Inventory shrinkage refers to the loss of inventory between the time it is recorded in the system and the time it is sold. The primary causes are administrative errors, vendor fraud, damage, and, most significantly, theft. Even a small percentage of shrinkage can severely impact a small business’s profitability.
Effective preventing theft and loss requires a multi-layered approach:
- Implement Strict Receiving Procedures: Count and inspect all incoming goods immediately.
- Restrict Access: Limit who can physically access the inventory and the inventory management system.
- Use Cycle Counting: Regular, small counts are better at catching discrepancies early than a single annual count.
- Leverage Technology: Use a system that requires user login for every transaction, creating an audit trail.
By focusing on process and using a secure inventory system, you can significantly reduce inventory shrinkage and protect your bottom line.
