5 Smart Ways to Prevent Employee Theft

Photo credit: mikeledray

Do you know how much money you lose every year to employee theft? Read our article to find out how to prevent or reduce those losses.

As a retail business owner, you understand the risks you take by hiring a staff you don’t know. It’s difficult to build a whole lot of trust in a small amount of time, but you must. Still, employee theft is a more prevalent reality than you may realize.

Research conducted by four different agencies – the Association of Certified Fraud Examiners, Easy Small Business HR, the Institute for Corporate Productivity and Jack L. Hayes International Inc. – show that workers are daring with their pilfering. Shoplifting is a big enough risk for retail shops, being 35.6 percent of the source of inventory shrinkage, but employee theft comes in at 42.7 percent.

Annually, businesses in the United States are losing about $50 billion to employee theft. Also, 75 percent of employees admit having stolen at least once from their employers. Those are sobering statistics. However, there are a few precautions and actions you can take to reduce the chance of being ripped off by those you’re paying to work for you.

Background checks

This step seems obvious enough, but many retail owners hire based on a recommendation and an interview. Do your due diligence and run that background check. It isn’t expensive, and it can help you spot some red flags before you make an expensive mistake by hiring the wrong person.

Trust but verify

Security cameras set up to monitor registers, the warehouse and your shop’s floor offer several benefits. A proper system that records all activity can keep your workers honest and keep shoppers from shoplifting. Having recordings of what goes on in your store can help protect you. Just be sure you consider local laws (especially when it comes to recording audio) to make sure it’s all legal, and be sure to disclose that you’re recording at all times.

Drop in unexpectedly

If you own more than one store, you may not be around much at all of your shops, trusting managers to handle all of the day-to-day operations. However, it’s a good idea to stop by here and there without announcing it to any staff members – including managers. Even your most trusted employees could be stealing from you, but they’re less likely to if they have no idea when to expect you to come in.

Keep an eye on the money

Not only should you check deposits before they go to the bank on occasion, you need to check on the Z-tape, X-tape and cash drawers. Do a little quick math to make sure everything adds up and there aren’t any missing figures. Your inventory is money too, so check the physical inventory on a few products against your digital inventory. If you don’t have inventory management software, you may be putting yourself at even higher risk of losing product from employee theft.

Editor’s Note: Need inventory management software? We can help you choose the one that’s right for you. Use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:

Tip line

In addition to all of these precautions, you can set up an anonymous tip line for employees to call and alert you of a co-worker with sticky fingers. Even if you don’t get a call to the line, it can deter those who are considering pocketing something if they believe their co-workers are watching.


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