Cut Down Employee Theft
by Allan Pulga
Retailers lose approximately 2 per cent of total sales each year from shrinkage, but with an average small-to-medium-sized business generating an annual profit of 15 per cent, shrinkage accounts for a significant portion of lost profit, wrote Dan King in a February 2006 article in Integrated Solutions for Retailers.
“Unfortunately, the majority of retailers have no idea where their greatest loss occurs, thinking vaguely of customer theft in store hot spots,” adds King, president of New West Technologies, a U.S.-based POS software developer. However, the 2004 National Retail Security Survey found that nearly half of all shrinkage is employee theft.
“The two biggest areas for employee theft occur in the back room and the register, with the latter being the largest,” says King. To minimize employee theft problems, he suggests reducing the opportunities for human error and greed by combating poor register management and implementing a “security pincer attack of operations.” Retailers must focus on accountability and control, he said.
AccountabilityHold employees accountable by implementing:
- Individual cashier log-ins: Track discrepancies by cashier to give you the opportunity to apply additional training or other administrative actions.
- Passwords: Educate your staff on good password management, including strong alphanumeric passwords and frequent changes.
- Till monitoring: Ensure that cashiers are emptying tills over a certain limit.
- Screen locks: prevent unauthorized users from accessing the register.
- Video surveillance: Prove/disprove with physical evidence after the fact.
Gain control of transactions considering:
- Discounting tiers: Limit discounts to set rates, avoiding abuse while treating customers flexibly.
- Negative quantity transactions: Reduce unauthorized returns and store credit when none are due.
- Duplicate item returns: Reduce item credit loss.
- Refunds over the original purchase amount: Eliminate fraudulent returns.
- Refunds to a different credit card: Prevent credit card fraud.
- No sale transactions: Require approval, audit and track exactly what is going on with these transactions.
“Accurate reporting and tracking are the key concepts to deter theft. When inventory is managed effectively and accurately, employees are less likely to steal and have a smaller margin of error to hide under before theft becomes obvious.”
- Link purchase orders to shipping receipts: Verifying the purchase order with the physical units will reduce manufacturer error and employee theft.
- Scan your inventory: Some inventory software tracks product serial numbers, which is a great way to track inventory, reduce duplicate entries, and increase accuracy.
- Reduce manual entry: It’s inaccurate, inefficient, and ineffective for tracking.
- Eliminate unnecessary paperwork: Each form is an opportunity for theft and error.
- Reporting: Follow historic trends on a bell curve to discover relevant discrepancies.
1. Background check every new hire. “Get their permission and use an agency to check with the police and other sources,” he says. “Make sure you know the person you’re hiring! Often just asking their permission to submit to a background check will turn away those you don’t want.”
2. Pay above standard wages. “The quality of your employees is up to you. If you’re doing your job you have good employees. Value them. Pay above standard by up to 10 percent. This will reduce theft.”
3. Engage and show respect. “Ask for their honest comments about the business. The more they feel, genuinely feel, valued, the less likely they are to steal from you.”
4. No employee bags at the counter.
5. Tight refund policy. “Theft is less in business with tight and enforced policies.”
6. Offer fair discounts to employees. “Let employees buy products for a fair discount and demonstrate respect for their involvement.”
7. Don’t take cash out yourself. “If employees see you take money out for questionable items like a coffee or your lunch they will feel invited to do the same.”
8. Roster mix up. “Change your roster regularly. It is common that a roster change will show you a theft problem you never thought was there.”
9. Tight internal systems. “Set up good systems with little room for error. Demonstrate through your actions that employees will be caught if they steal from you. Experts advise that people likely to steal choose employers who they assess to be soft targets.”
10. Roster rules. “Don’t have friends working with friends if they are the only ones rostered on.”
11. Spend more time up front. “The further you are from the action in your business the greater the opportunity for you to be ripped off. Spend time where the action is - unexpectedly.”
12. Balance the register during the day. “Do this every so often. Again to keep people on their toes. It is also good practice.”
13. Don’t let employees ring their own purchases up.
14. Don’t let employees sell to family and friends.
15. Beware of popularity. “There is anecdotal evidence that the more popular the employee the more likely they are the one stealing from you.”
16. Tell employees you suspect you have a theft problem. “This might uncover comments. It might also scare them to stop.”
17. Install a camera system and use it. “Too often retailers have the technology and don’t use it. To do nothing is to invite trouble. These suggestions are easy and most involve no or only a low cost.”