Inventory Shrinkage
Definition
The loss of inventory between what the records show and what is physically present, caused by theft, damage, spoilage or error. It is recognised as a cost when identified at a stock count.
Related Terms in Purchasing & Inventory
GMROI (Gross Margin Return on Investment)
A retail metric measuring the gross margin earned for each unit of money invested in inventory, showing how profitably stock is being used. A GMROI above one means inventory earns more than it costs to hold.
Sell-Through Rate
The percentage of received inventory sold over a period, indicating how quickly stock moves. A high sell-through points to good demand or lean buying; a low rate signals overstocking.
Backorder
An order for goods that cannot be filled immediately because they are out of stock, but which the customer is willing to wait for. Managing backorders well preserves sales that would otherwise be lost to stockouts.
Goods Receipt Note (GRN)
A document confirming that goods ordered via a purchase order have been physically received and inspected. Part of 3-way matching (PO → GRN → Invoice) to prevent overpayment. HelloBooks has full GRN with validation rules.
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