You may not think that your employees are stealing from your business, but the chances are great they are doing just that.
According to a recent survey by the consulting firm KPMG, 76 percent of employees across all industries said they had observed violations of the law or company policy in the workplace, with theft and fraud topping the list of crimes. (Given the failure of some 65 percent of those companies to file criminal charges against the offenders, I’d gladly go to work at a minimum wage for any business, provided I won’t go to jail and can keep whatever I steal.)
In a separate report on this subject, the Association of Certified Fraud Examiners estimates that fraud costs U.S. businesses $400 billion a year. What’s your share? There are a number of steps you can take to answer that question, beginning with a close review of your monthly financial statement.
Compare your total current operating expenses with those of previous months. Any abnormal increase in an individual expense account should be carefully scrutinized. Is someone in your bookkeeping department reaping the benefits of keeping some former employee on your payroll? Have you verified all the travel and entertainment expenses of your workers? Those are just some of the things to be considered before another day passes.
How about your sales tickets? Are they sequentially numbered, and is every number accounted for? Cash sales to customers could be an easy source of illegal revenue for a dishonest employee who pockets the cash while destroying the store’s copy of the sales ticket.
In that same vein, it just might pay for you to add the total cash and accounts receivable additions for a month and check that against the selling price of all goods deleted from inventory for the period. Any discrepancy could indicate that a customer paid for a less expensive model than the one given him by the salesperson.
Speaking of inventory, is some thief in your employ helping you to move merchandise, albeit at a complete loss? Most retailers believe that keeping a computerized record of all SKUs carried by the firm is sufficient to discourage thievery here, but they seldom use it properly.
Computer records should be checked against an actual count monthly. Although, time permitting, verifying the existence of the complete inventory is the best idea, spot checking a randomly selected category-without letting the staff know beforehand just which category you’ll be checking-is sufficient to greatly reduce the loss in this area.
For retailers with outside service technicians, a record should be kept of all repair parts stored on each service truck. At the end of each day, parts used by the technician can be replaced in exchange for the return of the used item.
There are as many additional ways for a business to avoid being victimized by dishonest employees as there are crooks planning to steal. That’s why employers must adopt the attitude that employee theft is a matter of inclination and opportunity. If we assume that all members of the team have the inclination, the best that we as owners/managers can do is deny them the opportunity.
That means keeping the warehouse closed to all but the warehouse manager, who should be accountable for keeping inventory losses down. It means, too, that merchandise for delivery to customers should be kept at a loading dock separate from the storage area.
In the store, those in charge of collecting cash from customers should not also be responsible for accounts receivable record keeping. And all products taken out the door should be checked against a sales ticket.
Will all this stop employee theft? That’s doubtful, although it will make it more difficult for workers to steal. The biggest deterrent to such behavior, however, is the attitude of you, the boss.
Carefully screen all new employees and make certain those who work for you know that insider theft, along with any other form of stealing, will not be tolerated and perpetrators will be arrested. Furthermore, make them aware that because theft in any form bears directly on profits, the salaries of all can be adversely affected by unreported dishonesty.
Jules Steinberg, a former NARDA executive VP, is president of Jules Steinberg & Associates, 425 Sunset Road, Winnetka, IL 60093. Phone (847) 446-7312; e-mail JSteinb611@aol.com.