Inventory shrinkage refers to businesses that inaccurately document their inventory in their accounting records. In other words, companies that have noted excessive inventory in their accounting records which do not reflect the true state of affairs, face this issue. Where this is paramount, it is an indication that a company suffers from inventory theft, supplier fraud, errors in counting, damages or related matters. Hence, businesses are losing money or sales with every unaccounted inventory that is absent. The easiest way to determine whether a company is facing this issue is to count all inventory and calculate its cost, after which the amount should be subtracted from the price listed in the accounting records. The only acceptable inventory shrinkage rate when converted to a percentage is 1 per cent. Anything more than that accounts for billions of losses in profits. Inventory shrinkage is a common issue faced by companies in the retail industry. This article will explain how inventory shrinkage can be prevented by adopting a point-of-sale (POS) system.
What Is a POS System?
A POS system is a mandatory software solution adopted by the retail industry to streamline the transaction process of an organisation. It is an essential financial tool that can maintain accurate accounts of retail companies. It is a mix of hardware and software which accepts payments and tracks all payments made. It tracks pricing accuracy, inventory changes, gross revenue, and sales patterns.
Six Ways to Stop Inventory Shrinkage With a POS System
A POS system provides many advantages. When it comes to inventory shrinkages, here are six ways it can help you to reduce them.
Audit Stocks Frequently
Checks must be carried out occasionally because the cause of inventory shrinkage can depend on theft to technical errors. Having an automated mechanism in place is handy in this regard. A POS system is a solution that records everything in the retail company in a documented manner. Hence, rather than manually counting stocks of enormous amounts, having a tracking system that allows managers to monitor every item that enters the stock is a beneficial way to ensure no item is missing. By cross-checking the unique code each item will be provided, managers can assess whether the item was brought or is missing for other reasons.
Increasing Transparency in the supply chain
Transparency of a supply chain can be increased by tracking items and ensuring records are true. For example, when an employee cannot be trusted, they could falsify reports in the system. Implementing a POS system that can automate the receipt generation process prevents such things from occurring. By scanning all the items and putting them ready, the POS system allows stores to record all items that make their way to checkout. Communicating to consumers where their packages are is another way to avoid inventory shrinkage. For instance, when a package is delayed, and the consumer is not aware of where it is, they tend to get frustrated and cancel their order. A tracking system that monitors where the package is allows them to estimate how long it will take for it to be delivered. This tool can also be used to send personalised messages where the delivery is being delayed due to unforeseeable circumstances. All this helps to ensure that transparency in the supply chain is increased.
Tracking Returns Accurately
Consumers may return their products if there is a product defect. Where such returns are not appropriately recorded, inventory shrinkage may occur. This is because the retail will be obliged to pay the fee back to the consumer, while the item that was meant to be returned either has not yet been brought back to the store or its return has not been recorded. Hence, at a glance, it seems as if there is inventory shrinkage when comparing the number of items recorded with the specific losses suffered in a particular month. Therefore, it is essential to have a clear process for returning goods. A POS system helps to record items that are returned easily. Hence, only once the item is delivered to the store will the POS system automatically update the system to reflect the change, after which the repayment is made. This always makes it easy to assess whether the consumer is eligible to send back the product. For instance, if the item has been used for a prolonged period, the consumer may no longer be eligible to send it back. Further, where a warranty applies, the POS system detects whether the item can be serviced and sent by the consumer.
Find Out Hidden Insights
A POS system provides detailed and insightful reports for the management’s reference. It provides a lot of information that helps retailers assess the cause of inventory shrinkage and make important decisions. For example, it can easily automate calculating inventory shrinkage, detecting when it is a cause for concern. Businesses cannot totally eliminate Inventory shrinkage. As already stated previously, it is only when it surpasses the acceptable rate that it could affect the business. Hence, having a POS system that automates the process of calculating inventory shrinkage every time a cycle check occurs means that no human staff member is required to know the right calculation. The system can be customised to communicate the warning to the manager at once. These reports can also find out whether the cause for inventory shrinkage is fraudulent promotional campaigns. Since everything needs to be reflected in the receipts generated, the system can detect anything abnormal where the numbers do not match and note it in the reports generated.
Providing Access Only to The Right People
A POS helps companies to centralise all information to one central database. By doing so, it provides access to all employees. However, this can be customised so that only those authorised can carry out specific tasks. In other words, trainees and new employees can be restricted from accessing sensitive data or controls that allow them to conduct fraudulent acts. Companies can therefore control what information is accessible to each employee based on their trust, skills and experience. A POS system allows companies to change authorisation in a few clicks. The software, moreover, can track each employee, noting what time they logged into the system, therefore, recording the transaction they are in charge of processing. This helps to crosscheck any information noted in the report and to find who is responsible for the relevant mistake.
Introduce Security Protocols if not implemented
Sometimes the safest way to ensure all employees are doing their job in good faith is by incorporating security equipment such as CCTV cameras in the business premises. The number of CCTV cameras required will depend on the size of the retail warehouse or shop, and while this may be costly, it will be a worthy investment. This allows managers to match transactions with video footage, which means that video footage is bookmarked whenever a transaction is made. By infusing the POS software into the CCTV software, transactions can easily be searched and analysed. This also allows the store manager to monitor the performance of their employees remotely and prevent them from committing theft in real-time. These videos can also be beneficial when it comes to training employees. For instance, past videos of customers stealing can be used to train staff on what to look out for when a potential customer may commit a crime. Having CCTV footage also means monitoring the store’s activities past business hours. Hence, it can be monitored and detected when an employee or someone else attempts to steal goods, leading to inventory footage. Make sure to cover all blind spots in the store to prevent anyone from having an advantage.
Unlock Multiple Benefits With One Solution
A POS system is a multi-faceted tool that significantly helps retailers. From automating repetitive tasks, to documenting each transaction, monitoring the entire store, producing reports with valuable insight, keeping track of returns and cross-checking whether warranties can be applied, a POS system helps to detect whether there is inventory shrinkage, how serious it is, and helps you to narrow down the reason for it. Let the POS system be the eyes of your inventory and supply chain and help you ensure no fraudulent activities are taking place that is hindering you from growing your business.
