What is Inventory Variance?
Inventory variance is the difference between the recorded inventory in a system and the actual physical inventory counted during a stock check. It is normal for restaurants to experience some inventory variance, and achieving zero variance is generally unrealistic.
Inventory Variance Formula
This formula compares the quantity recorded in the inventory or POS system with the quantity counted during a physical inventory check.
Inventory Variance = {Recorded Inventory} - {Actual Physical Inventory}
- Recorded Inventory – The quantity shown in the POS or inventory system.
- Actual Physical Inventory – The quantity counted during a physical stock check.
A positive variance means the system shows more inventory than is physically available, while a negative variance indicates that more inventory is present than recorded.
Restaurants should expect a small amount of variance during each inventory period. However, significant or unusual discrepancies can indicate operational issues and should be reviewed to prevent unnecessary loss of profit.
In restaurant operations, this can occur for a variety of reasons. Common causes of inventory variance include food waste, incorrect portion sizing, unrecorded staff meals, spoiled product, data entry errors, and theft.
If there is a discrepancy between the recorded inventory and the physical count, the manager will examine sales records, purchase records, and kitchen usage for recent weeks to determine why the difference occurred. In certain instances, the POS system will be adjusted to reflect the actual inventory amount.
By tracking this discrepancy, restaurants can improve control of their stock and reduce the risk of excessive or unnecessary inventory loss.