Liquor inventory control is key to your bar's bottom line. It's important that you have a process in place to do it right, and that all of your staff are onboard with that procedure.
Here are seven laws for a better liquor control system in your bar.
Law 1: The simple act of measuring increases efficiency.
Staff start performing better when they know someone is watching. This is a known phenomenon in athletic performance that trainers use to get more out of their athletes before doing any coaching. Just by simply observing and recording data, the process they are trying to improve upon miraculously becomes more efficient. In other words, once the athlete knows they are being watched, they perform better.
The same thing happens in the bar business when someone that has never done inventory begins the process of counting, recording data, and comparing usage to sales. Just the act of doing inventory and having staff know it’s being done will often result in fewer mistakes.
Law 2: The level of precision used in your inventory technique matters.
The more precise your method, the greater control it gives you over your operation. The best systems are itemized, extremely precise, and adaptable to any operation. And there are varying qualities of inventory methods.
For example, doing itemized inventory is more accurate than grouping inventory together as categories. And measuring precisely by weighing bottles is better than eyeballing bottles. And lastly, using a computer to automatically update prices from your invoices is more reliable than relying on a person to enter in every purchase line-by-line and change every little price fluctuation. Precise methods that leave very little room for human error are preferred over methods prone to human error and subjective judgement.
Law 3: Your standards are what determines the effectiveness of audits.
Variance reports mean different things to different people. Those with high operating standards are those that go through reports thinking, “How can I make more money using this?” When reports go out to these kinds of operators and things aren’t perfect, emails are sent, discussions are had, and things change.
On the opposite end of the spectrum, there are operators that will get a horrible variance report that shows 100 missing beers, who will shrug, walk away, then later on complain about a lack of money.
What is the difference between the two? It all comes down to standards. One person is genuinely interested in the success of his business and is curious; the other is apathetic and lacks energy. It all comes down to standards.
Law 4: Remember Murphy’s Law when setting up your procedures.
If something can go wrong, it probably will go wrong. So set your procedures up to catch things when they are small and therefore quickly and easily resolved.
For example, when deliveries come in, get someone to compare the invoice to what is ordered when it arrives, so any mistakes like short shipments or incorrect products can be handled right then and there.
When it comes to POS procedures, instead of allowing staff to delete their own transactions, authorize their own promo, and buy inventory without any oversight, smart operators restrict access to a few key individuals for these areas. This makes getting answers easier and prevents mistakes from being made by people that weren’t qualified to make them to begin with.
Another example of this is setting up your email systems for every manager’s eventual departure. Instead of allowing people to use personal email, use a general “manager” email address for team members,. This is important because everyone eventually quits. And if their email is a key link where invoices are being sent, and communications representing your company are going on without your oversight, things will go wrong. I see this all time with companies that have managers coming and going, and those that follow a sensible email procedure like the one I mentioned above experience much less chaos when people quit. They are prepared for people quitting, instead of hoping it won’t happen. Remember, if it can happen, it probably will happen eventually, so set up every one of your procedures accordingly.
Law 5: Surveillance is your friend.
Strategically placed cameras throughout your venue are what enable you to catch errors as they happen. The level of technology for cameras is so great now that you can have color and sound on a level that wasn't possible even five years ago.
I recently was retained to bust a thief a bar owner was convinced was stealing but could never get any proof on. I sat with him and watched his bartender delete several transactions after collecting cash from a customer, right in front of the owner, and I was surprised at the quality of sound and color his surveillance system provided us with. With a print out of the POS log in our hands, and an extremely detailed recording of his employee committing the thievery, we had all the proof we needed to bust the guy.
The moral of the story is, invest in a great surveillance system with the latest technology and ensure cameras are placed strategically.
Law 6: Culture vs. Control.
People conditioned to fear repercussions in a fair system are better behaved than people who fear nothing in a strict system. I have worked in nightclub environments where people are weighed in and out each night and subjected to nightly collection of paybacks where theft is rampant. I have also worked in nightclubs where inventory procedures are done once a week with no payback procedures, and inventory controls are tight and theft is never a big issue.
You may be wondering, why do night-to-night weigh-outs result in constant shortages? Shouldn’t they stop them? Well, no not really. In fact, nightly weigh outs usually result in the opposite. The procedure of collecting paybacks from the difference between the weigh outs and the POS report simply defers to the weigh out as the final word on what the business is owed. The POS sales report pretty much becomes irrelevant in this system. The staff become used to the idea that the weigh out is what they pay on, so they do whatever they want from point A to B without any fear of repercussions. In this scenario, the paybacks actually encourage theft as opposed to reducing it.
However, if you audit inventory once a week and come down hard on your staff after comparing their usage at the POS against actual inventory that is used, after a few weeks of hard conversations and maybe even some firing of uncooperative staff, things get under control and variances become much less. The staff become conditioned to understand that mistakes will be brought up, so they act accordingly in their day-to-day activities. In this culture, even without the threat of paybacks, theft is discouraged and inventory efficiencies increase.
Law 7: Constant Vigilance.
The work is never done. The conversation with your team about controlling variance is never ending. Like any reconciliation procedure, once you are regularly monitoring your inventory, you need to keep doing it to keep things tight. There are some ignorant people out there that will do an inventory audit, see they have only 2% variance, and then cease audits afterwards because “the problem is not big enough to justify the time and energy audits require.”
Going back to standards, another person can get the same report, perceive a 2% variance as absolutely unacceptable, and push for more tighter controls to eliminate it entirely. The goal is 0% variance all the time, which is impossible. But for those that are vigilant, it remains the gold standard that must be reached by their staff at all times.
Kevin Tam is a Sculpture Hospitality franchisee with more than a decade of experience working directly with bar, restaurant, and nightclub owners on all points of the spectrum. From family-owned single bar operations to large companies with locations on an international scale, Kevin works with them all and understands the unique challenges each kind of company faces. He’s also the author of a book titled Night Club Marketing Systems – How to Get Customers for Your Bar, a regular writer/contributor for Bar & Restaurant, and publisher of an eBook called: The 5 Commonly Overlooked Areas That Kill Your Food Cost.
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