Shrinkage

Shrinkage refers to the reduction in the amount of inventory, cash, or other assets a business has, often due to theft, loss, spoilage, or errors. In a retail context, it’s the inventory that disappears before being sold, perhaps because of shoplifting or miscounting. In finance, it can mean a decrease in expected earnings or funds. Essentially, shrinkage represents the gap between the recorded value and the actual amount available, reflecting inefficiencies or losses that can impact profitability and operations. Managing shrinkage is important for maintaining accurate records and operational efficiency.