A bouncing liquor cost is a common issue impacting many bars. This occurs when your liquor cost fluctuates significantly from period to period. In most instances, this is an indication that errors are impacting your calculations rather than being caused by significant changes in your business and therefore liquor cost.
While there is a wide range of what can be considered a successful liquor cost (we see a range of anywhere from 16-25% among many of our high performing clients), your liquor cost will rarely fluctuate by more than 1% from period to period. The only time you should expect to see your liquor cost change by more than 1% is when you undergo structural changes to your business model, such as:
- The implementation of a significant pricing promotion such as Happy Hour
- Significant changes in your product mix
In the absence of these types of structural changes to your business model, a liquor cost that fluctuates by more than 1% is a sign that human errors are impacting the accuracy of your data. Having a bouncing liquor cost means you do not have reliable information to manage your business with and consequently impacts negatively on bars’ profits.
Reasons for a Bouncing Liquor Cost
The use of an outdated liquor inventory system will significantly increase the likelihood that you will experience a bouncing liquor cost. In particular, the use of a clipboard to take inventory gives you a much greater chance of introducing errors into your data. The actions of recording data onto your clipboard and manually transferring it onto a spreadsheet create many opportunities for mistakes to occur. Often, it is this human error that ultimately causes your liquor cost to fluctuate every period.
Common errors which may cause a bouncing liquor cost include:
- Errors when entering sales information –These errors are commonly caused by entering sales for the wrong date or the presence of unusual sales events such as a private party which impact how accurately sales data gets entered into your POS system.
- Data entry errors –Common data entry errors include counting your inventory incorrectly, recording the wrong number when taking inventory, or transferring data incorrectly to a spreadsheet.
- Missing information errors –These errors occur when you do not include all necessary information to accurately calculate your liquor cost. Missing information errors commonly occur if you are missing invoices or forget to count all inventory (a common error when you have cases back-stocked in a storeroom).
Bar-i Can Help
With an outdated liquor inventory system, it is very difficult to identify the source of these errors. When you are unable to find the errors, the calculation of your liquor cost will be based on wrong information, and your data will be inaccurate.
Bar-i can help you eliminate these calculation errors. Our liquor inventory system tracks product-by-product performance instead of tracking the overall performance of your entire product line together. This makes it much easier for us to spot errors in calculation. In addition, our liquor inventory software has automatic error flags which will detect any instances where the amount of product counted vary from what is expected. This allows us to zero in on specific errors and correct them before they impact on decision making.
By eliminating a bouncing liquor cost, your bar can have confidence in the data you generate. This will help you more accurately determine which products are performing well and which ones aren’t, improving the efficiency and profitability of your bar.
Please contact Bar-i today or call us at 303-219-0196 to schedule your free consultation. We provide services to bars nationwide from our offices in Denver, Colorado.