If you have a bar in your restaurant, it can be a great profit center for you.
It can also be a drain on your profits if you are not carefully monitoring your inventory. Alcohol is a liquid product that can be over-poured, stolen or sold for cash profit by your staff. In this article, we’ll take a look at what you need to do to maximize your sales revenues by controlling your inventory.
I spoke with Robert Plotkin, president of Bar Media, about how controlling your inventory can increase your profits. He says there are six essential business procedures you need to implement:
- Keep your inventory levels as low as you can. When you have an excess of stock, you cannot control it as easily.
- Know exactly what inventory you have, where it is, how much you paid for it and at what rate you’re using it.
- Make sure a manager is there to check in the shipments.
- The alcohol needs to automatically be taken some place secure such as a liquor closet. This room needs to be key controlled. The door always needs to be closed, and you should only have two keys to the room: one for you, one for the manager.
- There are some basic bookkeeping controls you need to have in place. You need to track the flow of the inventory in the liquor room and out of the liquor room. "At any point in time, a manager should be able to go to the perpetual inventory book and look up any product," Robert says. "The quantity in the book should correspond exactly to how many bottles of Jim Beam are on the shelf. It’s like keeping track of how much money you have in your checking account."
- You need to requisition your inventory against the perpetual inventory book just as you do with your bank statements, Robert says.
The best way to keep with all this is to do a physical audit weekly, biweekly or monthly. Robert says it’s best to do it as frequently as possible. "The more frequently you audit your inventory, the more control you’re going to have and the safer your inventory is going to be." After you do your audit, you will know how much inventory you still have. At the end of the month, the balance of bottles is your beginning inventory for the next month. By doing this audit, you are also figuring your liquor cost.
"The best way to gain control of your business is to frequently audit your business," Robert says. "By determining what’s been used and what’s left, you are taking the first steps at preventing internal theft."
Everyone knows doing inventory is a time-consuming process, and a manager is usually the person to do it. Robert says that even here you have to exercise some caution. By having a manager do the inventory, you still run the risk of losing money. Absentee owners definitely run the risk of having management and staff take advantage of them. Robert says this is one of the reasons absentee owners fail so frequently. "If you don’t have a vigilant management, you are setting yourself up for failure."
Here’s an example about why you need to be involved in the audits. Let’s say you have a manager with a drinking problem. The manager is responsible for inventory as well. You tell your manager that they need to audit the bar and liquor room. Well, this manager steals a couple bottles of booze from you and adjusts the inventory to reflect that he didn’t steal anything. If you aren’t active in your audits, you may not realize this is happening.
Robert says there is a service that can come in do your audits for you called Bevino. They come in with a laptop and electronic scale and do your audits, Robert says. "The process is accurate to one hundredth of an ounce," he says. "They can tell me precisely how much Johnny Walker Black Label I’ve used between inventories. They compare what’s there to what sales the bartenders ring up. On their reports they will tell you exactly what your cost percentages are, what your actual profits per brand are and what your retail losses. Because they’re an outside auditor, they have no vested interest in how those numbers come out."
Robert also spoke of a handheld device called AccuBar that can help you do your inventory. The AccuBar device is first programmed with all your brands. When you are doing your physical audit, you will look at the bottles at the bar. The image of the product you are taking stock of will appear on the screen. The bottle you are looking at is half empty. You touch the middle of the label on the Accubar screen, and it automatically figures out how many ounces you have left.
I spoke with Dave Grimm, partner and communications manager at AccuBar, about this product. He says the AccuBar comes in with two options. You can buy the PDA device and pay a monthly fee for the Internet based version of AccuBar, which provides you monthly reports. You can also buy the standalone version and have the reports on your computer. Dave said this product can also be used to track your food inventory as well. For more information on AccuBar, go to www.accubar.com.
HOW TO CONTROL INVENTORY AT THE POUR
Robert says there are four ways to deal with dispensing of liquor and making sure you exercise some control.
- Free Pouring (Vegas Style) – This is where the bartender inverts the bottle and counts off one-1,000, two-1,000 as an Ball-bearing spouts like this can drastically cut down on overpours at the bar. Photo Courtesy of Precision Pours www.pmq.com 63 ounce. "There is a lot of flair to it, and it’s very fast, but it is the easiest to over pour," Robert says.
- Using a Shot – This is a method where you use a shot glass to measure off the liquor amount. "It does offer some control," Robert says. "It’s just as easy to steal using a shot as it is to free pour, but it keeps honest people honest."
- Spouts with Ball Bearings – These are similar to spouts used in free pouring, but they have ball bearings that control the amount. I talked to Duane Nordling at Precision Pours, a manufacturer of these spouts. He says they range in size from a quarter ounce to three ounces. The nice thing about these spouts is the all cost under $4 a piece. Duane says that that even the best bartenders can over pour. The line between the fill line on a shot glass and the top of the glass is one-eighth of an ounce, he says. If you pour one-ounce drinks from a bottle, you’ll get 34 drinks. If you over pour that eighth an ounce on the same bottle four times, you only get 30 drinks. At $4 a drink, those 34 drinks constitute $136 in sales. At 30 drinks, you only make $120; that’s $16 in sales lost by over pouring just four times, Duane says. He says for around $250 you can outfit your entire bar. If you are using three cases of liquor a week, at $180 a case, you can save $540 a week. Visit www.precisionpours. com for more information.
- Electronic Dispenser – These dispensers are controlled by a computer and dispense the predetermined amount. Robert cautions against using these because they are very impersonal. He says you need to consider your type of establishment before implementing something like this.
To protect your inventory, a surveillance camera can be an asset. "It makes it harder to steal bottles out the back door of the place," Robert says. "This prevents the tricks like dropping the bottle into the trash and retrieving it from the dumpster later."
By installing some basic inventory controls in your business, you can cut your bar costs and increase profits. Robert says that with the bookkeeping procedures and implementing some of the pour controls, it’s very possible for you to lower your liquor costs 5 to 10 percent. "What that means is, before you started controlling your inventory, let’s say you were running a 28 percent beverage cost, you can conservatively pick up five points," Robert says. "Five points means for every $100,000 in sales, you’re picking up another $5,000 that would have gone down the drain."