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.
BUSINESS BASICS
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.
INVENTORY SERVICES
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.
SURVEILLANCE CAMERAS
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."
CONCLUSION
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."
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