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Cash Businesses are Losing Billions to Employee Theft

Aug 17, 2007
If you are a retail business owner or manager, be assured of one thing: employees are stealing from you. Employee theft is costing you and your fellow business owners billions of dollars annually.

The National Restaurant Association estimates that employees are responsible for 75% of inventory shortages--and that they steal what amounts to four percent of sales in restaurants. That alone amounts to over $20 billion in employee theft. The US Department of Commerce says 75 percent of employees steal from the workplace at least once--and half of those steal repeatedly. Why? Because no one catches them!

Many owners and managers already suspect they have a theft problem--but they don't really believe it could be their employees--especially if they themselves are honest people. Why would an employee steal?

But think like the employee. They often make minimum wage, and struggle financially. Maybe they're not taking cash--just walking out the door with food or liquor. They may even justify it by saying "everybody does it." This behavior is so widespread that--worst of all--they even may assume that management knows about it and is doing nothing.

Here's how to make a big dent in theft:

o Track Employee Sales
Dishonest employees count on owners and managers to not be paying attention. If the boss doesn't take the time to review the accounting and track individual employee sales, it makes it easier to skim cash.

Audit the cash to look for patterns. During a shift take a current reading, remove the register drawer and replace it with a fresh one. If one employee's cash register is always over or under by a large amount, or if the cash isn't adding up to what the register reading says, it should be a red flag. Share audit results with the staff. Just putting employees on notice that they could be audited at any time will discourage many of them from stealing, especially if the company is consistent about it. (And the boss could put a positive twist on it, by offering a reward to any employee who balances to the penny.)

o Work Side By Side With Employees

Pick one day a week to work behind the counter. Be sure to work with each employee. Is there a difference in sales for that day? Are the numbers always higher when the manager works? In a bar, restaurant or other cash retailer, this may mean an employee is pocketing some sales, or giving away food and drinks (or merchandise) to friends. (Don't reach any conclusions, however, until there's at least a month or so of results to analyze.)

o Trust But Verify

Review employees' schedules, their total sales, their "no sales" and their daily sales over several weeks and note which days they work. Then give the highest grossing employee an unexpected schedule change. What happens to the shift he or she left should provide interesting data. If sales increase for that shift, you may find that what looks like the best salesperson could also be the biggest source of employee theft. The busiest shifts are the easiest times to steal. Doing this with the lowest grossing sales person may provide more insight, too.

In the restaurant or bar business, this can be an eye-opener. A very busy bar may turn out to be the result of a bartender who is giving away drinks. Why not? He gets big tips--and frequently is rewarded by an owner who thinks the employee is generating big business!

These simple steps not only can minimize employee theft, but can provide a manager with useful insights. But if the company still appears to have a major problem, turn to an expert--someone who can identify what's happening when the manager isn't around. An undercover observer--whether a licensed investigator or a mystery shopper--can help catch the dishonest employee who's simply smart enough to keep his eye out for the boss.

Where there's one, there may be more

One final piece of advice: Never assume "the problem is solved"--or even that the worst offenders have been stopped. Nonetheless, by showing that you are serious about employee theft, you may discourage all but the most determined thieves--and reinforce the honest employees. The key is to be consisten and thorough.
About the Author
Dan Cosgrove is CEO of Mercantile Systems, Inc., and an expert on employee theft management. Also read the employee theft case study and find more great resources at the Library & Case Studies section of Dan's website http://www.MercSystems.com.
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