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How to Spot Employee Theft

Learn How to Spot the Warning Signs of Employee Theft

Unfortunately, employee theft is a reality of retail operations. The statistics speak for themselves: a standard small business loses around 5% of its annual revenue to employee fraud. Additionally, the Department of Justice has shared findings that nearly one-third of all employees commit some degree of employee theft.

Keeping track of suspicious behavior is one method for spotting employee theft, but some staff members are quite skilled at hiding their activities. Knowing how to spot employee theft is the first step to eradicating it, and here’s how to identify the warning signs of some of the most common types of employee theft in your store.

Identifying counting theft

Often, employee theft takes place at the point of sale (POS) and one popular and common method is counting theft. As POS systems have become more advanced, so have the tricks needed to carry out this form of theft.

Livelenz offers up the following scenario as an example: an employee decides to use a particular product as their “theft mechanism” throughout a shift. Whenever a customer makes that purchase the employee rings it up on the POS and shows the customer the amount. If the customer pays in cash, the employee clears the order, opens the till to provide change, and then puts the cash in the drawer. Simultaneously, the employee puts one penny in with their dimes. At the end of their shift the employee then counts up their pennies to see how much they’ve made in overage, ensuring that the amount of cash totals the amount in the POS system. 

How can this be spotted? Watch cashiers to see if they are combining change, separating certain things, or putting bills down in opposite ways. Your POS system should also allow you to run reports that track cleared orders, or orders that were never completed. Run these reports frequently to monitor your cashiers.

Spot employee theft by auditing your books

Regular audits are another way to spot and prevent employee theft. Plus, they can act as a deterrent for would-be thieves.

Some estimates suggest that 40% of small businesses have been victims of embezzlement. This variety of theft can be difficult to detect if you aren’t carefully monitoring your business’s books, but timely internal and external audits will help you notice any theft that may be occurring. Having your CPA do at least one non-scheduled audit per year is another excellent idea for spotting theft.

Identifying inventory shortages or inconsistencies

Inventory theft is another common culprit that employers may encounter. Employees may order excess inventory and then keep the extra for personal use, or they may fill out inventory documents incorrectly. When it comes to inventory being ordered, checking the delivery addresses is one way to spot theft. Sneaky employees can have excess inventory sent to their home address, for example. Other scams include employees setting up a fake supplier who never delivers a product, but who gets paid.

Use RFID tags to track expensive products, take regular physical inventory, and keep meticulous records. Other techniques for spotting this type of theft are looking out for inventory shortages and comparing sales reports to shipping documents. You should also review complaints about missing products, as this can be another sign of employee inventory theft.

About the Author — Christie Acker

Christie is responsible for helping Envysion’s enterprise clients in the retail and restaurant spaces understand the best ways to use video-based business intelligence to deliver on their brand promise and drive profitability. With over 15 years experience in building and supporting world-class sales organizations, Christie is an accomplished and tenured leader in the enterprise software sales market. An avid traveler, she has visited over 60 countries and uses her diverse experiences to help understand clients' needs to design and implement solutions to help achieve their goals. Christie holds a Bachelors degree in Economics from Vanderbilt University.

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