Author: Dave Grimm, AccuBar Communications Director
"With our system, there's no need to take inventory."
I can't tell you how often in this industry I've heard that claim. I've heard it from hundreds of prospective customers. You'll hear it from salesmen trying a little too hard to sell you a back-office system, POS system or some other nifty gadget. Most recently, I even saw it broadcast on a large screen in a tradeshow booth.
Not only is this wrong, but it feeds into a common misconception that is costing the industry millions. Relying solely on theoretical inventory is like locking the doors of your establishment while leaving the windows open. Your employees could be robbing you blind, and chances are you won't know it, because you've got a false sense of security from thinking your POS system or pouring system has it covered. But take a look at our page on bar scams, called "Your Bartender's Retirement Plan." Many of those scams will go unnoticed if you rely only on theoretical inventory.
Here at AccuBar, we tell a story of one of our first customers. It's a small restaurant/bar whose owners weren't taking physical inventories, thinking they were getting all the inventory information they needed from their cash registers. "I started the day with four cases of Mondavi Cabernet, and I sold 12 bottles, so I have three cases left," they thought. But after a month of taking physical inventories, they discovered they had lost 70 bottles of wine that month. A server was giving bottles to customers to get better tips, and had been for years. And their theoretical inventory process was clueless.
For those who don't know the distinction between theoretical inventory and the real thing, it's simple. Theoretical inventory means deriving your counts without actually counting. You had 5 bottles of Jack, you received another case, you sold 6 bottles worth, so theoretically you must have 11 bottles in inventory. No need to actually count, right?
In a perfect world, sure. But your basic bar is about the most imperfect world imaginable. Along with the 6 bottles you sold, you also lost half a bottle from your late-night bartender pouring 1Ĺ-ounce shots instead of your standard 1ľ. And one of your waiters faked a check to get himself a few shots. And your janitor noticed the storeroom unlocked, so he helped himself to a bottle. And to top it off, your bar manager, wanting to thank the staff for all its "good work," gave a little party after hours with your booze. So your theoretical count is nowhere near accurate. (For more on the difference between theoretical and physical inventory, click here.)
Industry estimates show that the average bar loses 25% of its beverage to theft, overpouring, spillage, etc. At AccuBar, our experience has been that in places not taking inventory, the losses are substantially higher. That adds up to a ton of money in a hurry. Be sure of one thing: Your staff knows how closely you're tracking your inventory. If you leave the barn door open, even a crack, the cows will inevitably take that as an invitation to mix themselves a few martinis.
So do yourself a favor: Next time someone says you no longer need to do inventory, realize that they're really saying they have a nice chunk of swampland to sell you.
Date: December 11th, 2008