You Don’t Have To Get Yourself In Hot Water To Avoid Shrinkage

Shrinkage: Inventory due to circumstances such as damage, shoplifting, vendor fraud, employee theft, and administrative error. It is when you have less inventory physically present than what is recorded as presented including what has been ordered and received.

What are some simple steps that can help you mitigate risk?

  • Use numerically sequenced forms or preformatted computer systems to record sales orders and invoices. This could help identify missing order forms/invoices that could be a red flag for fraud.
  • Segregate duties in your accounting department. The employee who is submitting transactions would be separate from the person authorizing them, who would also be separate from the person reconciling them. This could help reduce the opportunity for irregularities to occur.
  • Require that larger payments/orders have a secondary approval prior to purchase. This could reduce the chances of unwanted/unauthorized transactions being made.
  • Limiting access or controls to certain files/spreadsheets. This can help limit the number of employees that have access to edit/delete records. Which also leads to backing up your records. This can help reduce the chances of losing important information that was lost or recovering items that are deleted intentionally.
  • Install surveillance cameras. This can help track any inventory that is displayed and available to the public for purchase. When shrinkage occurs due to shoplifting it can be hard to account for those losses otherwise.
  • Do surprise physical counts of inventory by individuals not involved in handling, receiving, and selling the inventory. Confirm both the quantities and costs of inventory when doing surprise counts.

Understanding the inventory exposure, values, and quantities can help any business determine potential risks presented.

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