In my 30 plus year career in loss prevention I have had the duty to conduct employee theft investigations on over 2300 employees. These investigations have involved employees of all ages, races and positions from entry level to upper management and partners.
Most employee theft investigations must be conducted as a result of management failing to follow their own policy, procedure or even common sense. I have also found that in many cases management will fail to learn from previous employee theft investigations. Not learning from history will make you destine to repeat it.
Get your policy manual out, dust it off, review it and update it. Then make sure that everyone else know and understands that they must follow it. This will be work in the beginning but will make the life of a manager easier in the long run because they do not have to keep reinventing the wheel. You will also find that you will reduce the number of employee theft investigations that need to take place. The rules are there for a reason: It happened before and the company lost money. That’s why there is a policy for it.
Too often, signals pointing to internal theft, even when noticed, are mistakenly ascribed to chance, error, coincidence, or some other benign circumstance….and the signals are ignored.
What are the signals for internal theft? Contact us and we will share some. Internal theft will not go away on its own.
Many times Loss Prevention Professionals find that a Shoplifter is not just working alone. They have developed relationships with employees that are actively or passively helping them. In some cases for profit or a “cut”. In other cases they are allowing friends to steal. For instance, a Cashier allows a friend to bring high value merchandise through their POS, pretends to ring up the high value merchandise but uses a low value SKU such as a pack of gum.
Many times we in Management think that this type of employee theft or shoplifting is only committed by “younger” people. This is not the case at all. Do not be mislead by a preconceived notion.
Below are situations that you must be on alert for at all times:
- Unusually large or frequent refunds to a particular customer for returned merchandise.
- Anonymous phone calls or letters concerning theft.
- Unusually friendly relationships among employees and outsiders such as truck drivers, repairmen and trash collectors.
- Frequent contact among employees and visitors, especially those visitors who carry shopping bags or other containers.
- Contact by employees with gamblers, drug dealers, gang members, loan sharks, etc.
- Many customers always deal with one employee and refuse to buy from anyone else.
- Stock being sold in outlets that never buy from the company.
- Gifts or favors to accounts payable employees from suppliers or to accounts receivable employees from customers.
- Reduced purchases by customers who deal closely with warehouse or shipping personnel.
- Presence of outside personnel (telephone repair, building service, salesmen, etc.) in areas where they have no legitimate business, or in un-businesslike communication with employees.
- Newly received items being sold in flea markets.
- Complaints received from other business or retailers.
- Shoplifters are always blamed for the theft.
- Gifts or favors from other mall retailers accepted by your employees.
These “signals” do not necessarily prove the existence of theft; they only point to the possibility of such theft.
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.
