4 Strategies for Effective Bar Inventory Management

Beverage inventory is a hugely important part of running any successful hospitality business. And while it might not be the most exciting element of the work, it requires doing. Whether you’re a small mom-and-pop or a multi-venue group, running a bar isn’t just about slinging drinks and keeping the vibes high, it’s also about making sure you’re not bleeding cash through wasted inventory, over-pouring, or straight-up theft. And if you’re not tracking your booze properly, you’re likely throwing profits down the drain. 

At the end of the day, it doesn’t matter how great your bar is if your inventory is a mess. A dialed-in system — whether it’s a POS, software, or outside help — keeps your margins tight and your bar profitable. Here are four methods for managing your bar’s inventory so you can use the one that’s best for your business and make sure every ounce of liquor is making you money.

1. Integrated POS System

Many point-of-sale (POS) systems are equipped with built-in inventory tracking, especially the more tech-forward ones like Toast and Square. They still require you to input every drink, but will update your stock levels in real time as you’ve entered everything in the system and priced it properly and portioned it properly. This is a fairly basic option, but it can be effective, especially for smaller operations in which the owners are involved in every facet of the business, including ordering and bartending, and can be very diligent about input.

Because the biggest place for error here is with the actual inputting. If, for example, your speed screen isn’t set up well and getting to a Greyhound takes more than three touches and the bar is slammed, it might be easier to just input a Martini because it’s the same price and faster. This leads to inaccurate inventory based on what was put into the system, versus what the actual stock is, and discrepancies. And depending on the POS system, the capabilities can be great or not, so it’s important to do a walk-through of the system’s functionality as it pertains to inventory. 

2. Automated Inventory Software

To eliminate some of that guesswork, inventory software options like Partender, Bar-I, or Sculpture Hospitality help you scan bottles, track pours, and match what should be in stock with what actually is. These platforms are able to do more accurate data collection and cut down on over-pouring, theft, and waste — because, let’s be real, bartenders aren’t always as precise as they should be. With real-time tracking and alerts, you’ll know exactly when it’s time to reorder and where you’re losing money. 

While these options certainly help with more accurate data, they do require similar operational diligence, especially when it comes to knowing what to do with that data. If you find out that you’re losing 12 percent of your inventory, it’s on you to reconcile that loss. 

3. Third-Party Inventory Services

If you’d rather let the pros handle it, third party services like Barmetrix can come in regularly to audit your inventory, and give you detailed reports on what’s happening behind the bar. This is the most expensive option, but for any operator who is serious about scaling their business, or concerned their stock numbers never seem to add up, it could be worth the expense in eliminating lost inventory. 

Because of the considerable expense, though, it’s important to evaluate if third-party services are right for your business. And while a one-time spot audit might help identify the source of error for any operator who suspects they have shrinkage or variance, the overall ROI of employing a third party on a continual basis needs to justify the cost of those regular services. 

4. Spreadsheets

If you’re running a small bar and don’t mind the work, spreadsheets can do the trick. Manually tracking bottles, sales, and reorders in Excel or Google Sheets is cheap but can be a pain. And if you make one mistake, your whole inventory can be off. If you’re going this route, be ready to double-check everything and make peace with human error.

While spreadsheets can be a viable inventory option for a smaller business, being able to do a full manual inventory using a spreadsheet is crucial to any operator. There’s no substitute for truly understanding every aspect of your inventory. That means learning how to organize, count, and track your stock, properly input invoices, extract sales data, calculate variances, and analyze discrepancies. Most importantly, it means knowing how to determine your Cost of Goods Sold (COGS) and your beverage cost.

Only after you’ve mastered this process should you consider switching to an automated system. It’s not that these systems won’t save you time — they absolutely will. And when managed correctly, they can be incredibly accurate. But if you don’t understand the fundamentals yourself, you’re putting your business at risk.

Unfortunately many operators don’t know how to do inventory manually or calculate variances, instead becoming completely dependent on outside services. Then, when business slows down or budgets tighten, they’re unable to do a spreadsheet of their inventory on their own. Even more alarming? Some operators don’t do inventory at all.

If you don’t understand your numbers, you don’t understand your business. Learn the process manually first — your future self will thank you.