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5 Ways to Prevent Internal Theft in Retail

As a retailer, it’s probably safe to say that you trust your employees more than you do any random person off the street. However, just because you trust them more, it doesn’t mean you can overlook them as a potential threat to your business.

Retail Knowledge found that internal theft was the single biggest cause of loss to retailers, with 38% of respondents citing it as the number one area of loss in their store. Exactly how much does internal theft, or shrinkage, cost retailers? Forbes reports that in the United States retailers lose about $60 billion a year to shrinkage.

After all, your employees do have access to the cash register and merchandise, and an employee can steal by concealing merchandise in a purse, pocket, or bag… just as a shoplifter can.

This doesn’t mean you should be skeptical all of your employees, because you know what they say, “one bad apple spoils the bunch”. However, in case you do encounter some “bad apples” here are some easy ways to help prevent internal theft.

1. Get to know your employees.

This process should start before the person is even hired. Perform background checks and contact references of any prospective employees, this can alert you to any potential issues and give you a feel for their character.

Once they are on the job, take some time to get to know them and keep an eye out for the following traits:

  • Strong objections to procedural changes related to financial, inventory or supply matters
  • A lifestyle that is more extravagant than their salary level
  • Drug or alcohol abuse
  • Evidence of compulsive gambling or persistent borrowing

2. Create procedures for monitoring your cash drawers.

One of the biggest places for internal theft is at the cash register. Dishonest employees will “pilfer the till” by making change and pocketing cash without ringing up the transactions, voiding transactions, and engaging in “sweethearting” which is industry terminology for under-charging or giving merchandise to friends and family. One of the easiest ways to keep employees from skimming a few dollars off the top is to create procedures that hold them responsible for the money in their drawer. There are a few different ways this can be done:

  • Conducting random cash counts throughout the day. If employees know that at any time, a supervisor might come over and count the cash drawer, finding any discrepancies or missing money, this may deter them from taking any cash. This method would work well if you have multiple people who could be using the same cash register to ring up customers.
  • Giving each employee their own dedicated drawer. At the beginning of their shift, give employees a drawer that only they are allowed to use and that they are responsible for counting down at the end of their shift. During the countdown, make sure a supervisor or other employee is present so no money is taken then. After the money is counted, if the drawer is short this should be recorded somewhere for future reference.

3. Keep a close eye on your inventory.

Money is not the only thing stolen by retail employees. They can also steal merchandise, much the same way as outside shoplifters. There are a few things you can do to prevent merchandise theft:

  • Limit which employees have access to stock rooms
  • Conduct inventories on a regular basis. For an extra layer of security, consider having employees who aren’t primarily responsible for keeping inventory records do the count.
  • Create policies about employee backpacks or purses. Consider limiting bag size or doing a bag check at the end of an employees shift.

4. Provide an easy way for employees to report theft or suspicious activity.

If done properly, this can be a very effective way of preventing internal theft. Employees who work together frequently, are probably going to be more likely to notice if a co-worker is acting suspiciously. Consider making this system of reporting anonymous, so employees don’t have to fear retaliation because they reported a co-worker.

5. Get professional security cameras installed.

A digital IP-based surveillance system has potential to eliminate the opportunities for internal theft. A great deal of employee theft takes place at the cash register or POS (Point-of-Sale). By installing cameras that monitor the cash register, you will be able to easily access a time-stamped video. So if you have a rough idea of when the theft might have occured, you can easily search for the video footage of that particular time.

Other common places for internal theft include stock rooms or employee break rooms. It can also be very beneficial to install cameras in these areas, both to deter theft and actually catch dishonest employees in the act.

A professional security system company can work with you to create an optimal system based on the layout and unique security needs of of your store. Here at Supreme Security Systems we are experts in the retail security space. We work with a number of stores across New Jersey. If you would like to learn more about what we can do for your store and our recommendations, contact us today!