Most Controllable Expense- Employee Theft

January 15, 2015 by
The most controllable expense a store has is its payroll. Hours can be fluctuated up or down based upon the sales needs of a given day, week or a specific event. As such, when other store expenses rise, payroll is often the first to be cut to make up the financial difference. When hours start getting cut, employees will often take it upon themselves to make up the difference- resulting in employee theft.
Employee theft isn’t only about cash theft or inventory theft. Employee theft is about the unauthorized use or gain of any company assets- including payroll. Because it is easier for an employee to justify a slide in their favor of the hours worked than it is to justify stealing cash for that same amount of money, time card theft is an often overlooked but equally as detrimental form of theft.
Attending a loss prevention workshop that covers a variety of theft situations from employees can help you to not only see when time card theft is happening, but what to do about it, and ultimately how to avoid it from happening again.
Time card theft usually starts out pretty small- a few minutes here and there. If left unchecked, employees can start to wheedle multiple hours out of you before you begin to notice.
For more information on Loss Prevention Seminars, Loss Prevention Training, or Loss Prevention Workshop contact us or call 1.770.426.0547 – Atlanta Georgia
Visit the Loss Prevention Systems website for more information on Retail Employee Theft and Retail Shoplifting problems and view the Retail Loss Prevention Seminars, Retail Loss Prevention Training and Retail Loss Prevention Workshop we offer to help with your Employee Theft and Shoplifting problems.

The most controllable expense a store has is its payroll. Hours can be fluctuated up or down based upon the sales needs of a given day, week or a specific event. As such, when other store expenses rise, payroll is often the first to be cut to make up the financial difference. When hours start getting cut, employees will often take it upon themselves to make up the difference- resulting in employee theft.

Employee theft isn’t only about cash theft or inventory theft. Employee theft is about the unauthorized use or gain of any company assets- including payroll. Because it is easier for an employee to justify a slide in their favor of the hours worked than it is to justify stealing cash for that same amount of money, time card theft is an often overlooked but equally as detrimental form of theft.

Attending a loss prevention workshop that covers a variety of theft situations from employees can help you to not only see when time card theft is happening, but what to do about it, and ultimately how to avoid it from happening again.

Time card theft usually starts out pretty small- a few minutes here and there. If left unchecked, employees can start to wheedle multiple hours out of you before you begin to notice.

For more information on Loss Prevention Seminars, Loss Prevention Training, or Loss Prevention Workshop contact us or call 1.770.426.0547 – Atlanta Georgia

Visit the Loss Prevention Systems website for more information on Retail Employee Theft and Retail Shoplifting problems and view the Retail Loss Prevention Seminars, Retail Loss Prevention Training and Retail Loss Prevention Workshop we offer to help with your Employee Theft and Shoplifting problems.

 

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Shoplifting Stories and Stats

January 14, 2015 by Leave a Comment

shoplifting4Many retailers invest thousands of dollars to protect themselves against theft. From surveillance to electronic devices, these retail shop owners try to find a way to reduce their shrinkage in a daily basis. Whether they are dealing with petty shoplifters, employee theft or organized groups, they have to know their problem first to be able to find a solution they can implement in their store. To read more about this common problem, follow the links below for more information.

EPD: Retail theft up in 2014

EASTON — The Easton Police Department reported a 61 percent increase in retail thefts in 2014 — from 163 retail theft cases in 2013 to about 263 in 2014.

In response to this increase, the EPD announced that each month it will release photographs of all individuals who were charged with retail theft.

There’s an understanding that to better prosecute and deter thefts, a partnership between retailers and law enforcement is vital, EPD said.

In August 2013, EPD also started a Retail Investigator’s Network, which brings together retail loss prevention/asset protection investigators, prosecutors and law enforcement from Easton and Denton.

During these meetings, solved and unsolved investigations are discussed, which has increased closure rates in Easton and Denton, police said. These meetings have opened lines of communications between retailers. These meetings are also used to educate everyone in crime trends and other criminal activity that’s associated with retail theft.

In 2014, retail loss prevention/asset protection investigators and law enforcement in Easton and Denton have saved retailers about $142,722, EPD said.

Dover Police See 19% Drop In Reported Shoplifting Cases Since Posting Arrests Online 1-6-15

The Dover Police Department saw a 19% drop in shoplifting complaints since beginning the Shoplifter Notification Program on August 7th, 2014.  The program which posts mug-shots of persons arrested for shoplifting on a weekly basis on the department website and social media outlets, has helped to reduce shoplifting incidents during the 4-month trial period.  The reduction in shoplifting incidents during the trial period also led to a 12% drop for the entire calendar year compared to 2013 numbers and bringing the total number of shoplifting cases below 1,000 for the first time since 2010.

From 2011 through 2013, the Dover Police Department investigated 3,290 shoplifting cases, averaging 3 per day during that time period. In an effort to help reduce the amount of shoplifting cases in the City of Dover, the department began the weekly notifications, displaying the names and booking photos of those arrested. The goal of the notifications is to notify Dover merchants of offenders in hopes of being able to reduce the number of shoplifting cases. The majority of shoplifting cases are committed by repeat offenders and the department’s goal is that by releasing the information, store employees will be better informed when monitoring their stores and inventory, and that suspects will think twice before stealing merchandise in fear that their name and photo will be shared with the public.

The Flowerpot Bandit: Man ‘holds up petrol station’ wearing a flowerpot on his head and wielding a chainsaw, but only manages to steal a bottle of soft drink

A teenager has been arrested after he allegedly held up a petrol station while wearing a flower pot on his head and wielding a chainsaw, though he only managed to steal a bottle of soft drink.

The man entered the 7-Eleven service station in Ipswich, Queensland, at 4.30am on Monday, wearing a flower pot on his head in an attempt to conceal his identity, it will be alleged.

He is accused of lunging at the shop assistants while holding a running chainsaw, and demanding money from them.

Chainsaw attack: The 19-year-old held up a service station wearing a flower pot on his head. He then made demands for money from the male attendant

The terrified shop assistants, who were cleaning a coffee machine at the time he entered, claim they then retreated into a back room and called police.

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Start 2015 With Loss Prevention Best Practices For A More Profitable Year

January 9, 2015 by Leave a Comment

theft (4)Now is the time to go on the attack! Fix your loss issues before they cost you this year’s profit margin. To do this, in many cases requires you to change the way you look at losses. First and foremost, if you are not leading with an “LP” mindset, how can you expect others to follow and support your goals? Loss prevention should always enter into decisions even if in a minor way. Decisions on how and where to display merchandise and the standards you set for employees to follow, are just the start.

There are three main sources of loss in a retail environment: External (shoplifters), internal (employees) and paperwork errors.

Let us look at two of these, starting with internal. My experience tells me that about 10% of employees in a given retail store are involved in theft. You may be saying to yourself that “my employees wouldn’t do that to me”. If you find yourself thinking that way, you are actually at a greater risk than most. Because you are in denial. People will steal regardless of how good you are to them, how much you pay them, how many times you have helped them and so on.

Often when I hear someone say that, we end up finding out that they have some of the largest losses. I know this may sound cynical but it is the truth based on my experience and thousands of employee theft investigation I have personally conducted. So what can you do to prevent employee theft?

To start, understand that employees must be held accountable. Employees can steal four different things from you: cash, merchandise, supplies and time. All of these have value including supplies. If you operate at a typical profit margin of 2% after taxes a loss of $100 will cost you $5000 ($100/0.02). So even a twelve pack of toilet paper has value, not to mention the serious morale issue when you don’t have toilet paper! Employees need to understand that the only thing they are allowed to remove from the store is the air in their lungs.

On top of this, what message are you sending employees by your actions? For example, if you have a policy that cash register shortages under $5.00 are not investigated and a cashier held accountable, then you are telling everyone that it is okay to steal up to $4.99.

Look for employees that wholeheartedly share, understand, support (not just to your face) and practice your LP policies. These employees should be held up to be the standard. Others will then follow. Those who don’t, well… you get the picture. We have a great sample document you can use for your LP employee handbook. It sets the standards and lets them know from the very beginning what you expect, tolerate and will not tolerate. If you would like a free copy in Word format that you can customize for your use, please send me an email.

Shoplifters, those horrible people that come into your store and try to steal everything they can. Okay I will say up front, we sell Checkpoint anti-shoplifting systems. These systems are used by most major retailers worldwide and for a reason. They shut down a huge amount of shoplifting. They are commercial grade and meant to stand up to the tough retail environment. With that aside, let me ask you this, Why are you not using one? A Checkpoint System is a proven way to bring your shoplifting losses under control.

Other best practices include the use of CCTV. However, you must have the correct expectations for this. CCTV is a reactive measure. Shoplifters are rarely deterred by cameras as they know you do not have the payroll to watch them all the time or even when they are skulking around in your store. CCTV is good for employee theft prevention and investigation. You can use it in a somewhat proactive way by bringing an employee in, showing them a 60 second clip of them doing something good and then complimenting them on a job well done. They leave with a good feeling but say to themselves and others “wow I guess he/she is watching”. Do that monthly and see what happens. Believe me, word will get around.

Employee training is something we almost always overlook. Or we just say that they are learning as they go. You invest a lot of effort and money into a new hire. Spend a few hours with a structured outline and make sure they understand what their new job is, the standards you have and what you expect them to do each and every day. The document I offered you above for free will help with this.

Pre-employment screening is also overlooked. For example, have you ever confirmed that a person you are looking to hire can actually count money? Do you test for that? Put $100 on the table and see if they can make correct change without the assistance of the cash register. If they cannot, do you really want them handling your cash?

Paperwork errors are just as deadly as any other form of loss. Keeping a correct inventory not only helps with reordering but is a critical component of controlling theft. How can you react to loss, if you do not know what items are stolen? For example, you might not know that a particular item is being stolen because shoplifters have found a demand for it elsewhere.  If you suspect that a particular item is being targeted, then conduct what is called a cycle count on it. A cycle count simply means you are counting it on a daily, weekly or biweekly basis. Comparing that information to your sales of that item will allow you to react quickly before it is too late and the losses become severe.

Are you ensuring that your employees are not making mistakes in their work and then not correcting them? You also need to set the standard that you are watching and reviewing. For example, if an employee is checking-in a shipment and they are to piece count every item, then follow through by picking up the manifest that they just did and spot check their counts on a few items. When they get it right, complement them. If they made mistakes, show them their errors and let them know how the job is to be done and the standard. By the way there are vendors that will try to short your shipment hoping that you don’t check.  Vendors and shippers also have employee theft issues and you do not want to be left holding the bag for their issues. I have caught major shipping company employees cutting open the bottom of boxes removing merchandise and then taping the box back up. All of this is done on the truck before they arrive at your business.

I realize that much of this is common sense.  However, in many cases we are so busy trying to make money that we forget to keep the money we have on the bottom line. Remember, we are here for you. If you have any questions or issues, we are simply a phone call or email away.

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Cycle Counts

January 9, 2015 by Leave a Comment

shoplifting2With only a distant memory of the holiday shopping season in our minds and spring business just on the horizon, it’s a good time to start focusing on inventory control and accuracy. With the hustle and bustle of the holidays, retailers sometimes lose focus on what’s really important, their inventory. It should be second nature for you to take an annual inventory of your store. The best time to do this is soon after the holiday. Think about it, your store is most likely at a low inventory point, so counting is normally easier, and you have a little extra in the payroll budget due to that month of increased sales. It only makes since. Often though, this annual inventory is the only time some retailers verify their on hand accuracy, however, cycle counts can be of great benefit to any store environment, any time of year.

If you are unfamiliar with cycle counts, just think of them as a mini-inventory focused on a small section of your store. In my experience, conducting a count on high value, or high theft merchandise at least quarterly (monthly is better), can actually help boost sales. For example, let’s say that you sell several styles of pocket knives. Your sales are good in this category, but your shrink is always high. You know you lose knives daily due to theft, so your on hand counts are always a little off. If you are replenished based on those counts, then you may not be getting the product you need, which will then hurt your ability to sell that product. Not only is the theft creating a loss, but now you are losing sales because your customers can’t purchase a knife you don’t have. If you waited an entire year to conduct an inventory, you would lose those sales for the entire year. This can easily be corrected through consistent and well planned cycle counts.

Once you have the areas of the store selected that would benefit from a cycle count, plan to do them on a day that is historically a low sales day, like early on a Monday morning. This gives you a chance to get it done with minimal interference from customers, and it won’t mess with your counts if a customer purchases an item you are counting. Take a small section, once a month. Don’t try and count an entire department. Keep it simple and focus on a small area that is normally high shrink. Print out what you should have on the books, and compare it to what you physically have. Simply make any adjustment to your inventory as needed. It’s really that simple and it’s a great way to stay in stock for your customers.

As in the example above, as a manager, or store owner, you know what areas of the store have the most shrink. In order to combat theft and remain in a good stock position throughout the year, you have to have accurate on hand counts. If you implement any inventory adjustments, always ensure that they are conducted by a manager, or one of your most trusted employees. Having an inaccurate count can cause a loss on paper, and/or keep you out of stock even longer. Additionally, this can also help you to identify areas of employee theft as well. If you have items that are shipped to your store that are stored in areas only accessible to employees, you shouldn’t have any losses. For instance, if you have high end sunglasses that are kept locked in a case and you find you are missing hundreds of dollars’ worth of those glasses, chances are you may have an internal theft issue. If you would wait until the end of the year to find that during your annual inventory, you may never be able to uncover the source of the loss.

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Building Partnerships

January 5, 2015 by Leave a Comment

law-3Every store should have a way to build reliable partnerships with local law enforcement. For some jurisdictions, that could mean the sheriff’s department, city or county police. In some rural areas, that might even mean the state police department. There are many was to build these partnerships, and your store’s safety and security will benefit greatly from those partnerships.

What you are looking for is to have periodic visits from these law enforcement officers. Ever wonder why you see police at a donut shop? For one, the shop owners frequently give free or reduced prices on coffee to these officers. It is a nice gesture to these officers, but also an incentive to get them to frequent the shop. The more often police are in the shop chatting, drinking coffee etc, the less likely the shop is to be robbed.

Coffee and donut shops are often open late, and have only one or two people working. This makes them prime targets for robberies. Having an increased police presence helps to reduce the risk. If something were to happen, the police would quickly respond not just because that is their job, but also because they are probably on a first name basis with that shop owner and its employees. For these businesses, a cup of free coffee is a small price to pay for that kind of security and peace of mind.

Depending on the kind of store you have, giving product out for free or at a discount may not be feasible. That doesn’t mean you can’t make it worth it for local law enforcement to stop by periodically. Even though most departments shy away from case quotas, officers who do produce cases are given raises and promotions over those who don’t. By building partnerships with officers you can get some extra help with your suspected shoplifters, reduce losses, and help out your local community by giving local law enforcement tips on suspected criminal activity in your store.

Most law enforcement agencies have a community resource officer. They would be one of the first points contact to start building a relationship with. Asking if they would be willing to do a safety or security presentation for an employee meeting is a good way to break the ice. It is the first step in letting the local police know they are welcome in your store.

One of the next ways is to see if there is a retail anti theft task force set up. If so, ask if they would be interested in putting your store on their list. These task forces go into local businesses, in particular around busy holiday shopping seasons, and look for shoplifters, credit fraud, and other criminal scams. The task force will send officers into stores, generally in plainclothes, to watch cameras or do floor surveillance to spot any criminal activity.

These task forces are a free service to their retail community. While these officers are in your store, you can talk to them about what kinds of thefts you are experiencing. It also gives you an opportunity to connect with the officers and get to know who they are. These officers can become invaluable resources even after the task force is done for the season.

You now have specific officers that you can call if you have a shoplifter in your custody, or experienced a high dollar theft. The officers might be more willing to do some investigative legwork on your case, if you have built a partnership with them. Of course, part of the partnership is showing restraint and professionalism to these officers.

It is not suggested that you call them for every low dollar shortage that walk out your door, or for people who “seem suspicious” but you have no corroborating evidence. There are still laws that must be upheld regarding liable and slander. If you consistently show poor decisions about which cases to call on, you will tarnish your reputation negating any usefulness of your partnership. Remember, there is a difference between offering viable leads to confirmed inventory losses, and crying wolf over every gut feeling you have.

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Loss Prevention

December 18, 2014 by Leave a Comment

shoplifting3During this time of year the number of shoplifters visiting your store is more than at any other time of the year. Stores across our nation invest millions of dollars in loss prevention, and still billions of dollars are lost due to this crime. Some of the measures retail stores use to prevent shoplifting are the use of video surveillance, security guards, and special tags that are attached to the merchandise and are set off when leaving the store without paying. These are some of the many other prevention measures that help retailers deterred shoplifters from entering their stores. Are your loss prevention measures adequate? Do you need to do more to prevent loses? Read the articles below for more news about shoplifting.

Police conduct holiday shoplifting operation, 19 arrests

ST. PETERSBURG, FLA. —

Yesterday plain clothed detectives with the Department’s Economic Crimes and

C.O.T.A. Units conducted a one day operation with loss prevention officers at

the Wal-Mart Store located at 201 34th Street North.

The purpose of the operation was to address the problem of shoplifting that increases during the holiday season.

A total of 19 individuals were arrested, mostly on charges of retail theft although several had outstanding warrants and one juvenile was in violation of court ordered home detention for a previous burglary charge. Of those arrested, 9 were adults and 10 were juveniles.

Great Falls merchants go on guard against shoplifting

Downtown Great Falls’ Amazing Toys owner Dave Campbell said his staff noticed that a $350 Legos set was missing from its perch. They searched the store and found the valuable toy stashed near the front door where a thief planned to retrieve it later.

Dragonfly Dry Goods owner Alison Fried said her staff warmly greets customers, which most shoppers welcome. But some folks, possibly with bad intentions, turn around and walk out the door. She said she has a good camera system inside and outside the store that videotapes 24 hours a day. Fried lets other downtown merchants know who to look for if her store has been hit by a shoplifter.

“We use the team approach,” she said. “We’re a cooperative community downtown.”

“Shrink,” a business concept that includes shoplifting, employee or supplier fraud and administrative errors, cost the retail industry around $42 billion in sales in the United States last year, according to the latest Global Retail Theft Barometer. Worldwide, those factors cost businesses $128 billion.

Man Accused Of Abandoning Child While Shoplifting Speaks Out

A Lexington couple who allegedly abandoned their child while fleeing from loss prevention officers at Walmart say that the police have it all wrong.

Eric Powell and his girlfriend Samantha Barker are accused of shoplifting and taking off leaving behind their 9-month-old child.

Powell says that is not at all what happened.

“We was at Walmart shopping she was at the store shopping and I was by myself looking at magazines and stuff,” says Powell.
He says when they went to check out, he realized he couldn’t pay for the diapers they were trying to buy.

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Conceptualize Dishonesty Using the Fraud Triangle

December 16, 2014 by Leave a Comment

shoplifting7Honest people can have a hard time perceiving and understanding dishonesty in others. Because they have a difficult time conceptualizing it they have a difficult time detecting it. A common lament among managers who have discovered fraud among their employees, vendors and clients is, “I don’t understand how he could do this to me. I had no idea it was happening. I’m just too trusting.”

People too often identify themselves as being trusting, when they’re really being naive. Don’t be naive, protecting your business is vital, many small businesses have been closed due to the fraudulent behavior of their employees, venders or clients. If you don’t want to be taken advantage of it’s important to understand the 3 key factors of the Fraud Triangle.

Before discussing these factors it’s helpful to define fraud, people often have misconceptions about it. According to “Black’s Law Dictionary” fraud is “a generic term, embracing all multifarious means, which human ingenuity can devise, and which are resorted to by one individual to get advantage over another by false suggestions or by suppression of truth, and includes all surprise, trickery, cunning, dissembling, and any unfair way by which another is cheated.”

The 3 factors, which make up the Triangle, are typically present when someone commits fraud. Understanding these elements will help a manager spot dishonesty easier and earlier, because a person who exhibits these thoughts and characteristics is at great risk for deceitfulness.

1. The perceived pressures the person believes they are under.

2. The perceived opportunity the person has to commit fraud.

3. The person’s rationalizations for committing the fraud counter-act their innate integrity.

Here’s an example of how the Fraud Triangle works. Mrs. K has never stolen from her employer and is indigent when others do. She wants to take her immediate family to an expensive reunion. She can’t afford it, but all of her extended family are attending. Mrs. K perceives this as a personal and financial crisis (1st side). She’s the company’s bookkeeper and there are no fiscal controls in place (2nd side). Mrs. K rationalizes that she’ll “only borrow” the money for the trip and then pay it back (3rd side).

She embezzles the money, gets away with it and keeps on stealing. Because usually, once all 3 components are present, when people commit and get away with fraudulent acts they continue the behavior. Also, they may continue behaving dishonestly if they get caught but have no or too few consequences. This is why many managers have found that giving someone “a break” usually backfires on them.

When you understand the Fraud Triangle, and use it as a touchstone for conceptualizing people’s dishonesty, it becomes easier to formulate a defense against deceit. There are many ways to mitigate each of the 3 factors, which can greatly reduce or eliminate the possibility of being taken advantage of. After all, your honesty should be an asset to your business not a liability.

Nicole Abbott – writer, educator and psycho-therapist

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Just Don’t Do It- Loss Prevention Seminars

December 16, 2014 by
When I was growing up, my parents were notorious for telling me not to do things. They never really explained why not, they just told me not to. I can attest to the fact that this was not the most effective way to teach me a lesson. Now, as an adult, when I conduct loss prevention seminars, I go beyond just saying, “don’t do it” and actually share information to make a difference.
When employee theft is happening in a store, or is about to happen, you have to be more prepared than having a sign that says, “shoplifting will be prosecuted”. You have to train your employees that you are aware of different methods, and tactics used in employee theft. You have to be able to train the other employees to be eyes and ears when you are not there.
By sharing information on employee theft during loss prevention seminars you have the information to help your employees make better decisions. Employees who see the heightened awareness level in a store are less likely to try and get away with employee theft. 
The stores that have a blanket statement, but no training or awareness, are more likely to have theft issues. Without a clear understanding of how deep the awareness and prevention goes in a store, the more likely employees are to abuse the system.
For more information on Loss Prevention Seminars, Loss Prevention Training, or Loss Prevention Workshop contact us or call 1.770.426.0547 – Atlanta Georgia
Visit the Loss Prevention Systems website for more information on Retail Employee Theft and Retail Shoplifting problems and view the Retail Loss Prevention Seminars, Retail Loss Prevention Training and Retail Loss Prevention Workshop we offer to help with your Employee Theft and Shoplifting problems.

When I was growing up, my parents were notorious for telling me not to do things. They never really explained why not, they just told me not to. I can attest to the fact that this was not the most effective way to teach me a lesson. Now, as an adult, when I conduct loss prevention seminars, I go beyond just saying, “don’t do it” and actually share information to make a difference.

When employee theft is happening in a store, or is about to happen, you have to be more prepared than having a sign that says, “shoplifting will be prosecuted”. You have to train your employees that you are aware of different methods, and tactics used in employee theft. You have to be able to train the other employees to be eyes and ears when you are not there.

By sharing information on employee theft during loss prevention seminars you have the information to help your employees make better decisions. Employees who see the heightened awareness level in a store are less likely to try and get away with employee theft. 

The stores that have a blanket statement, but no training or awareness, are more likely to have theft issues. Without a clear understanding of how deep the awareness and prevention goes in a store, the more likely employees are to abuse the system.

For more information on Loss Prevention Seminars, Loss Prevention Training, or Loss Prevention Workshop contact us or call 1.770.426.0547 – Atlanta Georgia

Visit the Loss Prevention Systems website for more information on Retail Employee Theft and Retail Shoplifting problems and view the Retail Loss Prevention Seminars, Retail Loss Prevention Training and Retail Loss Prevention Workshop we offer to help with your Employee Theft and Shoplifting problems.

 

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Employee Theft This Holiday Season

December 9, 2014 by Leave a Comment

theft (2)Billions of dollars are lost every year due to shoplifting every year in the United States. Many retails stores prosecute every incident and some others choose not to contact the police. According to research, 64% of small businesses that have experienced employee theft, only 16% have reported the incident to authorities. One of the main reasons not to prosecute the employee according to the research is because the expense of hiring attorneys outweighs the theft committed by the employee. You can read more news about shoplifting by following the links below.

Shoplifters pepper spray Walmart employee during attempted toy theft

SAND SPRINGS — Police are searching for two women who used pepper spray on a Walmart employee while attempting to steal toys from the store Monday morning.

The robbery attempt happened about 1:30 a.m. when two women tried to leave the store with several toys, Sand Springs Deputy Police Chief Mike Carter said.

One of the women used pepper spray on an employee who intervened before they fled the area in a black or navy blue Chrysler PT Cruiser, Carter said.

Detailed descriptions of the shoplifters were not provided.

Anyone with information about the crime is asked to call the Sand Springs Police Department at 918-245-8777.

5 ways to avoid employee theft and fraud at Christmas

Christmas: a time when many businesses celebrate the harmony between carols and cash registers. But while Christmas may be a cash cow for some, the combination of temporary staff, increased business activity and financial pressure on staff can move your business from booming to busted.

Employee fraud and theft have fast become a major problem for small businesses in Australia. According to KPMG, workplace fraud more than trebled between 1997 and 2012, costing businesses millions of dollars.

While employee fraud and theft happen all year round, the hectic nature of Christmas produces the perfect environment for staff, both long-standing and new, to become opportunistic.

You see, opportunity is one of the key drivers of employee theft. In a recent global survey by the Association of Certified Fraud Examiners, 85 per cent of respondents admitted that they would commit a fraud if the ‘right’ circumstances existed.

Employee Theft Is More Widespread Than You Think

Think of all the ways stores lose money.

Pricing Errors. Damaged Goods. But what about when employees steal merchandise? It’s actually a lot more common than you would think.

There’s a reason your average shopper doesn’t know about this problem.

“It’s kind of an embarrassing topic,” says Richard Hollinger. He’s a criminology professor at the University of Florida and he’s been studying why and how employees steal for more than 25 years.

It all started when he was 16. He was working at a small grocery store just south of Macon, Georgia.

“Some of the guys around me, they would graze or eat their way through the store. And I asked them: ‘Stealing food and eating it while you’re at work: isn’t that theft?’ And they go, ‘No, that’s part of your fringe benefits package.’”

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Negative On Hands

December 1, 2014 by Leave a Comment

shoplifting2When you are conducting perpetual inventories, you are constantly assessing your stock levels. By maintaining accurate stock levels, you are ensuring your customers will have access to the merchandise they are looking for. This creates consistent customer service and maximizes your store’s sales potential. Having an accurate on hand inventory also helps you to reduce your cost of goods by eliminating erroneous inventory orders, as well as identifies potential theft issues more readily.

To have an accurate on hand inventory, you need to have a system in place that captures your inventory movement at the SKU level. This system should recognize any time an item comes in or goes out of your store. This should include receipt of product from the vendor, sales, customer returns, returns to vendors, and miscellaneous usage like damages or store use. You should also have a way to manually make inventory adjustments through processes like cycle counts or inventory replenishment audits.

By maintaining these counts and processes, you should be able to look at any given product and know exactly how many of this item you have. This helps you prepare for sales and special promotions, or to satisfy a larger than normal quantity purchase by a customer. Cycle counts are an invaluable tool in ensuring these counts are up to date and accurate.

A cycle count is a manual count done by a store employee to determine if what the store’s computer system says you should have on hand matches with what you actually have on hand. For example, you are preparing an end cap to be filled with “Item A” for an upcoming sale this weekend. Your on hand inventory says you should have 20 of the item, so you go and look to find all 20 pieces. After searching the sales floor, you discover that you can only find 15 pieces. So you take those 15 to the end cap and enter a cycle count adjustment into the computer system to subtract the missing 5 pieces. Your computer now says that you only have 15 pieces, and you have a shortage of five pieces.

After the weekend is over, all of “Item A” was sold. Your inventory tracking system shows that you have -5 on hand. Negative 5? That indicates that you sold more than what you physically had on hand. Hmm. Something is very clearly off.

One very likely possibility is that when the employee was looking to fill the end cap, they did not look in the back stock room to see if there was any merchandise there. During the weekend, another employee found the missing 5 pieces and restocked the end cap for the sale. Because the employee had cycle counted and adjusted the items out of the inventory, a negative was created when the “missing” five pieces were sold.

This is one example of why it is important to maintain an accurate inventory, even when a manual adjustment is made. When the employee made the adjustment, there was the potential to accidentally order more product than what was needed. If the computer system thought that there was less than what you actually had, an order could have been generated to get the stock levels back to where your store should be. Because the product was physically still in the store, you could have been left with extra product that you didn’t need.

Having a negative on hand of an item means that a recount should be made quickly to determine what the error was and have it fixed. Adjusting your inventory back up to the actual stock levels will not create an overage.

This is not extra product that you didn’t have before. Think of it like loosing a five-dollar bill and not knowing where it went. Then the next winter, you pull out your coat, reach into the pocket and find a five-dollar bill. That money did not magically appear. It was your money that you misplaced and later found.

Fixing your negative on hands does not add extra to your inventory, or your bottom line. It fixes your inventory where a shortage was previously created in error.

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