A quick first-level approximation to determine your shrinkage



A first-level approximation of determining your shrinkage

You would be getting a theoretical margin in a perfect world. In the real world, goods get stolen, lost, damaged, mispriced, discounted, etc.

Checking your theoretical margin

It is often easy to get as your supplier will usually provide you with this figure. The first point to do is check this 

Go to register resports> Stock > "Quantity On Hand and Price Check."

The report will show you your margins. 

Actual results.

Here is how we get the actual result.

(Stock sold) = (Sales) x (1-theoretical margin%/100). 

Now for each department, 
(Perpetual stock) =(opening stock)-(closing stock)+ (purchases)

This is a first-level approximation, so we assume that your stock ordering is good. Thus we make (opening stock)=(closing stock) and so use the following formula.

The (Perpetual stock) =(Purchases)

What you want to compare is the difference.

(Difference percentage) = (1-((Stock sold)/(Perpetual stock))x100%

As a rule, about .5% is a typical figure.

If it is much more than that, it is considered severe. 

Plugin the figures from your totals report and purchases for the last twelve months. Now for each department calculate the (Difference percentage)

It should take you less than 10 minutes to do once you get the hang of it.

This will quickly tell you if there is a problem and, if so, the extent and where the problem is now. 




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