It’s safe to say that no business, big or small, is immune to the scourge of the five-finger discount. It’s somewhat expected to originate from criminals posing as patrons, but it also can come from the worst place — a trusted employee.
According to the National Retail Federation’s 2015 National Retail Security Survey, retailers estimated that internal theft accounted for more than ¹/3 of inventory shrinkage in 2014. The report also revealed that the average dollar loss per dishonest employee case came to just under $1,600. Meanwhile, the average shoplifting case only costs employers about $300.
“An employee understands the system,” says Robert Moraca, vice president of loss prevention for the NRF. “When they beat the system you take a bigger loss.”
Cash and Prizes
Moraca revealed that cash is the number-one item stolen by employees. It’s lightweight, fits in your pocket, can be used anywhere, and is untraceable. Employees often steal cash by charging the customer for an item and putting the money in the register without entering the transaction into the system. They often do this by using the cash register’s employee override, so they don’t have to scan the actual item to open the cash drawer. They usually take the extra money out of the register at the end of the shift, so be very wary if you notice a surplus in the register from time to time, Moraca says.
He recommends random register audits to ensure the amount of cash in the drawer matches the receipts. This is made possible by the POS system’s electronic tape, which indicates exactly how much should be in the register at any given time.
Safe drops are another way to protect your business from employee cash theft, but not any old drop safe will suffice. Instead of the old-fashioned safe with a combination lock or key, modern versions can record the amount of money that’s put in and taken out. By using cash readers, like a vending machine where you put money in a reader to purchase an item, personal passwords and PINS can be used to deposit money into the safe, but only managers or owners may make withdrawals, says Moraca. These units will run you about $1,800-$5,000 — but they might be a small price to pay for peace of mind.
Making off with Merchandise
Products make up the second most popular item for employees to steal. And while it may be a bit difficult to sneak a hot tub out the back door (which by the way, has been done--See "Employee Theft Horror Stories") smaller items, such as chlorine bottles and pool toys can disappear out of your store as well.
But product theft has gotten a bit more sophisticated than the days of loading up a backpack with items from the stockroom and sneaking them out. A buddy system called “sweethearting” often can lead to significant losses, Moraca says. It works like this: An employee working the register rings up a friend who is purchasing a few cases of product. But he actually only charges his friend for one case. The friend walks out with the stolen goods, and the next thing you know, the items wind up for sale on the Internet or at a swap meet.
There are a variety of tools that can be used to deter this and many other types of employee product theft. Surveillance cameras, for example, can be pointed right over the sales transaction counter to record every move the employee makes. Newer systems even have the cash register receipts superimposed right on the video. This makes it very easy to see if an employee is charging a customer for every item that’s placed on the cash wrap.
Retailers also can keep product theft at bay by closely monitoring inventory. That can be as simple as doing regular checks.
“You’re looking to find a discrepancy between what you have on hand and what the software thinks you have on hand,” says Jessica Chase, vice president of client services for Evosus, in Vancouver, Wash. She notes that frequent cycle counts can help you identify theft patterns. If a certain type of product tends to keep coming up short, some business management systems can run detailed audit reports on stock movement. This would allow you to see exactly what point in time a piece of merchandise vanished…perhaps during one particular person’s afternoon shift.
Pool service businesses also have to deal with workers who can potentially steal company time. Luckily, there’s an app for that.
The Evosus Mobile Service app shows pool service workers the customers’ basic information (location, phone number, email, etc.) as well as the planned work for the day. However, they cannot update the service record with chemicals/inventory used, etc. until they’ve scanned the barcode that is stored at the customer’s home on a printed form. This ensures that they actually did the work at the customer’s pool.
“We literally had clients tell us they were able to catch people using the app and GPS, to find service techs who were not actually cleaning the pool,” Chase says.
RB Control Systems in Monroeville, Pa., offers mobile software to impede employee time theft as well. It allows managers to enable pool service techs to clock in remotely or only from the store, says Tyler Brandt, directing manager for RB Control Systems.
And for employees who think they can merely alter the time on the computer to give themselves an extra paid hour or so, RB’s software won’t allow it. The software uses internet time services to tell the accurate time, which cannot be changed, Brandt says.
Upon implementation of some of these employee theft deterrents, you might feel a little like Big Brother himself — or worse, cause your employees to feel as though they’re under 24/7 surveillance and are being accused of theft before they even had a chance to do anything wrong. Unless you’ve upped your security strategy to rival that of the TSA, then you don’t have much to worry about. Most employees will understand that you have a business to run and it needs to be protected.
“You want to send a clear message that this is your business, this is your livelihood, and you will keep a good control on the cash,” Moraca says. “At the end of the day, that’s why everyone works.”