How to Take Inventory and Calculate Pour Cost

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Ever since I wrote on How To Price a Cocktail Menu like a million years ago, I’ve gotten requests from bartenders, bar managers, and bar owners for some guidance on how to perform inventory and calculate pour cost. Which is, like, super surprising to me since there are few tasks more reviled in our business than the dreaded monthly inventory. Regardless, I figured it was high time I shared.

I never would have admitted it at the time, but I feel pretty lucky for the rude awakening I had back in 2001. I’d just come off of working in the clubs, and was immediately thrown into managing a little cocktail program at a new restaurant. It was awesome until about two weeks in, when my bosses informed me that I would be taking inventory every two weeks, and that there would be a sit-down meeting once a month to discuss my numbers. My what, now? I didn’t know the first thing about numbers, other than getting girls’ phone numbers. But I did it, respectfully yet begrudgingly, because it was my job.

Usually performed late at night after the end of a busy service, or early in the morning before service begins, inventory is a necessary chore that allows us to understand how a bar is performing financially, once we calculate pour cost. That pour cost number paints a very real picture of the bar’s financial health and reveals things like theft, poorly-priced menu items, and pouring accuracy. Without it, you have absolutely no idea what is going on in your bar.

But first you’ve got to know a few things:

  1. How much you spent during some time period
  2. How much you sold during that time period
  3. How much booze you started with at the beginning of the period
  4. How much booze you’ve got on hand at the end of the period

Items 1 and 2 you should either know already, or be able to find easily. If not, stop reading now; there’s no point in doing this if you have no idea how much you bought or sold. Items 3 and 4, I will help you find.

First you’re going to need to put together a list of every single bottle you carry at your bar. I’ve given you a head start by providing you with a simple spreadsheet I created just for this purpose. We’ll pretend this is from an imaginary bar with the world’s worst liquor selection ever.

Download my inventory spreadsheet and pour cost calculator here.

 

Get every bottle you carry entered into that spreadsheet, along with each bottle’s price. Note that the size of the bottle isn’t needed here, just the name and the price. Do it now.

Okay. Now we’ve got to get a beginning inventory so that we have a place to start from. Inventory numbers are worthless without a beginning and ending inventory so you’re going to have to go through this shit twice, once at the beginning of the period, and once at the end. The bigger your back bar is, the more you’re going to hate it. Trust me on this one.

The simplest method that doesn’t involve weighing bottles or whatnot is to visually take note of how much liquid is in each bottle. Now, sure. This isn’t the most accurate system in the world, but it’s the quick-and-dirty method that’s used by bars all over the world that aren’t huge corporate establishments. If you want to weigh your bottles and do it that way, be my guest. You’re going to have absolute accuracy, and that’s pretty rad. The rest of you, come this way.

Take a look at your bottle and break it down into tenths in your mind. Decide where the liquid line falls and make an educated guess about the contents. Here’s a picture to illustrate what I’m talking about:

Make your decision and enter that number into your spreadsheet. Repeat until you’ve recorded every single bottle in your bar.

So, over the course of the next, say, month, you’re hopefully going to sell a bunch of booze, and probably buy a few bottles as well. Keep a record of every penny you buy and sell from the moment you finish that initial inventory until the moment you begin your ending inventory. Oh, and don’t buy or sell anything while you’re actually doing that inventory. This should go without saying but doing so will screw up your numbers. Which means you’ll have to do this while the bar is closed. Sorry, sucker! You’re the one who wanted to own or manage a bar in the first place, so don’t blame me.

Do inventory again at the end of the period, and enter those numbers into the spreadsheet I gave you. Now you’re coming to the table armed with all four numbers you need: beginning inventory, ending inventory, total alcohol sold, and total alcohol purchased.

Okay. Now that you’ve got all the numbers you need, it’s time to calculate your pour cost (I’m such a nice guy I’ve even included this in the spreadsheet I’m letting you download, but I’m going to show you how it’s done anyway)

Pour cost is calculated thusly: it’s how much booze you had when you started, plus how much you spent, minus how much you have on hand, divided by how much you sold. Multiply that number by 100 and throw a percent symbol at the end of it, and you’ve got your pour cost. Now keep in mind that this post only tells you how to get that number. What number you’re supposed to be at, what you’re supposed to do with that number, and so on, is the topic of a much lengthier article.

At any rate, I hope this spreadsheet is of some help to at least a few of you out there. If there’s enough interest in this boring topic perhaps we can get a conversation going in the comments section about what to do once you’ve actually figured out what that number is. You know, in the interest of service to our fellow bar managers everywhere. Thanks for reading, as always.

62 Replies to “How to Take Inventory and Calculate Pour Cost”

  • Malikah says:

    Hi All!

    I just accepted an offer to run a bar. I am getting ready to do inventory and calculate pour costs, develop cocktail menu, etc.

    My question is, this bar has never done inventory. They have had a liquor license for about 5 months now, but no inventory. Do I start inventory as brand new? Or should I look at the past sales of liquor up to this point?

  • Hey Malikah,

    Congrats on the new opportunity, thats very exciting. Theres nothing quite like running a tight bar.

    First things first, you need to get all your data together. That means getting all your costs together, up to date and on one sheet. Get a hold of your suppliers to make sure you have all their most recent pricing and know your options when it comes to pours, products, and their associated costs.

    Once your inventory/order sheet is tight, then I would take a detailed and accurate inventory. This in essence will be your starting point. From there, I would give it a week and do another inventory. Always make sure you are getting clean numbers, so count after or before service.

    Having you inventory tight is only half the battle. After that, you have to take a deep look ibto the POS. Are there items you carry that arent represented by buttons in the order screen? Are you ringing up staff drinks? Are the bartenders pouring consistent amounts? Does the kitchen use your brandy to make sauce? Or get sauced?

    There are a bunch of factors that come into play.

    When you have data from a specific time period, then you can look at figures like top 5 beers and spirit sellers, items that did not sell (did their quanity on hand change?), top cocktails, etc.

    Be vigilant with your invoices. They tell the story no matter what. Make sure you take good care of their organization and stay on top of purchases. In the end numbers dont lie, so even if you can account for every ounce of Fernet, if you sell X amount, and bought Y products from vendors over the same period, there will only be the revenue minus expenses to make payroll, cover utlities, and make sure you can buy thise fancy cherries at the end of a shift.

  • Alek Relyea says:

    Hey Malikah!

    Congrats on the new position! Xavier’s advice is wonderful. The most important thing is to make sure you are counting your liquid cash at least once a week. I’ve always been of the opinion that the more often you can complete a full inventory, the more successful your bar will be. Just like ewe count the cash registers each shift with vigilance, so should we count our liquid cash with just as much scrutiny. Like Xavier said – make sure you are getting a clean inventory count.

    I started in the industry years ago, and I’ve always done inventory weekly. For years it was paper/pen/clipboard method eyeballing it. This is what most of the industry is still doing. The problem with this is that my numbers never reflected my boss’s actual P’s and L’s. The eyeball method has too much variance. I found Partender about 18 months ago, and I only wish I had discovered it sooner. I loved the product so much that I finally convinced them to hire me. It’s a wonderful tool to help keep your liquid cash in check (as well as analyze how it performs over time).

    But regardless of whether or not you choose to use Partender, follow Xavier’s advice and be vigilant with all your data. There is so much more to running a successful bar beyond hiring good staff and having a good menu. The little things that often slip by can make or break a great bar manager. Please feel free to reach out should you have any specific questions as you embark on this adventure. I’ve been on many different sides of the industry (including management), so I would be happy to help!

    Cheers,
    Alek

    [email protected]

  • timm says:

    You should look at Sculpture Hospitality. I owned a restaurant for many years and wish I found out about them. They have software where you can either do the inventory and calculate pour cost your self or you can use them to do the inventory for you and provide your actual pour cost vs what you ideal pour cost should be. Very valuable. Knowing what your pour cost should be is priceless.

  • Chad says:

    This was very helpful and was a good refresher. Would love to hear more about your analysis on the pour count percentage.

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