Knowledge Center: Jeff Stein — Don’t Let Others Shrink Your Profits
By Jeff Stein, president of Executive LP Services and MonitorClosely.com
According to the U.S. Chamber of Commerce, 20% of all new business failures are a direct result 
of employee dishonesty. In 2006 retailers lost over $41.5 billion in inventory shrinkage. “This total is ten times the value of street crime losses annually in the USA,” according to Criminal Law Lawyer Source.
And in the preface to Biting The Hand That Feeds: The Employee Theft Epidemic, Terrence Shulman points out the FBI finding “that employee theft is the fastest growing crime in the United States.”
According to a National Retail Security Survey report, retailers lost:
- $19.5 Billion to Employee Theft
- $13.3 Billion to Shoplifting
- $5.8 Billion to Administrative Error
- $1.7 Billion to Vendor Fraud
These are some scary numbers for the small- to mid-size business owners who do their very best to make a profit, let alone retain their profits. So what can you do to help prevent and deter losses from occurring in your business without the resources and funds of a large corporation?
You absolutely have to be involved and know all aspects of your business.
- Reconcile your daily deposits – If the funds are off, inquire and reconcile ASAP.
- Spot check your people all the time.
- Use sealable bags, so once the deposit bag has been completed, no one else can tamper with it.
- Use clear garbage bags. It is too easy for an employee to put merchandise in the garbage and then retrieve it later.
- Break down cardboard boxes before they are carried out to the dumpster.
- Keep your books, store, and stockroom clean and organized. The more organized these areas are, the harder it is for employees to hide thefts and frauds.
- If you are a retailer with a cash register, refunds and voids are the easiest way for an employee to steal cash from you. Whenever possible, review all transactions of this nature with your employees. Ask to see the merchandise. Then do a hands-on count of that item to see if it reconciles properly.
- Install a Closed-Circuit Television (CCTV) system.
CCTV systems are important. Besides acting as crime deterrent and theft identification, the cameras can increase employee productivity, discourages inappropriate behavior, reduce liability, defend against potential litigation and can and should also be used to reward good behavior.
If you don’t know these already, here are the Top Ten Warning Signs of Internal Theft:
- Discrepancies in daily or weekly counts
- Missing paper work (manual receipts, post voids, no-sales)
- Change in employee’s attitude/personality
- Excessive use of gift card by employee
- Frequent visitors or personal phone calls, having friends in store after hours
- Inaccurate of falsified counts / paper work
- Employee ringing own transactions
- Employee asking to borrow money from other employees
- Unexplained cash overages or shorts
- Improper use of register key
