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Handling Your Overhead

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By Johnathon Williams | Jul 3, 2009

For many businesses, recessions strike with a double whammy. Sales fall as fraud rises, squeezing profits at both ends. But unlike those in previous recessions, many of today's entrepreneurs are recovering lost revenue with new technologies that track output down to the last mile, french fry and drop.

And for the companies that provide those technologies, business is booming.

In the bar industry, inventory loss is measured through shrinkage: the difference between a bottle or a keg's maximum possible output and the output actually recorded in sales. Shrinkage has many causes--anything from heavy pours to outright theft--but the effect is always the same: less money in the till.

Shrinkage reduces bar supplies by an average of 25% to 30%, says Vanessa De Caria, vice president of operations for BEVINCO. BEVINCO conducts weekly audits of drink inventories at bars and restaurants for approximately $200 per week. Auditors weigh every keg and bottle while feeding the information to a laptop running the company's proprietary software. The software then plugs into the bar's sales system, revealing the difference between drink sales and inventory levels. The program even goes so far as to consider varying densities of different liquors into its calculations.

For bar owners, the results can be a rude awakening.

"They are absolutely shocked. Most owners when we walk in say 'I've got everything under control,' and they're mortified to discover they're losing 30%," De Caria says.

Aside from the percentage of the loss, clients receive detailed reports that break down what caused the loss, when demand for specific drinks is rising or falling, and how much inventory is still on hand, among other things. The company guarantees a return of $1,000 per week on its services.

The accuracy of the audit reports is due as much to the skill of the company's human auditors as to its software, De Caria says. Auditors take the burden of weighing bottles and analyzing sales data from owners, who are usually busy with other responsibilities.

"They've got a fire in the kitchen. It comes down to priorities," she says.

In the last six months, BEVINCO's sales have increased by 20 percent, De Caria estimates. Businesses that once declined the company's help have quickly become receptive. The lion's share of the company's customers are independents.

"In these times, particularly in this economy, people are relying more and more on technology to solve some of these issues," she says.

Tracking every drop might seem antithetical to bar culture, where good customers expect better pours or even the occasional free drink, but De Caria says the technology's emphasis is on accounting, not on stinginess. Comps are fine, so long as business owners know where their inventory is going.

Knowing where things are going is also the emphasis at LiveViewGPS. For a starting cost of $30 per month (after the separate purchase of a GPS unit), the company offers satellite-based tracking of vehicles through its web site. Clients access the service using a web browser; no special software is required.

The company's clients range from mom-and-pop operations with a single vehicle to companies with fleets of vehicles, CEO George Karonis says.