How to Calculate Inventory Shrinkage


Inventory shrinkage refers to the loss of inventory due to a variety of factors, including theft and damage. Knowing the shrinkage rate can help you determine whether you could be more profitable by limiting inventory losses. High rates of shrinkage mean that you are losing a lot of inventory that you are not being reimbursed for. In order to calculate shrinkage, you need to know how much inventory you expect to have and the actual amount of inventory that you have in stock.

Things You'll Need

  • Calculator
  • Check your company's records to determine the value of inventory that you should have in stock based on prior inventory totals and the value of goods sold. This is the book value. For example, your records may show that you should have $5,000 in inventory because you had $6,000 worth of inventory, sold $2,000 and bought $1,000 more.

  • Total the actual value of inventory that you have in stock. This number may be different than the book value because of losses, damaged goods or theft.

  • Subtract the actual amount of inventory from the amount that you should have according to your financial records. For example, if you expected to have $5,000 but only had $4,850, you would subtract $4,850 from $5,000 to get $150.

  • Divide the difference from Step 3 by the amount you should have to calculate the shrinkage rate. In this example, you would divide $150 by $5,000 to get 0.03.

  • Multiply the shrinkage rate by 100 to convert to a percentage. Finishing this example, you would multiply 0.03 by 100 to determine a shrinkage rate of 3 percent.

Related Searches


  • Photo Credit military boxes image by Ivonne Wierink from
Promoted By Zergnet


You May Also Like

  • Inventory Control Manager Job Description

    Inventory Managers work in a variety of industries including manufacturing, warehousing, retail and food service. Their main responsibilities are to keep track...

  • How to Calculate Shrinkage for Die Casting

    A popular way to make things out of metal is a process called die casting. Die casting is when you pour melted...

  • How to Calculate an Inventory Reserve

    Inventory reserve is that portion of a company's earnings set aside, or escrowed, to pay for and maintain company inventory. Since this...

  • How to Calculate Grain Shrink

    Calculating moisture shrink is a key component to successful grain marketing. Grain shrink is a percentage of weight loss due to drying...

  • How to Calculate Retail Shrink

    In accounting, shrink or shrinkage is when you have loss of inventory. This loss of inventory is usually due to theft. It...

  • How to Account for Fuel Inventory

    Accounting for fuel inventory requires a functional method of volumetric measurement, both when receiving and issuing fuel. Environmental factors can cause a...

  • Common Shrinkage Percentage in Food Service

    Restaurant owners, chefs and managers must control food costs, and shrinkage can negatively impact profits. Shrinkage refers to inventory minus all reduction,...

  • The Structure of an Inventory System

    An inventory system is a strategy for keeping track of the stock that a business has on hand. Because most companies use...

  • What Is "Inventory Loss"?

    Even in businesses with the best receiving procedures, warehousing abilities and tightest security, each item it receives and pays for isn't going...

Related Searches

Check It Out

Are You Really Getting A Deal From Discount Stores?

Is DIY in your DNA? Become part of our maker community.
Submit Your Work!