Originally posted by Cabaret Designers
Have you ever been the victim of a restaurant sales tax audit by your state liquor commission? Would you be prepared to write a check for $98,000 for such a demand? The first thing most people do in this situation is hire an attorney and a CPA who specialize in this type of claim, but it may be too late. After all, have you ever attempted to produce four years’ worth of sales and inventory records? According to a recent State of Ohio audit study (see below), over 80% of bars and nightclubs exceed the state allowance for shrinkage? Friends, is this the position you want to be in? For a minimal weekly charge, you could be a Bevinco client who not only saves thousands every year…you probably wouldn’t have a thing to worry about when facing a dreaded state audit. Why? Because Bevinco clients enjoy the peace of mind that comes with having the industry’s tightest inventory and documentation controls.
If you don’t think it’s worth your time and effort to learn as much as you can about gaining control of your inventory and inventory shrinkage, think again, my friend! Here are some facts you really need to know, what in all likelihood is happening to you (without your knowledge) and the ultimate nightmare that could happen to you:
The $98,000 Audit
Are you aware that 90% of bars are missing 15% or more of their inventory?! What does this actually mean? If you sell an aggregate of $15,000 worth of beer, wine and liquor each week and 15% is unaccounted, that’s $2,250 each week, or $117,000 annually. Subsequently, the state will be looking for $8,190 in sales tax each year*, but the worst part is yet to come. You aren’t even aware that you are missing the aforementioned inventory because you don’t perform consistent, reliable inventory audit procedures – if you perform them at all. So life is good today, because, in spite of yourself, you are still making money. But wait, your sunny world can come crashing down one day, four years from now, when the state sends you an audit demand for $98,280! Sound like something wrong with my math? No. The $98,280 bill includes penalties and interest – which is about three times the principal!
Free-Pouring Facts
As any logical-thinking person could imagine, free-pouring has to be the most inaccurate way of
· Average pour size is 1.38 oz
· 47% used 1.50 oz
· 43% used 1.25 oz
· 3% used 1.75 oz
· 3% used 1 oz
Average Shrinkage Per Category
In a comprehensive State of Ohio audit study of 350 bars (which can be downloaded below), Deibel unveiled some additional information that he says coincides with his many years as a Bevinco dealer. What I like about Chuck is that he’s a CPA and has taught cost accounting on the collegiate level. In other words, his research is extremely reliable. According to Deibel, here’s the shrinkage per category:
· Liquor 22.1% (10%)
· Wine 19.2% (5%)
· Bottle beer 10.6% (0%)
· Draft beer 16.3% (5%)
The numbers in parenthesis represent what the state of Ohio allows. Please pay particular attention to the numbers in parenthesis, because these percentages are what the state allows. The reality is that the actual losses for owners who aren’t BevInco clients are normally far greater, because they simply don’t have actual pour cost information.
Downloadables:
Ohio-Beverage-Monthly-May-2011.pdf
State-of-Ohio-Sales-Tax-Audit-Brief.pdf
The Bottom Line
According to Deibel, “Most (inventory) analysis methods that are done don’t really get at shrinkage.” “They basically have a (profit) percentage they look at, and if that’s in-line, people think that’s fine.” Most bar operators are not calculating their ideal sales or ideal pour cost percentages and comparing those numbers to their actual, so they are not aware of how much money they are losing. Consequently, when the sales tax audit occurs, bar owners find themselves owing thousands and thousands of dollars in sales tax, penalties and interest. With the Bevinco service, you will get a handle of how much inventory is missing and how to adjust your losses to these thresholds. Even better, you will gain knowledge and control of your losses through systematic audits. According to Deibel, his average client has reduced their inventory shrinkage from 20% to 2%!
As I mentioned earlier, Bevinco provides bar and nightclub owners with their proprietary software. A sample of how a Bevinco client improved his bottom-line in just four months is shown in these two audit reports, which can be downloaded below.
At an average weekly cost of $200, the Bevinco service will not only maximize your profitability, you won’t have to worry about being unprepared for a state audit.
If you’re serious about your business, you need Bevinco. Don’t you owe it to yourself?