Shrinkage calculator

The formula

Shrinkage is the gap between the books and the shelf, in money.

stock gone missing = book value − counted value
shrinkage rate = (stock gone missing ÷ book value) × 100

Both values are at cost, not at retail. Valuing the loss at what you would have sold it for counts profit you never made.

A worked example

Your books say you hold 100,000 of stock at cost. You count 97,500.

You are 2,500 short. Against a book value of 100,000 that is 2.5 percent.

If your sales for the year were 500,000, the same loss is 0.5 percent of sales. Both numbers are true and they say different things, which is why the tool shows you both.

What a good number looks like

Retail shrinkage runs at around one and a half percent of sales. Under one percent is a well run stockroom. Over three percent of stock value is a process problem.

The rate against sales is the one to track year on year, because it holds steady as the shop grows. The rate against stock value is the one that tells you how bad this particular count was.

Where the loss actually comes from

Theft gets the blame and rarely earns it. In most small stores the order is receiving errors first, damage nobody wrote down second, mis-picks third, and theft fourth.

That order matters, because the first three are free to fix and the fourth is not. Score your last count with the stock accuracy scorecard to see whether this is one bad line or a general drift.

Then count more often. A weekly count on your highest value lines catches a loss while somebody still remembers the delivery, which is the difference between a cause and an inventory adjustment nobody can explain.