Tracking Turns On InventoryDecember 3, 2013 By: Kristen Santoro
In order to succeed in the bar business you need a detailed understanding of product consumption in order to implement procedures that eliminate theft and waste in addition to tracking inventory depletion.
Inventory is money; and accurate tracking of profit margins and turns on inventory is imperative. To put things in perspective, think of inventory as money sitting on your shelves. The longer the product sits on the shelves the higher risk for employee theft and spoilage. Finding the balance between product, profit margins and turns can help save you money and add to your bottom line.
For a full service bar or restaurant the sweet spot on inventory turns is between four and eight times a month. According to David Scott Peters, a restaurant coach, trainer and speaker at the Nightclub & Bar Convention and Trade Show (taking place March 24-26, 2014 in Las Vegas) calculates inventory turns by “dividing the dollar value of the product used (calculate this monthly to know what your food cost is) by your average inventory (taking your beginning inventory plus your ending inventory and dividing it by two). The final calculation for inventory turns looks like this: [use ÷ average inventory]. This number measures how efficient you are with cash and inventory.” Achieving eight turns a month (ordering twice a week) makes your venue extremely efficient.
Accurate tracking on turns and profit margins ensures prices are appropriate and helps identify which high margin items warrant special promotions. These up-to-date tracking comparisons will also help to identify vendors who offer the best quality at the lowest cost.
Labor and food costs are typically the largest expenses for a bar or restaurant, and margins are usually slim; therefore keeping relatively tight inventory control policies can make a significant difference.