While it doesn’t take a rocket scientist to run a restaurant, it sure can feel that way sometimes. So many inventory processes to keep track of with many more tasks following up behind them. It seems like a never-ending list.

Its almost do-able until one inventory task takes way too much time to complete, then it hits the proverbial fan and now you’re stuck.

Step by step method for How to Track Inventory for a Restaurant or Bar

1. What is food or bar inventory tracking?
2. Getting to Know Your Basic Restaurant Inventory Tracking Terminology
3. Inventory Tracking for Restaurants
4. Steps to Get Started with Inventory Tracking

1. What is food or bar inventory tracking?

At their core, food and bar inventory tracking is both a measure of your profitability and a loss prevention tool for your establishment.

The underlying thought process about this tracking inventory is simple: If you don’t know what you’re losing, you won’t know what you could be earning.

Knowing inventory tracking means:

• Knowing the supplies, you’ve got coming into your restaurant
• Knowing what’s going out of your kitchen
• Knowing what you’ve got left over in the back of house

If and when you know these numbers without an issue, that is when you understand where your money (i.e. inventory) is sitting at any time. It’s one thing to see the supply of wings go quickly, it another thing to identify exactly why it did.

Areas of Loss

Sticking with the wings still. Were they sold to happy guests? If yes, then great! You will have no issue reconciling every once to a price point to get your total. If most of it went to happy guests, where did the rest go? It may have been legitimately classed under what we’d call an area of loss.

Sometimes losses can occur from:

• Staff error
• Spillage
• Comping a customer who complained
• Meals for staff
• Theft

All these are considered areas of loss regarding inventory and profit for your business. Stuff happens, accidents, customer complaints etc. Not every ounce of every piece of food make it onto a customer plate. It’s inevitable that some will make their way elsewhere.

That said, if for whatever reason, you don’t know what supplies were wasted, then you won’t know how much inventory was used. This leaves you wondering what your true earning were for that particular day, week, month, year…or even from one shift alone.

2. Getting to Know Your Basic Restaurant Inventory Tracking Terminology

Becoming an inventory master means much more than walking the walk. You should be talking the talk. Check the list below for terms you’ll need to familiarize yourself with.

Sitting Inventory

This is the cost in dollars of your product (or amount) that currently sits in-house. You could associate sitting inventory (depending on your business) as either the dollars’ worth or the physical amount of the product. Just make sure you are consistent though and stick to a single unit of measurement only.

Depletion

This is the cost in dollars of your product (or amount) that was used during a set time period. Much like sitting inventory, depletion can also be used based on days, weeks, and/or monthly sales. It is most commonly calculated using your POS’s sales data.

Usage

This is the cost in dollars (or amount) divided by the depletion’s average of your sitting inventory during a set time period. Let’s look at that formula

Your Sitting Inventory ÷ Your Average Depletion (during a set period of time) = Your Usage

As an example, let’s say you’ve got four gallons of ketchup and you’re planning on using one gallon per week. In short, you’ve got four weeks of product usage.

Variance

The difference with respect to variance is between the amount of usage cost and the cost of your product. For instance, you find your inventory is lower now by $100 worth of burgers at days end. Your POS on the other hand says you’ve sold only $95. You now have a food cost variance of -$5, which means $5 of chicken remains unaccounted (think area of loss possibilities).

Additionally, to help make easier comparisons, variance can also be shown as a percentage. Let’s look at that burger variance again; -$5 (your variance) ÷ $100 (your usage cost) = -5% variance.

So, as you can understand now the importance behind inventory tracking fundamentals, let’s examine a few best practices to track your restaurant’s inventory.

3. Inventory Tracking for Restaurants

Par Inventory Sheets

This is a tool used to manage your inventory by food supplier and or by food type. Managers and owners will set a certain level of how much of a specific item they want in-house (e.g. four chickens at all times). This is also called a par level.

Owners and managers will use their par inventory sheets the next time the inventory order needs to take place. They will use them as a guide to what and how much needs to be ordered, all based on the sitting inventory, how quickly it was sold and any events coming up that may temporarily need more inventory.

‍On the upside: It is intuitive and simple math and understanding a bit of forecasting is all you’ll need to get your numbers.

On the downside: Costs and variances are not a part of this sheet (only usage is). This can be a problem when you factor in theft, over portioning as they can go undetected quite easily when no comparisons are made to an actual variance.

Inventory Management Automation

If you plan on doing it right from the start, then inventory management software is the most accurate way to track your inventory in concert with your restaurant POS system. Using this software as inventory tracking for restaurants will track actual usage, against theoretical usage so owners and managers can understand better how their inventory moves through the restaurant.

On the upside: It is by far the most accurate method used to track inventory.

On the downside: While a few POS systems will have a module that tracks inventory, this is not nearly as robust as a dedicated restaurant inventory tracking application would deliver.

Gut Check ‘Guesstimation

Just so we’re clear on this method, it is not in any way shape or form, a legitimate strategy of tracking you inventory. While we would rather not include this method here, it is still in use and restaurant owners will still do the proverbial once over “gut check” when walking into a fridge or storage room.

This is the best way to enable theft, error filled reports and a food variance big enough to fly a rocket through.

The upside: Yay no more inventory to do!!

The downside: Gotta keep the keys to the restaurant warm for when the bank comes to take over.

4. Steps to Get Started with Inventory Tracking

Get Help from Your Staff

It’s too hard to do every inventory needed to be done without some help from your staff. Make use of your shift leaders and managers to assist with counts and detailed reports.

Speak to your line cooks and back-of-house team. They need to be accountable to record spillage notes, if any errors were made and of course when they come across rotten food. By teaching your team to be better inventory experts, they will definitely make life easier for you. Now it would surly help things along if they could input the info directly into a restaurant inventory tracking application.

Keep Track of Your Daily Sales

The best practice is to track your sales every day. At the very least, a quick check daily but a deep dive weekly to get your started would help.

The better you get to know your numbers the quicker you can identify odd instances and the faster you will be able to respond.

If you want to do a proper deep dive into your sales tracking and analysis, it won’t be an easy session without the help of a good tracking software system to do it for you. While you can do some of it with your inventory sheet, your best bet is to get to your data more accurately.

If you’re looking to just get started today with a free tool, click here to Download your ‘Free Excel Template for Tracking Inventory’ to begin right away.