What is Inventory Shrinkage Percent and Why Should You Care?
Ever wondered why your warehouse inventory doesn't quite match up with what's on the books? That's where Inventory Shrinkage Percent comes into play. It's essentially the ratio or percentage of inventory that has mysteriously vanished from your warehouse. This discrepancy often happens due to clerical errors, lost items, or theft.
Why should you care? Because it's your money slipping away. Knowing your Inventory Shrinkage Percent can help you identify issues, tighten security, and save a whole lot of cash in the long run.
How to Calculate Inventory Shrinkage Percent
Here's the formula:
[\text{Inventory Shrinkage Percent} = \left( \frac{\text{Booked Inventory} - \text{Physically Counted Inventory}}{\text{Total Sales}} \right) \times 100]
Where:
- Booked Inventory is the amount logged in your accounting books
- Physically Counted Inventory is what you actually have in stock after counting
- Total Sales is the number of items sold
Quick Tip: Use consistent units (like pieces or boxes) throughout the formula to keep things straightforward.
Calculation Example
Let's say you have:
- Booked Inventory: 600 items
- Physically Counted Inventory: 580 items
- Total Sales: 520 items
[\text{Inventory Shrinkage Percent} = \left( \frac{600 - 580}{520} \right) \times 100]
[\text{Inventory Shrinkage Percent} = \left( \frac{20}{520} \right) \times 100 = 3.85%]
Your Inventory Shrinkage Percent is 3.85%.
Why Does This Matter?
Spotting a shrinkage rate can clue you in on inefficiencies or potential theft, areas where you can bolster security, improve processes, and save money.