Dry January

How Do Bar Tabs Work? The Ultimate Guide for Bar Owners

Caroline PriceAuthor

icon RESOURCE
Bar Thumbnail

Opening a Bar Checklist

So many things go into opening a bar. With this free PDF checklist, you'll set your new business up for success.

Toast | BUILT FOR RESTAURANTS

Bar tabs may seem like a minor aspect of running a bar, but they’re an essential tool for improving efficiency, boosting sales, and creating a seamless customer experience. As Neal Bodenheimer, owner of New Orleans bars Cure and Cane & Table, explains:

“I think personal consumer credit has changed so much that there is no expectation from guests… We’ve had guests ask us to hold a tab for a day if they forget their wallet, but the erosion of cash culture has really changed the whole business.”

In today’s cashless economy, bar tabs are more important than ever, providing a flexible and convenient way for customers to enjoy their night out without constant interruptions to settle up. For bar owners and managers, integrating a well-managed tab system can enhance guest satisfaction while optimizing operations.

This guide will break down everything you need to know about how bar tabs work, why they’re essential, and how to implement them to elevate your business.

Key takeaways

  • Bar tabs streamline operations by reducing individual transactions, allowing bartenders to focus on serving more customers.

  • A seamless tab system encourages guests to order more while providing the convenience that keeps them coming back.

  • Invest in robust POS systems with features like real-time tracking, split payments, QR code ordering, and offline capabilities to manage tabs efficiently.

  • Protect customer payment information with secure systems, and communicate clear tab policies to avoid disputes and unpaid tabs.

icon RESOURCE

Bar Menu Templates

Use these bar menu templates as a starting point for your menu design or to give your menu a refresh.

Toast

What is a bar tab?

A bar tab is a convenient way for customers to order drinks or food at a bar without paying after each individual order. Instead, the bar keeps a running total of all purchases, which the customer pays in full at the end of their visit.

To open a bar tab, customers typically hand over a credit or debit card, which the bar securely holds or swipes into the POS system. The tab remains “open” as the customer continues to order, with all purchases being tracked on their account. Once they’re ready to leave, the customer can settle the tab by signing the final receipt or paying in cash.

Types of bar tabs

While the general concept is always the same, there are a few variations in how bar tabs are managed:

  • Individual tabs: A single customer opens a tab for their personal orders, keeping their drinks and food separate from others.

  • Group tabs: A customer opens a tab to cover a group, such as friends or colleagues. All orders are charged to the same tab, making it easier to manage payment at the end of the night.

  • Prepaid tabs: In some cases, especially for private events, the bar may require a deposit, preloaded balance, or minimum sales agreement before opening a tab.

    • Example: At North Garden Theater in Saint Paul, MN, wedding events are required to meet a $1,500 bar minimum. If guests do not reach that amount by the end of the event, the remaining balance must be paid.

Many modern POS systems allow customers to open, manage, and close tabs digitally through an app or QR code. This removes the need to physically hand over a card, offering a more secure and convenient option. For example, referencing Hawaii’s largest craft brewery, Maui Brewing Company, GoTab Chief Marketing Officer Patricia Mejia writes:

“The brewery onboarded on-premise QR code mobile ordering and payment in order to give guests on-demand control over their own dining experience, eliminating the hassle of waiting in line or flagging down their server to order another round or pay for their tab.”

Why do bars use tabs?

Bar tabs are a fundamental part of the bar and restaurant experience, benefiting both customers and staff in a variety of ways. While they may seem like a simple convenience, tabs play a critical role in your operations. Some of the key benefits include:

  1. Improves efficiency: Bar tabs reduce the number of individual transactions throughout the night, freeing up bartenders to focus on serving drinks and engaging with customers. 

  2. Encourages higher spending: When customers don’t have to pay for each order immediately, they’re more likely to order additional drinks or food. The seamless experience of a tab removes the mental barrier of constantly reaching for their wallet.

  3. Boosts customer retention: A bar tab provides a sense of trust and convenience for customers, encouraging them to stay longer and enjoy themselves without interruption.

  4. Minimizes cash handling: By storing card information and settling payments at the end of the night, tabs reduce the need for handling cash frequently. This speeds up service and improves security by minimizing the risk of errors or theft.

How do bar tabs work?

From opening the tab to closing it out, here’s a step-by-step breakdown of how to manage bar tabs effectively, ensuring smooth operations and happy customers.

  1. Open the tab

To open a bar tab, customers typically provide a credit or debit card. The bartender swipes or enters the card information into the POS system, creating a unique account for the customer. The customer’s name is linked to the tab, and bars may keep the physical card behind the counter for security purposes.

Modern POS systems also allow for digital tabs, where customers can open, monitor, and close their tabs directly through a mobile app or QR code. This eliminates the need to hand over a physical card, offering a more secure and convenient alternative.

Additionally, some bars may set a pre-authorization limit when opening the tab. This ensures the customer has enough funds to cover their expected bill and minimizes the risk of unpaid tabs.

  1. Add orders to the tab

As customers place orders for drinks or food, each item is added to their tab in the POS system. The system automatically tracks and updates the running total, making it easy for bartenders to manage multiple open tabs at once.

For group tabs, all orders from designated group members are charged to the same account, simplifying the process of tracking shared bills.

  1. Monitor the tab

To ensure smooth operations, bartenders can monitor open tabs in real time through a POS system. This allows them to:

  • Quickly locate and add orders to the correct tab.

  • Check running totals if a customer asks about their current bill.

  • Track unpaid tabs at the end of a shift to prevent errors or losses.

4. Close the tab

When the customer is ready to leave, they can request to close their tab. The bartender reviews the tab in the POS system, confirms the final total, and processes payment. Tabs can be closed in a variety of ways:

  • Credit/debit card: The payment is charged to the card provided at the start.

  • Cash: Customers can choose to pay in cash, at which point the original card is returned to them.

  • Split payment: For group tabs, customers may split the bill among multiple payment methods, a feature easily handled by most modern POS systems.

Customers can also leave a tip when closing their tab, providing even more convenience.

3 tips for integrating tabs into your bar

Whether it’s leveraging modern technology or keeping operations secure, a well-managed tab system can make a big difference in your bottom line. Here are three essential tips to help you integrate bar tabs into your business.

  1. Choose the right technology

The foundation of a smooth tab system lies in using the right technology. Here’s how to make the most of modern tools:

  • Invest in a robust POS system: A high-quality POS system is non-negotiable for managing tabs effectively. Look for features like real-time tracking, automated calculations, digital receipts, contactless payments, and mobile app compatibility.

  • Enable split payment capabilities: Customers often prefer splitting the bill. Ensure your system allows for splitting by percentage, item-by-item division, or multiple cards.

  • Incorporate QR code ordering: QR code technology allows customers to view menus, place orders, and manage their tabs directly from their smartphones.

  • Think about offline capabilities: Offline functionality keeps tabs running smoothly and avoids potential disruptions during busy hours.

  • Provide tip prompts: Use your POS system to display tip prompts when customers close their tabs to encourage higher gratuity amounts.

  1. Stay organized and secure

A well-organized tab system protects your business and builds trust with customers. Consider these best practices:

  • Keep payment information secure: Use encrypted payment systems and secure POS networks to protect customer information. Many establishments also add features like two-factor authentication or hold onto a photo ID until a tab is closed.

  • Track tabs in real time: Train your staff to monitor open tabs and ensure they’re tied to the correct customer or group. This reduces the chance of errors, unpaid tabs, or disputes.

  • Establish a process for unclosed tabs: Decide how to handle tabs that are left open. Most bars automatically process the payment using the card on file and may add a standard gratuity (often 18–20%). Clearly communicate this policy to customers to avoid misunderstandings.

  • Set tab minimums: To ensure profitability, consider implementing a tab minimum for credit or debit card transactions. This is especially helpful in covering transaction fees and avoiding small, less profitable tabs.

  1. Implement clear policies for bar tabs

Having clear tab policies ensures consistency and reduces confusion for both customers and staff. Key policies to consider include:

  • Inform customers of authorization holds: If your bar applies a temporary hold on customer cards when opening a tab, make sure to communicate this upfront.

  • Establish closing rules: Require tabs to be closed the same night they are opened, unless you allow extended tabs for regular customers. Ensure customers understand that only the person who opened the tab can close it, or establish a process for exceptions.

  • Outline fees for declined cards: If a card is declined or left unpaid, decide whether you’ll charge additional fees. Communicate these fees clearly to customers.

  • Train staff on policies: Ensure your team is well-versed in tab policies, so they can explain them confidently to customers and handle situations like unpaid tabs or disputes.

Tap into success with bar tabs

Bar tabs are a vital part of running an efficient and profitable bar. By understanding how they work, leveraging the right technology, and implementing clear policies, you can streamline your operations while providing an exceptional customer experience.

A well-managed tab system encourages higher spending, longer visits, and customer loyalty through added convenience. With tools like modern POS systems, QR code ordering, and secure payment processes, your bar will be ready to handle tabs smoothly and securely!

icon RESOURCE

Bar and Lounge POS Comparison Tool

A free, customizable Bar and Lounge POS Comparison Tool to research and compare point of sale systems in one Excel spreadsheet or editable PDF.

Toast

Is this article helpful?

DISCLAIMER: This information is provided for general informational purposes only, and publication does not constitute an endorsement. Toast does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Toast does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation.