Most high performing bars use some form of variance reports to manage their staff. Variance reports are basically an analysis to see how liquor usage compares with sales. Variance can be expressed in ounces, percentages, and in value (either at cost or at retail). A 2% variance for example, means that 98% of the liquor was rung in for the liquor audit period, and 2% was lost. Prudent owners use variance reports to keep an active pulse on how their business is performing at all times.
Variance reports are a step above a basic cost of goods sold analysis, which is how most bars try to figure out how well they are doing. Cost of goods sold is a percentage that is calculated by taking how much you spent on liquor, and dividing that number by how much you sold. For example, if you spent $5,000 on liquor and sold $20,000 in a one week time period, during that week your cost of goods sold is 25% or $5,000/$20,000. Variance reports are superior in that they provide bar owners what their cost of goods sold COULD have been, by making a comparison of usage to actual sales.
If you are using variance reports in your business, here are a few tips to help you use them to manage your staff.
Set High Expectations and Constantly Reinforce – If you set a standard to say that variance cannot exceed a certain amount, you have to constantly instill that in your staff so that the expectation is met. Staff performance varies from day to day and is never 100%. Things like theft, POS confusion, forgetting to ring things in, over pouring, and spills will always happen. Getting and keeping staff to perform at a high level is all about constant communication and getting them to understand that accurate liquor usage is a big part of the job. You always must remind your team to be responsible with their liquor usage.
Use Weekly Variance Reports on Top of Nightly Variance Reports – This applies only to night clubs that use nightly weigh out systems to calculate shortages, and then collect those shortages back from the bartenders tips in the form of paybacks. Paybacks are a big area of theft in night clubs, where managers can rob the bar owners blind – unless, there is a weekly audit to verify that the nightly audits were done correctly. I have seen bad payback scams done by bartenders and managers that basically consist of the bartenders selling a bunch of drinks for cash without ringing them in, the manager under reporting paybacks, and where the bartenders and manager walk away with thousands of dollars a night. This type of scam is common place in almost every night club where there are a significant amount of cash sales. It only thrives though, in places without a weekly audit to confirm paybacks were collected accurately.
Look at Variance Reports to Improve POS performance – Many owners do not get into a server or bartenders shoes, and spend much time on their POS actually ringing things in to make sales. Many times, young and inexperienced staff have problems at the POS, which causes unnecessary lost product when they don’t ring it in properly. Your Variance reports should tell you line by line what you are selling vs. what you are ringing in, so if at any time you see an odd variance, like a product that is consistently rung in as something else – you have to ask the staff why this is happening. It would surprise many of you to have these conversations with your staff and find out what people are actually doing at their POS. Everyone has their own style at the POS. A detailed variance report allows you to coach your staff to use the POS the way you want them to use it.