on hand and in inventory. This will also take into account any bar-specific garnishes and nonalcoholic items. This could be Luxardo cherries for a Manhattan or tonic water for a gin and tonic. Any other beverage item that you will use in your bar program goes into this inventory count.

The best way to track a bar inventory is by using the FIFO method, which stands for “First In, First Out.” This method simply means you will use the older products first, ensuring they are used before the expiration date and that multiple items aren’t open and losing their quality over time.

Deciding Who Will Count Bar Liquor Inventory

Just as important as deciding how you will track your inventory is designating who will actually count it. This task is often done by workers in some sort of leadership role. For a smaller team without many leadership levels, you can have your employees help take part in the tracking. But a high-level leader of your business should be reviewing inventory counts on a monthly basis. This is to ensure it is being done correctly and items are adding up and to give a true understanding of the bar’s cost of operations.

Step 2: Set Up Your Tracking Method for Liquor Inventory

As mentioned before, there are two main ways to take your bar inventory: using an app or using a spreadsheet. Let’s break down how to use both to take accurate inventory counts.

Setting Up a Spreadsheet

Using a spreadsheet is how many operations still work within the food and beverage industry, as they are efficient and organized ways to take bar inventory. A spreadsheet for inventory should be easy to read and use so that information can be collected accurately and in an efficient manner. Planning with your managers is key when using a spreadsheet so that everyone is on the same page on how to use it.

The sheet you create needs to include product information, like the price and the unit size, and an accurate product description. Arrange your sheet in categories: beer, wine, spirits, and nonalcoholic beverages.

Save time creating your bar inventory spreadsheet by checking out our bar inventory spreadsheet templates.

Setting Up an Inventory App

Inventory apps are used to order products and count them, saving you time, reducing errors, and giving you more detailed reporting faster than a spreadsheet system. With the technology available on the market, liquor inventory is easier than ever. You’ll start by adding your vendors, items, and storage locations to the app. In most cases, you can bulk upload your vendor and item information from spreadsheets. Alternatively, you can add items to the app one by one. Some systems speed this process by supporting smartphone scans to add new items.

Whether you upload items in bulk or one by one, you’ll need to include:

• Item name
• Storage location (may have multiple locations)
• Vendor you purchase from
• Product code from vendor
• Price
• Unit of measurement (bottle, case, ounces, etc.)
• Number of items in a pack
• Item category (beer, wine, liquor, nonalcoholic beverage, etc.)

When adding your vendors, be sure to include your sales representative’s name, phone number, and email address, along with order minimums, cutoff times, and delivery days. This way, anyone on your team can place an order or reach out to the sales rep if problems arise. I always suggest having your reps organized in your phone by name and company for ease of access.

Lastly, when setting up your inventory app you will need to set up count sheets. These sheets will serve as the basis for your inventory counts and will organize your information throughout the inventory tracking process. You should have a sheet for each storage area that you keep your goods in and set your items up in the order they will appear on your shelves.

You can typically include multiple units of measurement like “case” or “bottle” for each product directly on the count sheet—so you won’t have to wonder if that “1” means “1 case” or “1 bottle.”

Step 3: Do an Initial Count

Your initial count of inventory needs to be done outside of normal business hours. This is so you give yourself the time and space to count your inventory while having everything in place to get an accurate assessment of what is on hand. It is impossible to do a bar liquor inventory while drinks are pouring, so these dedicated times outside of business hours are key.

Below are some best practices when it comes to counting your bar inventory:

Count When the Bar Is Closed

As mentioned above, counting when the bar is closed is the best time to ensure accurate counts during your inventory tracking process. This is usually done by one or more managers, which then can evenly distribute sections of the establishment to count during this time. Counting when the bar is closed gives you the focus you need to get accurate data and also lets you see your inventory as a whole without the bustle of service.

Spread the Workload

While a manager should lead inventory counts and oversee the collection of data, using apps or multiple spreadsheets throughout your bar allows for more people to tackle smaller amounts of the inventory counting process. As long as everyone is properly trained, this can speed and streamline your inventory process.

Count Before Pending Deliveries Arrive

You need a static inventory count to compare to invoices for the same time period. Your sales and costs need to be in the same timeframe, so a strict cutoff point is important. It is easiest to just avoid scheduling deliveries for days that you are counting inventory.

Count in Pairs

Two sets of eyes better ensure accuracy. More than anything, however, counting in pairs prevents potential theft—or the appearance of it. Beyond this, counting in pairs allows you to double-check work and make sure that counts are accurately recorded.

Use the Same Team to Count Inventory

At every inventory interval, schedule the same team to perform the physical count. They will get faster and more efficient with each count, which will save you labor dollars over time.

Ensure All Staff Knows Common Counting Practices

Each bar may use different verbiage and have different brands. Ensure all staff doing inventory counts know exactly what they are looking for. Also, be sure to communicate how you count partial bottles. Do you eyeball if something is a half or one-third full bottle? Do you use a scale and record the weight? Or do you use a bottle scanning app to read the amount in the bottle?

Audit Your Process

If you can, have an outside auditor observe your process. If you own a bar and have managers perform inventory counts, audit them on occasion. An outside auditor for a larger restaurant group can be someone in accounting who works with the inventory. A person with an interest in ensuring the count is accurate will help negate inflating or falsifying numbers during an inventory count process.

Step 4: Set a Consistent Cadence

It is best to count your bar inventory weekly. Slower days, such as a Monday, are ideal as this allows you a good amount of time to organize the count and input the data you gather from it. Weekly counts allow you to get a consistent read on usage and par levels and allow you to adjust quickly if any irregular patterns arise during your inventory analysis.

Weekly inventory accounts may feel aggressive at first, but over time, it will give you 52 data points per year to show just how much of each product you use. It gives you the option to catch any instances of theft, overuse of products, or even unrecorded waste.

If you don’t have the bandwidth for weekly counts, you should at least count your inventory monthly. As your team grows faster with each count, make it a goal to eventually count weekly.

Step 5: Calculate Inventory Usage & Generate Reports

Your inventory count isn’t complete until you collect and input all the related data, like your total purchases and your total sales, separated by product category.

Total sales can easily be found through your POS reports, while total purchases will come from your invoices for orders you placed between inventory counts. If you perform inventory counts weekly, you’ll need all the invoices from the previous week. If you count monthly, you’ll need all the invoices from the preceding month.

If you use inventory apps for both ordering and counting, and if those apps integrate with your POS, all of this information will already be in one place. All you need to do is count, and your counts will generate an automatic report and analysis.

Step 6: Analyze Costs & Adjust

The standard overall beverage cost for a bar should sit somewhere between 18%–24%. This is to leave room for food costs, labor costs, overhead, and other expenses. However, your costs for each beverage type will vary across your bar. For example, everyone makes less of a profit margin on non-alcoholic beverages. But you’ll earn a higher percentage of profit on wine or liquor.

Setting and analyzing targets in each beverage category shows you where, specifically, your bar is making or losing profit. Below is a breakdown of the cost per type of alcohol you should be hitting based on our experience and general industry knowledge.

Industry Standard Liquor Cost %

These costs combined are your overall beverage cost. But breaking them down by category has benefits. For example, if you are hitting your overall beverage cost target but your individual category targets are off—let’s say your wine costs are high—it could indicate that you are leaving profit on the table.

How to Figure Liquor Cost

To figure your actual beverage cost, the math is easy; you just divide your total cost of goods sold (COGS) by your total sales, then multiply by 100 to get the number expressed as a percentage of your sales:

[(Total Beverage Cost of Goods Sold $) ÷ (Total Beverage Sales $)] X 100 = Actual Beverage Cost %

Making Sense of Your Counts

Once you have all of your data, you can calculate both your cost and the variance against your goal (as illustrated below). This gives you insight into where you need to tighten your operations to hit your beverage cost targets.

You can program your spreadsheet with the formula so your actual costs and variance from your target beverage cost will automatically populate as you update your inventory (our template is already formatted to do this). You’re likely to always have some variance from your target. But, so long as your variance is no more than 2% to 3%, your bar is doing fine.

Tips for Bar Liquor Inventory Control

Counting inventory can feel like a chore, but it is a necessary part of there are many ways to streamline the process. When counting your liquor inventory, follow the tips below to ensure an efficient process and accurate counts.

Review Prices From Vendors

Being aware of the pricing your vendors give you and how much you are being charged is key to ensuring that no outside force is affecting your profitability as a business. Consistent pricing updates, price comparisons, and vendor communication are keys to getting the best rates. Having an organized system for receiving and storing invoices helps you track price changes over time.

Ensure Staff Is Trained Properly

One of the biggest ways bars lose money is improper training or mismanagement of staff. Are staff members pouring drinks correctly? Are they giving out free products? Are they themselves drinking on the job? Create and distribute standard operating procedures (SOPs) to ensure your team are all on the same page with handling common barkeeping challenges.

Receive Products Properly

Thoroughly inspect all product packaging when it is delivered. This means rejecting any broken bottles, busted cans, or other compromised and unusable items. This lets you ensure all products can be used in-house and money is not wasted on items you did not damage. Immediately mark any rejected items on the invoice and the delivery drivers’ packing slips, and follow up with your vendor to have the costs for damaged products credited back to your account or removed from the invoice. Ensure that all deliveries are only accepted by authorized staff, like a manager or head bartender.

Have Organized Storage

Storing your goods in an organized and clean manner affects not only food safety but also how easy you can do your inventory counts. If your goods are scattered in every which way, counting will be a nightmare. Ensure bottle labels are facing out, rows have the same number of items, and designate storage for specific goods. This will make inventory counting a breeze.

Dig Deep Into Variances

If you see a variance above 2% to 3% in your data, you need to address it. The first step should be to recount to ensure the data is accurate. If a variance is still showing, explore further.

• Are your staff members improperly measuring drinks? This is a perfect time to retrain them.
• Are bottles of a certain liquor missing every few months? Theft could be an issue.

Collecting data is only half of the issue. If you see a variance, addressing it is urgent so you can improve your cost percentage and profitability.

Frequently Asked Questions (FAQs)

These are some of the most common questions people ask about how to do liquor inventory.

Bottom Line

As you can see by now, bar inventory is a critical component of operating a profitable bar business. Preparing to store your inventory data in an app or a spreadsheet and performing regular inventory counts will show you where your bar is doing well and where you could improve costs. As with most skills, you’ll get faster and more proficient the more bar inventory counts you perform and the more bar inventory data you analyze. If you have never counted your bar inventory, there is no better time to start than now.