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Keith and Therese have operated their busy retail business for twenty years. Their employees are personal friends and include the woman who babysat their kids – the same woman who Keith and Therese now know stole more than $200,000 from their business over four years, and whose actions almost ended their marriage and closed their business.

Employee and customer theft in retail businesses is expensive according to a variety of international studies. Depending on the size of the retail business, it can range from 2% of total sales in value to 6%

While Point of sale systems can report on the cost of theft, employee and customer, retailers often prefer to ignore this data as they find it less stressful.

It is only after theft has been uncovered that retailers become engaged and enraged enough to act.  For some this can be too late.

Having worked with many retailers to mitigate the cost of theft, I have prepared basic advice which, if followed, will reduce the cost of theft in any retail store.

TWELVE STEPS TO CUTTING THEFT IN YOUR RETAIL STORE

  1. Only sell what you bring into the store through your Point of Sale software. Selling items which are not tracked creates a considerable risk for the business.
  2. Track ALL sales – by scanning, touch screen button or PLU (product look up code), a hot key on your
    computer screen.
  3. Stop all department sales – sales where the employee gets to enter the amount of the item. This is an oldfashioned cash register approach that makes it easier for employees to steal.
  4. Scan ALL product returns and credit claims. This way, everything legitimately leaving the store is tracked.
  5. Undertake regular spot stock- takes throughout the business. The discrepancy between what you have on hand and what is recorded in your Point of Sale system can reflect theft.
  6. Reorder stock using your retail management software. This stops poor buying decisions. It also identifies stock theft and employee fraud around stock.
  7. Implement the use of employee initials, codes or bar codes for every sale. While this can slow sales, the
    increased vigilance will reduce theft.
  8. Set an end of shift cash balance target and stick to it. A register that does not balance can be an indicator of employee theft.
  9. Change system passwords regularly. Make it a condition of employment that these passwords are never shared.
  10. Do random register balance checks throughout the day. Check that the cash your computer system thinks should be in the cash drawer is in the cash drawer. Employees who steal may build up a reserve of cash in the drawer during the day, waiting for an opportunity to take out ‘their’ cash.
  11. Use your software to check and report on behaviour that could indicate employee theft. A good Point of Sale system will provide an Audit Log of odd behaviour including cancelled sales, deleted sales and the like which could indicate employee fraud.
  12. Follow your suspicions regardless. Put your business ahead of friendships.

The cost to any retail business of customer and employee theft can be significantly reduced. The keys are retail owner and management engagement, full use of the software and relentless application of a zero tolerance approach.

 

HOW DO YOU KNOW IF THEFT IS AFFECTING YOUR RETAIL BUSINESS?

Too often, retailers do not find out about theft until the cost to the business is considerable. In my work with retailers on theft and related challenges, I have developed a sense of indicators to point to theft being a problem in a retail business:

  • Falling gross profit. Compare your trading gross profit year on year for the whole year or for quarterly blocks – no less though as retail volatility could make a shorter period comparison of dubious value. If the gross product of the business – sales less stock purchases – has fallen more than a few points theft could be a cause. The theft could be cash or product related.
  • Stock on hand discrepancies. Undertake spot stock takes – count the quantity on hand and check this against the count held in your POS system. Do this regularly for 100 to 200 items. If you are finding discrepancies in more than 5% of items each count then it is likely you have a systematic theft problem.
  • Employees living beyond their means. If you have an employee who starts to obviously live beyond their means without and reasonable expectation, become suspicions and look for evidence of theft in your retail business. There may be a good reason and you just do not know about it. Likewise, it could be due to theft.

Theft indicators abound in a retail business. Be aware of the indicators appropriate to your business and to establish processes for regularly measuring these against a reasonable yardstick to see if you are being affected by theft.

Keith and Therese could have stopped the theft much sooner had they used the facilities in their Point of Sale software.

Mark Fletcher is managing Director of GHA partner Tower Systems www.towersystems.com.au