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Unit 11: Loss Prevention and Shrinkage Control

Internal Theft Notes

While internal theft can be anything from taking merchandise to taking cash or store supplies,
we will focus on those instances of internal theft that pertain to merchandise. Some examples
are:
Writing up a cash sales slip for merchandise but destroying the ticket after the customer
leaves and pocketing the cash.

Recording a false cash refund and pocketing the cash.
Taking merchandise without paying for it.
Extending unauthorized discounts or credit card refunds for friends.

Shoplifting

Anyone can be a shoplifter; a regular customer who never intended to steal but gave in to
temptation and opportunity, or a seasoned professional.

!
Caution Shoplifting can occur at any time.

Overages

Although shortages are normally expected, it is not logical to have counted in the physical
inventory more than the book figure indicates. Goods are stolen, but not donated to the store.
Therefore, overages are due largely to errors in record keeping, although they may be due to an
employee trying to cover up the theft of merchandise. Some examples are:

Recording markdowns without actually reducing prices on price tickets.
Overstating the physical inventory.
Including in the physical inventory count merchandise that has not yet been recorded in
the book inventory.

Self Assessment

State whether the following statements are true or false:

5. Shrink is a part of the business everyone likes to talk about.
6. Shrink cannot take many forms.
7. The four most common forms of shrinkage are employee theft, shoplifting, vendor theft
and paperwork errors.

8. The difference between the perpetual book inventory and the physical inventory count is
called shrinkage.

11.3 Methods & Ways to Reduce Shrinkage

There are several factors that affect the reduction of shrinkage:

Whether or not you have a stated shrinkage goal to work towards.
Top management’s commitment to reduce shrinkage. If top management gives shrinkage
control top priority, it will invariably be reduced.

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