Is Your Missing Inventory At Your Employee’s Home?

Contributed by Kristian Rivera. 

One of the biggest concerns for retail business owners is theft. But it’s not always an outside job: 35% of inventory shrinkage comes from employee theft. You spend time vetting new hires and training individuals you hope will be an asset to your company, and then they end up costing you money.

Common Theft Tactics

It’s not always the obvious strategies that savvy employees use to steal from you. We’re here to help you uncover the stealthy ways they’re slowly draining you of profit. Below are just a few common practices that employees use to steal from your business.

Refunding a Transaction with Gift Card Credit. If you see a large number of refunds, especially if you don’t sell trackable, tangible items (think hotel rooms or food), dig into what’s going on. They could be legitimate, but if you see a suspicious number of gift card credits attached to those refunds your employee might be pocketing them. Especially if it isn’t routine for your business.  

Hiding Stolen Goods in the Trash. Few employers think to search through the outgoing trash, so many devious employees use this as a strategy to remove the items from the store to pick up later near the dumpster.

Consuming Difficult-to-Track Products. This is rampant in the food industry; are you likely to notice that the Rocky Road level in your ice cream shop is low? Probably not. Young employees are notorious for giving freebies to friends as well.

Taking Money from the Register: This is harder to get away with in an era where point-of-sale systems are so precise, but it still happens. Keep an eye out for excessive voiding or missing transactions.

Stealing Customer Data. Products aren’t the only thing at risk in your retail business. If you store sensitive financial information on your customers, make sure it’s secure on your computer and only accessible to you via a complex password.  This is a goldmine of wealth for the right thief.

How to Circumvent Employee Theft

While you may not be able to completely prevent employee theft, there are some tactics you can take to reduce the instances of theft in your store.

Communicate Serious Consequences. One reason some employees may feel like they can steal from you is if they believe there won’t be harsh consequences if they are caught. If your policy is instant termination, so what? A 16-year-old may not need a job, and if they do, they can certainly find another one quickly.

Real consequences should involve law enforcement. Employee theft is a crime, and one punishable by the law. Communicate that you will call the police and outline what the typical sentence is for such theft as a deterrent in your employee handbook and in training meetings.

Use Inventory Management Software. One of the best ways to spot theft in your retail store is to keep a strong handle on inventory. These days, there are some fantastic inventory management platforms that not only help you stay on top of what you need to restock but that also can show discrepancies in sales versus inventory. This can help you identify potential employee theft occurrences.

Educate Employees on the Effects. Employee theft doesn’t just affect your bank account; it affects your ability to keep your staff on. If your employees understand that if one person steals from the company, it endangers their own jobs, they may be more likely to either refrain from stealing or tell you if they know their coworker is doing so.

Don’t just educate your staff on the effects of employee theft once; because you likely have high turnover, it’s important to bring it up every few months. This drills it into your long-term employees’ heads and introduces the importance of being on the up-and-up with new hires.

Set Up Your Store to Make It Difficult. Even if you trust each and every one of your employees implicitly, it can’t hurt to implement certain security measures around your store. Start with the security system. Back in the day, many retail owners didn’t bother to put a VHS tape in the system to record activity, but these days, with digital video making it so easy and affordable, you have no excuse not to set up security cameras.

Make sure every corner of your store, in the front and back, are covered with cameras, and that there’s nowhere employees can go to stuff a product down their pants. And actually monitor your videos once in a while! Otherwise, what’s the point?

Implement Daily Practices. Make a policy that if the cash register is short, the employee who was using it, is in charge of making up the difference. Even if they aren’t stealing from you, this will make them more careful at collecting money from customers.

Consider taking out the trash yourself to ensure that this isn’t a transportation method for your products leaving your store.

Monitor returns, voids, and gift card issuing and make sure they match up to transactions.

While employee theft may be impossible to avoid completely, with a bit of diligence, you can make it clear to your staff that you won’t tolerate it at all, and you can do your best to make it difficult to accomplish.

Contributed by Kristian Rivera, a digital marketing specialist at Fit Small Business, a rapidly growing website for small businesses. When not helping other small business owners, Kristian manages a startup where he utilizes his experience in product management, digital marketing, analytics and business development.