![]() Using it saves time, saves money, and eliminates counting errors or excess inventory. Liquor inventory software like BinWise Pro automates the process of taking and analyzing inventory. (Having enough safety stock and maintaining par level inventory helps avoid this.)īoth of these mistakes will show up in your usage rate numbers. They don’t have enough inventory, run out of stock, miss current and future sales, and cause long-term damage to customer relationships.There is the added risk of inventory spoiling, too, for hospitality businesses. They hold on to too much inventory, which ties up too much cash, and requires the ongoing cost of maintaining that surplus inventory in a sales-ready condition.There are two common ways businesses drop the ball on bar inventory management: You don't want to find out the hard way if wine can go bad or what happens when alcohol expires. ![]() Keep a clean record of all the wholesale products you buy, if any, so inventory is easier when the time comes.Įven if you know the formula by heart and have all the numbers you need, calculating your inventory usage manually can still waste lots of time and be error-prone. While this seems quite easy and simple to do, keep in mind that you must repeat the process of taking liquor inventory or wine inventory for every product in your bar or warehousing by category, brand, item type, and sometimes even by the supplier. But sometimes businesses don’t have that bandwidth and drawing inferences is acceptable. Obviously, bars and restaurants can get more accurate numbers if they calculate inventory usage specifically for that month instead of deriving monthly figures from quarterly ones. Over the quarter, there were about 12 bottles used per month. Inventory Usage = 48 Monthly Inventory Usage = 48/4 Monthly Inventory Usage = 12 To calculate the monthly inventory usage rate, we’d take the total inventory usage and divide by the number of months. Now let’s say we want to find out monthly inventory usage over time. Over the quarter, there were 48 bottles of vodka used. Inventory Usage = Starting Inventory + Received Product Inventory – Ending Inventory Inventory Usage = 10 + 50 – 12 And at the end of the quarter, they’re left with 12 bottles of vodka. Over the four months, they receive 50 bottles of vodka. Let’s consider a bar’s inventory usage of vodka bottles over a quarter. An Example of Using the Inventory Usage Formula All that requires is dividing the total inventory usage number by the units of time you’d like an inventory rate for.įor example, if you have annual inventory usage and want monthly, divide by 12. That’s because a set time period is required to have starting, received, and ending inventories.īut some businesses will calculate annual inventory usage, then further calculate inventory usage over time per day, week, month, or quarter. Inventory Usage Over TimeĬalculating inventory usage is, by necessity, calculating inventory usage over time. You can also use a Google sheets inventory template to help with tracking and calculations. To find COGS, use the monetary value of each inventory, and not the number of units, in the formula. Here’s the inventory usage formula: Inventory Usage = Starting Inventory + Received Product Inventory – Ending Inventory That's, of course, where draft beer inventory comes in handy. The difference is that inventory usage measures units used (4 bottles, 10 kegs, etc.) and COGS measures the monetary value of the inventory used. Inventory usage and COGS use the same formula. How to Calculate Inventory Usage and Inventory Consumption If you want to know how many bottles of vodka you used over the course of three months, you’ll have to determine vodka's inventory usage over time. It’s similar to COGS, but it speaks to the number of units sold and not their monetary value. Inventory usage is how much inventory a business has used over a specific time frame. ![]() If your stock isn’t moving, your money isn’t moving, and your business is stagnating. Inventory turnover measures how often inventory is sold or used during a set time period. To find out if you’re effectively managing your inventory, look at your inventory turnover ratio. And how much and how quickly your business grows. That’s money not spent just to acquire inventory, but to store it for resale.īar inventory management directly impacts your cash flow, which in turn impacts how much money you can reinvest in your business. For the hospitality industry, it’s often the largest ongoing investment. Your business invests lots of money in inventory.
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