The 2008 University of Florida study shows that inventory shrinkage or “shrink” is significantly higher at 1.51% from the all time low of 1.44% in 2007. Keep in mind this is 2008. So it is reasonable to assunme that 2009 will be worse because of the economy. Sources of inventory shrink nationally are as follows: 42.7% Employee Theft, 35.6% Shoplifting, 15.4% Administrative, 3.7%Vendor Fraud and 3.9% unknown.
Employee theft is still at the top of the list. We have found in our work that this holds true for non-retailers also.
On the shoplifting front projections are that there will be an increase in loss due to the ecomomy and Organized Retail Theft (ORT). By the way, 71% of all shoplifting is attributed to Amateurs.
What does this mean to you? Retailers and business of all types are subject to employee theft. Do not wait to get your policy and procedures in line and enforced. Chances are you are losing money somehow right now. Get it fixed!
Some areas that you should look carefully at include:
Accounting and Bookkeeping-Are there enough 2 party controls in place? Is an audit or review of critical functions such as AP and AR being conducted? We have found employees stealing money from these areas by processsing charge card credits to their personal accounts, creating phony invoices and then voiding them upon receipt of payment.
Refund and Void Controls-Are two employees required as the return is being processed while the customer is still there? Do you have key or password control on the refund and void function?
Receiving Controls-Who is doing this? Is there some check and balance? A manager should “audit” every shipment by spot checking a few items. Let’s keep the employee and vendor honest.