Today’s post discusses third party liquor inventory systems across the spectrum from least expensive/ hardest to use on one end through most expensive/ easiest to use on the other. Whatever method you use to perform liquor inventory at your bar, you should be aware where your current method fits into the grand scheme of options since that ensures you are using the liquor inventory system that works best for you. The choice is pretty straightforward for the most part with the least expensive liquor inventory systems typically being less user friendly and usability increasing with cost as you move up through the options. Your overall aim is clearly to choose a system which is effective so you might frame the decision as “finding a system which is effective at your bar and represents the best balance between ease of use and cost”. Effectiveness is most important followed by the trade-off between ease and cost.
What do I mean by an effective liquor inventory system? Most bars in the US still perform their liquor inventory each period in order to calculate their liquor cost. Liquor cost is an ineffective performance measure since in provides no information on how much inventory shrinkage is reducing your bar’s profits. The simplest way to gauge the effectiveness of your liquor inventory system is to determine whether it provides detailed information about what product is being poured compared to what is actually being sold. If you can tell how many ounces of each product are missing each period, your system is performing effectively. If you are still using liquor cost, you can’t see what’s missing which means you can’t fix it and you have an ineffective system.
Moving onto the trade-off between ease of use and cost, we can begin with in-house systems used to calculate liquor cost. While these systems have virtually zero cost, since they don’t identify what’s missing, they aren’t effective. In actual fact an ineffective inventory system will cost your bar thousands of dollars in missing product each year! The next option would be do-it-yourself systems where you purchase a system from a provider and then you and your managers use the system to track liquor inventory more precisely. If you are able to get these systems to work they represent good value however typically they fall down on implementation. Between setting up the system, integrating with your POS system and resolving errors each period, DIY systems often fail to be effective since they don’t produce accurate, reliable results which can be used to manage operations.
On the other end of the spectrum are full service liquor inventory systems. These have the highest ease of use since a professional comes to your bar and does all the work for you. Unsurprisingly full service systems are the most expensive but the expense is justified in the fact that they guarantee that you will be able to precisely see what product is missing and should therefore be effective.
Bar-i's hybrid liquor inventory system costs around half the cost of full service liquor inventory systems since counting is performed in house by you or your managers. While you still have to physically do the counting, the system is very easy to use since the process is completed for you remotely by your assistant. Your dedicated assistant takes care of the boring and technical parts such as the data entry to account for deliveries and integrating with your POS system. The trade-off between using a hybrid system compared to full service one is a significantly lower cost in exchange for doing the counting yourself in house. Since you retain a professional assistant who completes the process for you, the system retains ease of use and effectiveness but at a lower cost.
In conclusion, whether you choose a DIY, full service or hybrid liquor inventory systems, they can all be effective since they can all identify precise variances of individual products. If you don’t know how many ounces of Jagermeister were missing last inventory period, your current system is ineffective. In that case spending a little money on a system which is easier to use will give you a better chance of being effective and making more money. Saving money by using an inexpensive but ineffective liquor inventory system, is the most expensive mistake of all to make.
Bar-i Liquid Accounting provides hybrid liquor inventory to bars nationwide from our offices in Denver, Colorado. If you know how many ounces of Jager were missing last week congratulations on having an effective system. If not, you’re kidding yourself that you have control of shrinkage and we'd love for you to consider us as one of your options.