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Chapter 15. Keeping Track of Your Invent... > CPA Tip: Control Inventory Shrinkage

CPA Tip: Control Inventory Shrinkage

Is inventory shrinkage a problem at your company? Do inventory items seem to disappear without leaving a trail? Nearly half (44.55%) of inventory shrinkage comes from employee theft, according to the 2000 National Retail Security Survey. Another third (32.7%) comes from shoplifting. You can take steps to control employee and customer inventory theft.

  • Electronic surveillance security systems can pay for themselves if inventory shrinkage is a big problem at your company. Consider security mirrors, video cameras, micro tags.

  • Spot checks of cash register drawers can keep cashiers on their toes.

  • Consider inserting electronic tags in inventory items that are most prone to be removed surreptitiously.

  • Be sure cashiers are well trained on all technology, and find out what dissatisfactions they might have with their job. Take steps to improve employee relations so that employees take pride in their company. Make job expectations known and develop a system of employee rewards.

  • Provide higher wages that attract a more dedicated group of employees.

  • Have in place a system of specific consequences for employees who do not follow company policies.

  • Take regular physical inventory counts and be aware of the precise amount of inventory shrinkage that exists in your company. Monitor this shrinkage as you implement changes to see which changes are most effective.

  • Use personnel to perform physical inventory counts who are not the same people who would have access to removing inventory items. This may entail hiring outside people to count inventory. Accounting firms provide this service.

  • In a retail environment, make sure you have enough employees to monitor the actions of customers. Then, have procedures in place for reporting suspicious activity of customers.

  • If possible, and if necessary, consider a policy whereby no employee is left alone in the business premises.

  • Have procedures in place to verify cash refunds. Require customer name, phone number, address, and signature for all refunds. Make spot calls to customers to confirm that the refund actually occurred.

  • Perform reference checks on all employees. Consider checking employee parcels when they are leaving the premises.

  • Consider using a point-of-sale computerized cash register system for tracking and updating inventory instantly. QuickBooks is working to develop a liaison with a company that can provide point-of-sale software that will integrate completely with QuickBooks. You can continue to check the QuickBooks Solutions Marketplace, online at http://marketplace.intuit.com/default.asp, for regular updates on third-party software applications that are available for QuickBooks users.



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