Coffee Shop Inventory Software & Management Guide for 2025

While crafting the perfect latte is essential for running a successful coffee shop, efficient inventory management is just as crucial for keeping operations smooth and profitable. From tracking coffee beans and milk to managing syrups and pastries, there’s a lot to keep organized.

Fortunately, wth effective inventory management, your coffee shop can achieve impressive gross profit margins. Sharp Sheets reports that cafes typically earn 60% gross margins, meaning 40% of sales go toward the cost of ingredients.

Reaching these levels of profitability, however, requires the right tools to meet customer demand consistently while minimizing waste. In this article, we’ll explore how coffee shop inventory software can help you streamline operations, why it’s essential, and best practices to optimize your cafe’s inventory management.

Key takeaways

• Coffee shop inventory software helps track stock levels, automate reorders, and manage recipes to reduce waste, prevent shortages, and boost operational efficiency.

• Inventory software enables data-driven choices by analyzing sales trends, forecasting demand, and prioritizing high-margin menu items.

• Regular inventory counts, organized storage, staff training, and tracking variances are essential for minimizing shrinkage and optimizing stock levels.

• Integrating inventory software with a POS system like Toast simplifies inventory management, enhances accuracy, and supports scalability as your coffee shop grows.

What is coffee shop inventory software?

Coffee shop inventory software is a digital tool for tracking, managing, and optimizing inventory. It streamlines the process of monitoring stock levels, ordering supplies, and minimizing waste, ensuring that key items like coffee beans, milk, syrups, and pastries are always available.

Unlike generic inventory systems, coffee shop inventory software offers industry-specific features like recipe management, allowing you to track ingredient usage down to the ounce. You can also set automated reorder points for essential items and gain insights into product performance to make data-driven decisions.

By providing a clear overview of inventory and reducing manual tracking, coffee shop inventory software helps you maintain profitability and deliver consistent customer experiences. 

Why is coffee shop inventory software important for coffee shops?

Whether you're running a cozy neighborhood café or managing a chain of coffee shops, inventory management software is essential for staying organized and efficient. Here’s how the technology can help support your business:

• Prevent stockouts and overstocks: Running out of essential items like coffee beans or milk can disrupt operations and disappoint customers. On the other hand, overstocking leads to waste, especially for perishable items. Inventory software helps strike the right balance by providing real-time stock visibility and low-stock alerts.

• Reduce waste and manage costs: Coffee shops often deal with perishable goods, and waste can quickly eat into profits. Inventory software can track expiration dates, monitor ingredient usage, and identify patterns of overordering.

• Improve operational efficiency: Inventory software automates stock tracking, freeing up time for you and your staff to focus on customer service and other business priorities. Integrated systems can even sync with your POS, updating inventory levels as sales occur.

• Support menu optimization: Gain insights into the performance of menu items by tracking ingredient usage and sales data. This can help you identify popular or underperforming items, adjust recipes, and create more profitable offerings.

• Enable data-driven decisions: With detailed reports and analytics, inventory software empowers you to make informed decisions. From identifying seasonal trends to planning purchasing schedules, having access to real-time data ensures your business operates smoothly and profitably.

• Scale for growth: If you want to expand your business, inventory software ensures consistency across multiple locations. By standardizing inventory management processes, it’s easier to maintain quality and control costs as your coffee shop grows.

Key terms in coffee shop inventory management

Mastering inventory management begins with understanding key terms. Here’s a breakdown of the most important concepts for coffee shop owners.

Cost of goods sold (COGS)

COGS represents the total cost of all ingredients used to prepare your menu items during a specific period. It’s a vital metric for monitoring profitability and controlling expenses. Calculating COGS accurately allows you to:

• Control food costs: Adjust menu prices or portions to stay within target profit margins.

• Make informed pricing decisions: Set competitive prices that protect your margins by understanding your ingredient costs.

To determine your COGS, use this formula: 

COGS = (Starting Inventory + Purchases) − Ending Inventory

For example, If you start the month with $500 in coffee beans, purchase $1,000 more, and end the month with $300 in stock, your COGS for the month is $1,200.

Par levels

Par levels are the minimum inventory thresholds required to meet customer demand without overstocking. Properly setting par levels helps you maintain a balance between inventory costs and availability by:

• Avoiding stockouts: Ensure that popular items like coffee beans, milk, or syrups are always in stock to maintain customer satisfaction and sales.

• Preventing excess inventory: Overstocking ties up capital and can lead to spoilage or waste, especially for perishable goods.

For example, if your coffee shop uses an average of 50 gallons of milk per week, you might set a par level of 60 gallons to accommodate fluctuations in demand.

UOM & unit conversion

Maintaining consistency in units of measurement (UOM) is critical for accurate inventory tracking and recipe management. Coffee shops often purchase items in bulk but use them in smaller quantities.

For example, you’ll likely purchase milk in gallons but measure it in ounces for recipes. Inventory software automates unit conversion, ensuring accurate tracking and cost calculations.

Recipes and recipe costing

Recipe costing involves figuring out the total price of each ingredient in your drinks. Inventory software allows you to create detailed recipe cards, calculating the cost of each ingredient automatically. This helps you:

• Optimize pricing: Real-time ingredient cost updates allow you to adjust menu prices as needed to protect profit margins.

• Streamline operations: Standardized recipes simplify staff training and ensure consistency in both product quality and cost control.

For example, if a latte requires 8 ounces of milk and a shot of espresso, your inventory software will calculate the exact cost of those ingredients, helping you determine a profitable price.

Actual vs. theoretical inventory

This concept compares your actual inventory (what’s physically on hand) to theoretical inventory (what should be on hand based on usage and sales). To reduce these inaccuracies, it’s key to:

• Identify shrinkage: Variances between actual and theoretical inventory often indicate issues like theft, spoilage, or over-portioning.

• Spot efficiency gaps: These insights help optimize purchasing, storage, and usage to minimize waste and improve profitability.

For example, if your software predicts you should have 50 pounds of coffee beans, but only 45 pounds are in stock, investigating the discrepancy can reveal opportunities for improvement.

Inventory Shrinkage

Shrinkage refers to inventory losses due to theft, spoilage, or errors in handling. It’s a hidden cost that directly impacts your bottom line. By actively tracking shrinkage, you can implement measures to reduce waste and minimize theft or mismanagement.

For example, if you notice excessive milk wastage, you might train staff on proper portioning or adjust par levels to reduce overstocking.

How to leverage coffee shop inventory software

Technology has transformed how coffee shops manage inventory. To make the most of your coffee shop inventory software, consider these tips:

• Automate inventory tracking: Monitor stock levels in real time, set low-stock alerts, and track usage trends to ensure you never run out of key ingredients or overstock perishable goods.

• Standardize recipes: Use detailed recipes to calculate costs, train staff, and ensure consistent quality and portioning across all menu items.

• Analyze sales and performance: Identify best-sellers to prioritize their ingredients, and phase out underperforming items to improve profitability and streamline operations.

  • Example: Starbucks changed the default standard recipe for their iced coffee, which had included pumps of syrup, after discovering a large number of customers were ordering the drink without the sweetener.

• Optimize reordering: Automate reorders for essential items, predict future needs using sales trends, and leverage inventory data to negotiate better deals with suppliers.

• Reduce waste and shrinkage: Spot discrepancies between actual and theoretical inventory to address issues like theft, spoilage, or mismanagement and reduce unnecessary losses.

• Support growth: Manage inventory across multiple locations, generate detailed reports, and ensure consistency as your coffee shop expands.

  • Example: The Nitro Bar in Rhode Island began as a small coffee cart and now has four brick-and-mortar shops and over 70 tap locations.

• Integrate with other tools: Use inventory software that syncs with your POS system to streamline operations, automatically update inventory after sales, and calculate key metrics like COGS.

• Train your team: Educate staff on how to use the software, follow recipes, and report discrepancies.

Manual vs. automated inventory management

Managing inventory manually can be time-consuming and prone to errors, especially in the fast-paced environment of a coffee shop. Automated inventory systems streamline the process, offering significant advantages such as:

• Improved accuracy: Automated systems reduce errors that occur with manual data entry, ensuring precise inventory tracking and reliable reporting.

• Time savings: Automating tasks like stock counts and reorder management saves time, allowing staff to focus on customer service and other important duties.

• Optimized par levels: Automated systems analyze usage patterns over time, enabling you to set more accurate par levels.

5 coffee shop inventory management best practices

These coffee shop inventory management best practices will help you reduce waste, optimize stock levels, and ensure smooth operations.

1. Take inventory regularly

Regularly counting inventory—whether daily, weekly, or monthly—is crucial for maintaining accuracy. Use your coffee shop inventory software to help you:

• Spot discrepancies early: Frequent checks help identify issues like overstocking, understocking, or shrinkage.

• Establish a consistent schedule: Set a regular time for inventory counts to improve tracking accuracy and simplify cost forecasting.

• Adjust orders proactively: Use count data to update your order quantities and maintain optimal stock levels.
  
  

2. Improve processes and organization

An organized storage area and streamlined processes ensure efficiency and prevent waste from eating into your profit margins. To effectively manage your stock, be sure to:

• Optimize storage: Label items clearly, keep similar products separate, and place high-turnover ingredients in accessible locations to minimize search time and spoilage.

• Streamline receiving: Verify deliveries against purchase orders to catch errors or discrepancies immediately, preventing overcharges or stock shortages.

• Standardize procedures: Develop clear protocols for receiving, storing, and managing inventory to ensure consistency across your team.
  
  

3. Train your staff on inventory procedures

Teaching your teams the ins and outs of your inventory management process fosters accountability and ensures smoother operations. To ensure all staff members contribute positively towards your inventory optimization, follow these tips:

• Promote accountability: When staff understand how waste impacts profits, they’re more likely to follow proper procedures.

• Provide training: Teach employees how to track inventory changes, follow First In, First Out (FIFO) practices, and report discrepancies.

• Assign roles: Designate inventory responsibilities to specific team members to avoid confusion and ensure accountability.

Caterpillar Cafe in Richmond, WA combines unique menu offerings with personable and knowledgeable staff to deliver an exceptional customer experience. Owner Amanda Divine told the Tri-Cities Area Journal of Business:

“We focus on things that we care about and also things you can’t get most anywhere else… We try not to compete with the big people. Our inventory isn’t exclusive, but the key is putting it all together. We focus on community and that in-person aspect and being able to make product referrals.”

4. Track waste and variance

Documenting waste and analyzing variances helps uncover inefficiencies and reduce costs. To find areas where you can improve, it’s important to: 

• Track waste: Monitor food and ingredient waste to refine portion sizes and improve storage practices.

• Analyze variances: Compare actual inventory counts to theoretical levels to identify shrinkage caused by theft, spoilage, or mismanagement.

• Address root causes: Use insights from waste reports and variance analysis to implement corrective measures and improve your processes.
  
  

5. Leverage data

Lastly, using data effectively ensures that your inventory aligns with customer demand. To make the most of your data and determine appropriate stock levels, use these tips:

• Focus on bestsellers: Adjust inventory levels to prioritize high-margin, popular menu items while phasing out underperformers.

• Forecast demand: Use historical sales data to predict future needs, order optimal stock quantities, and minimize waste.

• Align inventory with trends: Adapt quickly to seasonal or customer-driven trends, ensuring your coffee shop remains competitive and meets evolving customer expectations.

When it comes to leveraging your data to inform business decisions, Chris Deferio, founder of Keys to the Shop, told Perfect Daily Grind:

“The first year of business requires a lot of investment, and should be seen as an extended opening phase rather than a true indicator of how well the business will succeed… The second year allows you to make educated decisions to adjust your pricing, but if you can net 10% to 15% profit at the end of the year then your business is doing well.”

Optimize your business with coffee shop inventory software

By leveraging coffee shop inventory software and following best management practices, you can minimize waste, improve profitability, and ensure your customers can always order their favorite coffee drinks.

If you’re looking for a way to streamline and optimize your cafe’s inventory management, Toast’s POS system has all the essential tools you need. With built-in inventory tracking, automated reorder points, and real-time analytics, Toast helps you maintain control over your stock while integrating seamlessly with other aspects of your coffee shop’s operations.

To discover all the ways Toast’s coffee shop POS system can help take your business to the next level, be sure to check out all the features.