Inventory

Inventory shrinkage calculator.

Enter what the books say you should have and what a physical count found. See the shrinkage in dollars and as a percent of sales.

Shrinkage = booked inventory - physical count, and shrinkage % = shrinkage / total sales x 100. Books showing $48,000.00 against a $45,300.00 count is $2,700.00 of shrinkage, or 1.80% of $150,000.00 of sales.

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Your numbers

Your numbers
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Same basis as the inventory figures: all at cost or all at retail.
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Returns to vendors, write-offs and markdown adjustments you have already booked.
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Result

Worked example

A store starts with $60,000.00 of inventory and receives $140,000.00 of purchases. It records $150,000.00 of sales and $2,000.00 of other adjustments, all on the same cost basis. Booked inventory is $60,000.00 + $140,000.00 - ($150,000.00 + $2,000.00) = $48,000.00. A physical count finds $45,300.00. Shrinkage is $48,000.00 - $45,300.00 = $2,700.00, which is 1.80% of sales and 1.35% of the $200,000.00 of goods available to sell.

How it works

The formula is: beginning inventory + purchases - (sales + adjustments) = booked inventory; booked inventory - physical count = shrinkage; shrinkage / total sales x 100 = shrinkage percent. A negative result is an overage, which often points to a counting or recording error.

Shrinkage happens when a retailer has fewer items in stock than the records say, which can be caused by clerical error or by goods being damaged, lost or stolen between purchase and sale. Keep every figure on the same basis. Mixing inventory at cost with sales at retail will distort the result. If you want a percent of retail sales to compare against industry surveys, use retail values throughout.

For context, the National Retail Federation's 2023 National Retail Security Survey, a survey of retail loss prevention professionals, reported an average shrink rate of 1.6% in fiscal 2022, up from 1.4% in fiscal 2021. That is a retail industry average, measured as a share of retail sales, and your own rate can differ widely by product type and store.

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Sources

FAQ

How do you calculate inventory shrinkage?

Booked inventory = beginning inventory + purchases - (sales + adjustments). Shrinkage = booked inventory - physical count. Shrinkage percent = shrinkage / total sales x 100.

What causes shrinkage?

Per Wikipedia, clerical error or goods being damaged, lost or stolen between the point of purchase and the point of sale. Its article also lists food spoilage, shoplifting, spills and damage to items as causes.

What is a normal shrink rate?

The NRF's National Retail Security Survey 2023 reported an average of 1.6% of retail sales for fiscal 2022 across the retailers surveyed. Your rate depends on what you sell, so compare against your own past counts too.

Should I use cost or retail values?

Either, but use the same one for every input. Cost values give shrinkage at cost, which is what the loss actually cost you. Retail values give a percent of retail sales comparable to published retail surveys.

What if the count is higher than the books?

That is an overage, shown as a negative shrinkage. It often points to unrecorded receipts, a miscount, or sales or returns booked to the wrong item. Recount before adjusting the books.

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