“At the count of three, watch me disappear!” Is what stock items seem to be screaming to business owners. Magicians are the only ones that should be disappearing for the benefit of others, not stock inventory. Shrinkage is a serious issue for business owners. Diminishing stock has a direct cost impact on the business that can significantly increase expenditure to the point where it severely impacts cash flow and can potentially bankrupt the business. Trusting that employees will fulfill the operational needs of your business is optimistic, however business owners must account for employee errors, internal and external theft. To minimize the chances of becoming a victim, we suggest implementing the following actions.

Boost the security presence within the business.

Investing in the right security system can help identify and deter issues that are contributing to your business’s inventory shrinkage. Investing in CCTV cameras can expand the surveillance of your business, as well as keep records of any activity of people that come into contact with your stock. Depending on the security surveillance package that you opt for, you can even have people watching the movements of your inventory 24 hours a day.

Monitor the people that come into contact with stock

There may be several people that come into contact with your stock who could be contributing to disappearing stock. You should complete stock checks from suppliers to distributors, receipt and sale of the product.

 Communicate with staff the expectations and consequences of internal theft.

Deter your employees from engaging in internal theft by communicating the consequences of their actions, should they be caught contributing to shrinkage. Get your employees to share the values of the business and that theft against the business won’t be accepted or tolerated.

Look out for patterns of internal theft.

It is unfortunate to think how rife theft is in most businesses. Business owners are left frustrated, wondering why employees would bite the hand that feeds them. Sometimes it is obvious and other times it is discreet. In one case, a business couldn’t identify how their stock was getting diminished. It wasn’t until they conducted an inventory and accounting audit where they saw patterns of employee discounting being used to essentially give away the inventory for free, at the expense of the business.

Look out for patterns of external theft.

Shrinkage from external theft is also a serious threat from customers and visitors to your business’s premises. If people need to visit an area where stock is being kept, use security cameras to monitor the stock and employee access cards to know who will come in contact with the inventory. For retail setups, using security and alarm monitoring can help to deter and catch any would-be thieves stealing your stock.

 Avoid imaginary shrinkage.

Sometimes, the inventory appears to have been lost or misplaced, when it is actually just unaccounted for. Ensure that regular checks are carried out to avoid the misplacement of any stock.

Supplier fraud

It is critical that you know ‘who you are doing business with’. Doing business with the wrong supplier can have dire consequences. There is a threat that suppliers could be dishonest by providing you with fake invoices or incorrect inventory counts. Have your HR team conduct procurement checks of suppliers prior to them partnering with your business.

Customer returns.

Customer returns do account for a certain amount of shrinkage within a business. Flaws in the returns procedures often leave customers out of pocket. For example, customers asking for cash returns if they are returning the product. Or the customer may claim that they haven’t received the product.

Stock damage.

Another reason for inventory stock shrinkage is damaged stock that cannot be sold, has to be returned or is written off. Businesses should check the handling methods of their employees and any supplier distributors to ensure that the stock is safe up until the point of sale.

Too many businesses are affected by inventory shrinkage. Business managers that are left puzzled by the disappearing act of their inventory can take action with different security options.