“It’s just a Penny!?!”

The title itself led to one of the largest employee theft cases I have ever taken in a small box electronics retailer. One of the most frustrating things any executive can encounter is when money is spent on tools and training and the employees completely ignore them. One of those tools that many retailers have is the ability to track daily cash shortages. In fact many retailers have the capability to track the shortages to the exact register and employee. This is no easy task; it is a combination of technology and register handling policies that allow a business to track not only the overall daily cash shortages but to also track each employee’s cash shortages. The reason for this is two fold, one it will potentially catch internal theft and two it will pinpoint training opportunities for those having difficulties handling transactions. The company I worked for had a great way to track the cash shortages down to the employee which allowed loss prevention and district sales managers’ easy access to audit any potential employee theft trends.

A disturbing trend I began to notice in several stores was the “give a penny, take a penny” slush fund. I would conduct a loss prevention audit and when I came to the cash handling part of the audit I would review the cash shortages for the past quarter. A red flag would immediately go up when there were no cash shortages or overages at all. At that point I would go on the hunt for the “cup” or “dish” of change that ultimately was being used to cover losses or overages in the store. The management always viewed it as a minor issue saying “what does it matter if we were short a bit of change any way?? What’s a penny?” I would then have to sit down and counsel the staff on the pitfalls of covering even the smallest of losses.

I would start with “the case” example which began with a store bleeding massive amounts of product. Since this retailer’s losses were mostly a result (about 75%) of internal theft we knew it was more than likely an internal job. We began our employee theft investigation by auditing daily and weekly inventory counts as well as the over/short cash logs. We were attempting to narrow the focus of the employee theft investigation to ascertain how the product was leaving the store as well as who was responsible. We had to stop the bleeding as well as pinpoint the thief before they realized we were on to them. One thing this store manager made sure to do was to keep very detailed inventory counts and logs. There was no “slush” fund in this store. A review of the cash over/short log showed a very interesting trend. One employee was having consistent small shortages, a few pennies here, a little change there. This was nothing that an untrained eye would view as anything other than a training opportunity.

Another interesting fact was the inventory losses tended to happen when this employee was working. There were other employees in the store that also worked consistently when the inventory losses occurred. We knew this was a case of internal theft. I also had a very good idea of what was happening but decided to install a pinhole camera over the register to confirm my suspicions. Three days later the employee theft investigation was over. The employee in question was caught red handed doing what is typically called “drop sales”. He would sell an unsuspecting customer product for cash, accept the cash, use a “no sale” to open the cash register drawer issue change then close the cash drawer and never give the customer a receipt. After the customer left the store the employee did another no sale and took the cash the customer had given him for the product.

So I asked the store manager after he saw an example of this on video, “what are we short?” He immediately stated “the product”, I asked “what else?” , he was confused for a bit and then the light bulb went on over his head “We are short the change he gave the customer”. I asked the store manager how we would have been able to narrow the focus of the employee theft investigation to the product leaving via the register area if we had not had the cash over/short log. He had no answer. I assured him we would have been able to figure it out but the investigation would have gone on a heck of a lot longer and the losses would have been piling up while the investigation continued. The employee admitted to several thousand dollars in product theft via the drop sale method. This example of employee theft proved to be a very good training example for the entire company. “What’s a penny?” is a question store management learned NEVER to ask.

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