Stock loss, the discrepancy between physical inventory and accounting records, is a challenge every business faces. But this is especially true in the retail sector. Several factors contribute to the stock loss or inventory shrinkage, including customer and employee theft, misplaced stock, inefficient record-keeping, and shipping errors.
Losses caused by errors in an entry are referred to as inaccurate losses. However, inventory losses due to theft are true stock losses. To minimize stock loss due to theft or errors, you must control each step involving the stock. You need to create a stock loss action plan and implement it immediately.
How Can Your Business Implement Stock Loss Prevention Strategies?
1. Combat Shoplifting
Many businesses lose stock to shoplifting. One of the best ways to minimize this is to train your employees to identify and deal with shoplifting or to handle thieves.
It is not uncommon for companies to exclude shoplifting training from their onboarding process, yet having the guidelines that teach employees how to handle thieves can help prevent shoplifting. The more open and honest employers are with their employees about shoplifting, the more equipped they will be to identify and address this scourge.
2. Minimize Employee Theft
People stealing your inventory is one of the biggest contributors to stock loss. Your organization needs to have a stock loss action plan that allows you to visualize who has access to your inventory. While stealing customers walk out the front door with unpaid merchandise, your employees can do the same via the back door. Investing in inventory management software can prevent this by allowing you to track stock, know what stock you’re losing, and know how frequently you are losing it. You can identify discrepancies and see the correlation between which employees are around when the stock goes missing.
3. Implement a Double Check System
A great way to minimize mistakes is to implement redundancies in your checking system when you accept inventory. You can limit mistakes during the transfer of data from one system or another with the use of a single automated system.
4. Improve the Way You Receive and Store Stock
Invest in improved receiving and stocking handling processes to prevent damaged stock coming in. This will minimize stock loss. Train employees on handling and storing your stock in the back room or the warehouse.
How Implementing Inventory Management Software Can Help
Inventory management software, like NetSuite, streamlines inventory generation and order fulfillment operations for organizations and businesses. The software lets organizations use management tools to optimize their inventory, auditing, and purchase order management. Inventory management software lets companies monitor inventories while improving supply chain efficiency. This lowers inventory theft incidents, allows for accurate financial reporting, and improves inventory tracking.
Do Inventory Tracking
You can integrate inventory management software with other enterprise resource planning tools to improve inventory control by tracking inventory in real-time. This gives you insight into where products are and how they move to the system. This minimizes human error in a way that cannot be done with a manual spreadsheet.
Manage Multiple Locations
Inventory management software, like Netsuite, will let you connect multiple locations, bringing different data points into one location. This gives you a bird’s eye view of your inventory and supply chain. You can keep track of stock as it moves across different warehouse locations. You can see which locations have the most products and which locations are experiencing the greatest stock loss.
Create Up-To-Date Workflows
Create workflows to keep everyone up to date with your inventory progress. Interactive charts and task dependencies help management and team members at every level prevent and identify product loss.
What Is Involved in a Stock Loss Tax Deduction?
Accounting for inventory loss is part of the process to reduce the value of inventory that has lost its value from things like theft by shippers, shoplifters, or employees. Most businesses do an inventory write-off at the end of the calendar year. However, if your organization is experiencing large amounts of theft or product loss, you should account for these changes monthly.
If accounting for inventory loss is inaccurate, your organization could find itself being taxed for products it was unable to sell, overestimating your deductions, and finding yourself at risk for fines and fees. Having the right combination of inventory management software and adequate accounting is essential for keeping inventory loss at bay and taking the necessary steps to protect your organization’s financial interests when inventory losses happen.
NetSuite inventory management has been created to secure the correct amounts of stock and keep waste at bay while letting you make intelligent business decisions. At Fusion CPA, our team can help you set up inventory management software regardless of your business industry. Even the best inventory management software, if set up incorrectly, will produce poor results that will impact your business’s credibility. Contact us today, and let our team of CPAs show you how you will benefit by having NetSuite or similar software set up to monitor the inventory of your business.
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