Your Bar's Data Goldmine: What POS Reports Are Actually Worth Reading

Today on the Bar Business Podcast, uncover the most valuable reports you should be checking weekly, learn how to spot profit draining products before they hurt your bottom line, and master inventory management using real data, not guesswork. Today, we're diving deep into how to extract meaningful data from your POS system. Data that can actually help make you more money. And I know we all have POS systems. all have... Well, not all of us. There are still some people using cash register. Let's be honest here.

But 99.9 % of us anymore have POS systems. And most bar owners only use those POS systems for basic sales tracking and shift reports. And they're leaving valuable insights buried in that data, buried in their system. Now, here's the good news. The data you need to boost your profits, it's already in the system. You just have to know where to look and then how to use it. So as we go through the episode today, that's what we're talking about. What exists in your POS system and how

what you're going to do with it in order to make progress and to understand your business better. Now, we'll be going through three main points this week. Essential reports that I would recommend that you track weekly. Inventory management through POS data, how that works and what you need to know, and then how we can focus on operas.

operational optimization in order to improve our business based on the data that we have access to.

So we're to start by talking about essential reports that I would recommend you track weekly. Now, this is going to look a little bit different for everyone, I will admit. And if you want to schedule a strategy session, go down to the show notes, I'm more than happy to talk to you and walk through what I think for you may be best. But in general, there are kind of five things that I think are really important to track on a daily or weekly, I should say, basis. The first one is what are your top 10 sellers?

And what are your top 10 profit makers? You should know if you've done proper menu costing what your top 10 profit makers on your menu are. You should also know from your P mix data inside your POS system, what are your top 10 sellers? And I would look at that every week and say, are these lists the same? Now, of course, we talk a lot about menu engineering and we have in the past and going through that whole mathematical process. But I can tell you right now, if you look and you say, I know these are my top 10 profit makers and none of those are my top 10 sellers.

Well, something's not lining up the way you want it to. So always look at your P mix. What sold last week? Did you have any specials? Was what sold the items that you're going to make the most profit on? All of that is really important to know and understand so that you can really get your head wrapped around what your customers are buying.

And when we're looking at the top profit makers and the top sellers, we also want to look at what items did not sell well. What items do our customers not actually want? Now, once we've identified that, we can consider taking those off the menu next time around. Now, that's not to say some weeks, you know, it gets real warm one week and it was cold the week before. And so instead of selling a bunch of soup, you sell a bunch of salad. Those things happen. Right now, where I am, is

hot and humid and muggy and terrible outside, I'm probably not going to drink ⁓ espresso martini. I'm much more likely to order like a Coors Light in this weather just because I think Coors Light and water are kind of synonymous. The next thing I want you to take a look at is your average check size. Now, if your POS reports sales per labor error, look at that too. Here when we're talking about average check, but look at your average check. Look at the number of guests you have per check. Look at your average spend per guest.

Now, obviously, those are kind of ⁓ the average check, the number of guests and the average per guest. You're kind of looking at subsidiary data points, if you will, where your average check is the main one. Then you're just dividing that by the average number of guests and it gives you the average spend per guest. But pick one of those numbers, whether it's average check or average spend per guest, and look at it every week because you generally want to know, OK, if I start to see, my guests were spending on average.

$35 every time they came in for the last eight weeks, but then the last two weeks, they've only been spending $25. Is that a sign of a recession? Is that a sign of them spending less money? Is that a sign that just seasons have changed and what your guests are buying has changed? You need to think about those things, but always look at that kind of guest check average, which is to me, that is one of the best indicators of whether or not your business is going up or down at the current moment.

The next thing I want you to look at when you're looking at your POS data, pull your labor costs and look at it as a percentage of revenue for each day, for each day part, and figure out what that means. If you have sales per employee, see if there's a huge differences in what one employee can sell versus another. But grab all that labor data, pick a couple things you're to look at and look at it every week.

And at a minimum, at a minimum, look at labor costs as a percentage by day or even better yet by day part so that you can understand when's my labor high, when's my labor low. And I think we all intrinsically know Tuesday, there's a much higher probability that your labor will be high than Friday, where there's a much higher probability your labor will be low. Why? Because your business is probably better on Friday than it is on Tuesday. So

Unless you're employing way more people on Friday than Tuesday, that labor rate is going to be low. So that's why we want to look at it day by day. And when you compare this, you don't want to necessarily compare Tuesday to Friday. That's like having an orange in one hand and an apple in another and going, why aren't these the same? What you want to do is compare this Tuesday to last Tuesday and the Tuesday before that to start to understand that labor pattern that exists on your Tuesday evenings.

Now, the last thing that I want you to look at is to review your inventory movement patterns. Spot dead stock. Now, this is not necessarily in your POS. This should be in your inventory, right? You should be doing inventory every week. You should be taking a look at that actual inventory and comparing it to what you went through theoretically. But really, what we want to look for here is just stuff that isn't moving. Dead inventory. I've told the story before here. I took over management of a country club.

as food and beverage manager at one point years ago. And I go back in the liquor storage to count everything. I had like 18 bottles of PIMS because they were doing PIMS as a special around Christmas five years ago. And it bought a bunch of it. It bought like three cases of it. Well, they sold a case and a half and there'd be a case and half back there for a year. That was dead stock. And then I had to figure out, okay, can I move PIMS?

I didn't really worry about it, I just kind of left it there to tell you the truth, because PIMS is kind of a weird thing to move.

But always check your inventory and say what's dead, what's not moving. Now, if it's something like PIMS, great. PIMS will be good on the shelf for the next 20 years, give or take.

But where you really need to pay attention is your food because, you know, if you have too many green onions...

Those are going to spoil relatively quickly and you need to figure out how to use them or get rid of them before they spoil. Now, if you see you have dead food inventory and it's going to spoil, the thing that I would highly recommend, find a food bank, find a church, find somebody that's feeding the homeless, give them that food before it spoils. A, you can take it as a tax deduction. B, it helps you get better ingrained in your community. It builds some goodwill towards your bar and it makes you seem like you're supporting the community.

not being a detriment to the community like a lot of people view bars.

So those inventory movement patterns, that's one piece that I want you to look for in your POS data. But now let's actually dive into inventory management through POS data. So we're get a little bit more specific here.

So again, this could be in your POS. This could be just on an Excel spreadsheet. It's however you're doing inventory is where you're going to find this data. But again, you should be doing inventory every week. So this data should exist somewhere. Now, if you're not doing inventory every week, if you don't know how to do inventory every week, if you have any inventory questions, shoot me an email, call me up. It's 312-994-2202. That is my phone number. Give me a call. We can talk inventory as much as you would like.

But when it comes to inventory, the main thing that I want you to focus on, because like we just talked about, you want to see that dead stock, you want to get rid of things that are going on, you may want to donate those. So we need to look at actual usage data and set accurate par levels. Now, how do we set an accurate par level? What I like to do is I like to look at usage for the last three or four weeks. And I kind of just take an average and then I add about 10, 20 percent. If I'm 10 or 20 percent above average for the last few weeks.

I should be able to weather any storm. And let's face it, sometimes on food, something is going to run that you didn't expect to run and you're going to end up 86ing it. That is perfectly OK. Right. I mean, I hate to 86 food items on a menu, but I am very much of the thought process that I'd rather 86 something for a day than throw away a bunch of something because no one bought it. So keep that in mind.

Now, we want to also track inventory days or days of inventory for each product category or however we can. Now, inventory turnover. There's an equation for that. You can go back and listen to one of the podcasts we did on inventory that will lay that out for you. But the big thing to know here is just essentially how many days is something sitting around? If I buy a case of onions, does that case of onions last me a week or two weeks or three weeks? Hopefully, it's not lasting me five or six weeks because guess what? Then it's going to be wasted.

So look at how quickly you go through everything. Understand how quickly you go through it. Hopefully those par levels keep you from waste. But unless you're tracking the days of inventory that you have, you don't really know. And then within everything, when we get into that inventory turnover formula, you can track your overall days of inventory. And once you know how long your inventory lasts in general, right? I mean, a lot of times for booze and beer.

A lot of folks are around that 21 to 30 day range. And what I encourage a lot of people to do is just shorten that back to, you know, let's get between 14 and 21 days instead of 21 and 30 or 30 plus days for beer and liquor inventory turnover. Because the less inventory we have, the more cash we have. Inventory is nothing more than cash sitting on a shelf. And so if we have a month worth of cash sitting on a shelf as in a month worth of inventory, it's going to take us

30 days to get to that last bottle to get all that money off the shelf. If we have 14 days, it only takes us two weeks to get to that last bottle to get that inventory turned from bottles on a shelf into actual cash. Now, obviously, we want to be a little careful here. We don't want to put ourselves in a position where we're running out of everything all the time. But I think almost everybody is getting an order at least once a week. A lot of folks are getting orders twice a week. So if you have 14 days of inventory, you are not hurting.

Right? If you didn't get an order for two weeks, you would still be able to operate and meet your parts. So just shorten that down as much as you can. Understand that you have access to these orders and to get in deliveries on a regular basis and don't handicap yourself by having excess inventory just to feel good about your cash sitting on a shelf, not earning interest and unspendable. Because when you think of it that way, it really does not make sense to

worry about having too much inventory. You want to run that as tight as humanly possible. The other thing we want to do with our inventory is we want to monitor the variance. I mentioned this a little bit before between theoretical and actual usage. So theoretical usage, you're pulling that P mix out of your POS system. You're saying, okay, I sold 50, 50 cores banquets. So my theoretical usage, I should have gone through 50 cores banquets. And then you count and you find, well,

When I did my actual count, I have 52 less course banquets than I did.

last week. So I'm down two that I don't know where they went because I didn't sell them. So that's going to be the difference between theoretical being 50 and actual being 52. Now, if we're using this example, that's a 4 % variance between theoretical and actual. And so we really want to dive in there and figure out why this exists because anytime our theoretical food cost or beer cost or liquor cost or wine cost is more than 3%.

different from our actual cost. We really want a diamond. In an ideal world, that's going to be 1-2%. Now, not a lot of people get there. I say, know, kind of that 2-3 % is a decent place to be. And once everything else is optimized in your bar, you can start to notch that down a little bit. But make sure you're under 3 % and preferably under 2 % between that theoretical and actual.

The last thing we want to do is to create data-driven ordering processes. So what is your procedure when it comes to ordering? Most people I know, get a notepad, they walk around the bar and they just go, ⁓ I have 12 of these. Well, normally I have 24, so I should order 12. OK, fine, that works. But what data is driving your ordering? If we're trying to get our inventory down, right, if we don't want 21 days or 28 days of inventory, we want to get that down to 14 days of inventory, we have to understand our PARs.

So if we set the accurate part levels and we follow them.

We should be able to use those par levels to create data driven ordering procedures.

The problem is a lot of people get almost there. I mean, they are so close to getting this right. And then they just do not, for whatever reason, capitalize on that opportunity. And actually,

do their ordering on a data-based.

system. So whatever you're doing with your inventory, mean, this is the bottom line is if you order too much, you either have inventory on the shelf or you have waste and spoilage. Waste and spoilage is, I might as well take your money and just light it on fire. That's what you're doing when you have waste and spoilage. It is literally the number one thing that is in your control that most people screw up.

Understand ordering how you order, how you manage that inventory is key and that's a big chunk of the data that you have, whether that's in your POS system or just in however you're doing your inventory. Now let's dive into a little bit of operational optimization that you can use based upon your POS data.

So one thing that we should talk about here is heat maps. Now, what's a heat map? A heat map is some fancy way of saying a diagram that shows you the relative strength of something or the relative number of something. This could be a bar graph. ⁓ It could be a line chart. It could be a heat map per se. But what we're really concerned with here is being able to put our data together and visually look

at the relative values of that data over time. Now, what do we want to do this with? Well, ideally, what we want to do this with is our sales. So we want to say, OK, I'm going to plot my average sales for every day part on every day averaged over the last, eight weeks. Well, that's going to me good idea. When are people coming in? What's selling? When do I have sales? And then I can use that.

to start to troubleshoot and help my business. Let's say I find out I always have a lot of business at six and my happy hour runs from five to seven. Well, but I'm always dead four to five. Maybe what I want to do is move my happy hour from five to seven to four to six because that six to seven spot I'm always packed. Maybe that's because of happy hour. Maybe we try this and we find, shit, because I moved this.

I'm not getting the same business between six and seven because of happy hour. Now, maybe though, when we do that, we say, okay, the business between six and seven went down, the business between four and five went up, ceteris paribus, everything else being equal. That's a... Ceteris paribus is just an annoying Latin term that a professor said to me way too much, and now I say, ceteris paribus, everything else being equal, that could be a better situation for you. It's really hard to say.

I also want you to track your modifier and special request patterns and really dig into your voids and comps. It's amazing how many people don't dig in properly to voids and comps. And it's very important that you do that. Because unless you're monitoring your voids and comps carefully, who's voiding and comping, what codes are they using, there's a lot of room for abuse there from your employees. So that's going to be a piece that you need to look at to optimize your operation. And finally, what I would look at for operational optimization is to look at your payment types.

How is your cash flow working? Is it mostly credit cards? Is it mostly cash? Are those percentages changing over time? We know right now a lot of businesses were heavy credit card or are heavy credit card and very few are heavy cash. But what is that percentage? Always look at that and think, especially if you're in one these rural areas or one these bars that's heavy cash currently and you're paying your employees tips every night. Is that sustainable over the long haul? We've talked about that before.

So to wrap us all up for the week, your POS system is more than just a cash register. It's a powerful tool for making data-driven decisions that can significantly impact your bottom line. When you review the right reports and act on the insights they provide, you can optimize everything from inventory levels to staffing to when you're open to what specials you have.