Inventory Shrinkage: Causes, Prevention and Audit Steps

Shrinkage is the gap between what your records say you have and what you actually have. It comes from theft, damage, error and process gaps.

Calculate it

Common causes

• Receiving errors and short deliveries
• Wrong picks and unrecorded issues
• Damage and expiry
• Theft
• Data entry mistakes

Controls that work

1. Role-based access: few people can adjust stock.
2. Approval for adjustments and write-offs.
3. Regular cycle counts of high-value items.
4. An audit log of who changed what and when.
5. Reconcile receipts against purchase orders.

Audit steps

1. Freeze movements for the area.
2. Count blind, without showing system quantity.
3. Recount differences.
4. Investigate causes before adjusting.
5. Post adjustments with a reason.

In NexoraIMS

Cycle counts, approvals, roles and an audit log support these controls. See stock audit and cycle count software and cycle counting.

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