What a stock variance is telling you

Stock variance is the difference between the stock you counted and the stock you expected to find. If your records say there should be 24 bottles of a spirit on the shelf and you count 23, the variance is −1. The formula is the same for every item: variance = counted − expected.

A negative variance means less stock than expected, and a positive one means more. Either is a signal to look closer. (If you are new to counting, start with our guide to running a bar stock count.)

Variance as a percentage

A gap of one bottle means something different on an item you hold ten of than on one you hold two hundred of. To compare items fairly, express the variance as a percentage of what you expected:

One bottle short of 24 is about −4%. One bottle short of 200 is −0.5%. Same gap, very different stories.

Three families of cause

Almost every variance comes from one of three places. Look at them in this order, because the first is the cheapest to fix and the last should only be your conclusion once the others are ruled out.

1. Recording errors

Something happened but wasn’t written down: a delivery, a transfer between store and bar, a sale, a breakage. The stock is where it should be. The record is wrong.

2. Process differences

The stock was used, but not in the way the record assumes. Pours run a little generous, a bottle is spilled, staff drinks or tasting samples aren’t logged, or two counters estimate open bottles differently.

3. Loss

Stock has left the property without being sold or recorded. This is what most people fear first, and it is the conclusion to reach last. If you accuse before you’ve ruled out the first two, you will be wrong often enough to damage trust in the count itself.

A four-question check for any gap

1. Were all deliveries and transfers for the period recorded?
2. Were all sales for the period entered, including open tabs?
3. Did the counters use the same units and the same method for open bottles?
4. Was anything broken, comped, or used for staff meals or events?

If all four answers are yes and the gap remains, it is a real gap, and it now has a smaller list of possible causes.

Put a value on it

Multiply the variance in units by the cost price of the item. Two bottles of a low-cost mixer and two bottles of premium spirit are the same variance in units and very different problems in naira. Sort your variances by value and start at the top.

Read the trend, not just the count

A single count can mislead. Keep the last few variances for each item side by side. A small, steady variance usually means your process is sound. A sudden jump, or the same item short week after week, is what needs attention.