Employee Theft Prevention Strategies Part One: Cash

In this ongoing series we look at ways of preventing employee theft.  In this part we take a look at best practices for preventing theft when working with cash, in part two, we look at how to prevent Credit Card theft from the business and customers, in part three, we look at inventory theft, and in part four we look at time theft.

There is an old saying in management circles; if you have not found theft in your business you are not looking hard enough.

Most business thefts are crimes of opportunity. If you remove these opportunities, or make the likelihood of a thief being caught more certain, you can prevent most thefts. Don’t underestimate the value of deterrence! The way to remove these opportunities is to have systems in place that immediately indicate when there has been a problem.

Although all thefts are about money at some level, there can also be a certain amount of revenge and intellectual challenge. The disgruntled employee proving how clever they are by being able to “beat the system” and thereby the manager, or owner, they feel undervalued by is a common theme in workplace thefts.

Image Courtesy  of Pixabay

Trust No One

A key concept in theft prevention is to not trust anyone – that includes the people that you trust. While that sounds like an oxymoron, it is actually an appropriate way to ensure that you do not place your team in a posted tells difficult situation. What that means is that the systems you put in place should never place too much trust in any one person and therefore there should be no suspicions about anyone, because there are never any situations where more than one person has access to cash. A system that embraces this model is not put in place because you do not trust the people that you work with, or who work for you. They are put in place so that you do not have to be put in the position of having to distrust them.

It should go without saying, that there must be a system in place for recording inventory and services sold and paid for by clients. Even if you are selling penny candies by the lb. there needs to be a system in place to know how many lbs. have been sold by the end of the day, or shift, and how much money has been brought in. This most basic of elements is what all other elements of a theft protection system stem from. This system must also be capable of issuing a receipt to the customer showing what they bought, how much they paid, and what change, if any change, was given back.

Video cameras which record, and are secure, should always observe all transactions. The quality of cameras is such now that individual bills can be counted, and identified, significantly simplifying the job of finding errors or theft. It should be noted that cameras can also be used to exonerate employees and therefore should be seen as a win-win for both employer and employee.

If a theft is uncovered then the employee concerned must be terminated. It is generally up to the manager, or an owner, of a business whether to prosecute. I generally advise to go ahead and prosecute as long as there is evidence and not just a strong suspicion as it sends a message to other employees. If procedures where not followed, and there is a suspicion that a theft may have taken place, then at minimum disciplinary action should be taken, depending on the employee and whether this a repeat offense should indicate whether this action should be termination.

It is important to keep in mind that the discovery of an issue or potential issue should be seen as the first sign of a much bigger problem. This will not be the first theft, but only the first theft that you have discovered.

Image Courtesy of Pixabay

Cash

When cash handling is involved in the daily operations of a business, then there should be a dedicated cashier per shift. If the requirements of the business are such that multiple people handle cash, then each cashier should have their own cash drawer. The cashier should count their cash drawer that the start of their shift. A standard and set amount cash should in the drawer each day. I should clarify that only a cashier has access to the cash drawer. Other members of staff may receive a cash payment from a customer, but only the cashier should process the payment and issue the client’s change. In an ideal world, the cashier would be the only one to be involved in all cash transactions, but that is not always possible.

At the end of the casher’s shift the cash drawer needs to be counted and the cash taken in should match the transactions recorded in your sales system, leaving the starting amount of cash that the drawer for the following shift / day. The cashier can be involved with the balancing of their drawer; however, a supervisor, or manager, should also be involved.

If the cash drawer is over then most likely a transaction has not been processed correctly: services / inventory was given to the customer, but the transaction was not recorded in the sales system. It should also be noted that the client would also not have received a receipt. High cash volume businesses, such as fast food restaurants, often enlist the help of customers to ensure they receive a correct receipt by offering a reward, such as the meal for no charge. This is to ensure that transactions are recorded in the sales system.

There are two explanations for cash being over. A genuine mistake in the processing of the transaction was made, or a potential theft has been interrupted. Hopefully a partially completed transaction will be able to be traced down through your sales system and the mystery resolved. However, it is important to be on the lookout for employees telling customers that the printer is broken, and therefore they cannot have a receipt, or unconcluded invoices being printed as receipts. These are indications of a theft taking place – the employee places the cash in their pocket and the transaction not processed at all, or only partially processed. An ongoing search for partially completed transactions should be part of a general auditing process.

Cash being under is, again, either a mistake with the transaction (unlikely – particularly if it is a large amount) or just straight theft. If the integrity of the cash drawer has been maintained throughout the shift, then the cashier is responsible. This could be cause for disciplinary action up to, and including, termination. I am not in favor of making cashiers pay back drawer shortages. If the cashier is stealing, they are just giving the business back the money they stole, and everyone thinks that is the end of the matter. If the cashier did not steal they are being penalized for a system problem.

If cash drawers are routinely under, but by amounts that could be human error, and the cashier(s) themselves seem just as frustrated by the problems as you, then a potential solution is the put each cash amount received into a sealed envelope and then into the cash drawer. This allows for the balancing of the individual transactions against the sales processing system. The down side to sealing the cash from each transaction, other that the quantity of envelopes used each shift, is that is significantly increases the amount of cash in the drawer that is required as all change has to come from this “float” and therefore a larger amount of cash may be required. This carries its own risk and the total volume on cash on the premises is higher than it might otherwise be. But it might be the only solution to constant shortages. It should be noted that I have never needed to employ this strategy for any length of time. The theft was either uncovered or the errors stopped when an employee unexpectedly left; one assumes because of the additional scrutiny.

Image Courtesy of Pixabay

There are additional red flags to watch out for. Cashiers, who use their own pockets for “storing change because we are busy” should be treated with suspicion. This is the mishandling of cash and should lead to at minimum an explanation of why this is a problem with additional disciplinary action and increased scrutiny. Clients who complain about not receiving the right change, that their receipt / invoice is wrong, or that don’t understand why they owe money when they are sure they paid their bill during their last visit are all red flags of theft. Usually in these instances the employee concerned, if you can track them down will not be able to explain what happened. Of course, customers can make mistakes too, but in my experience these are easy to find and show to the customer why they are mistaken.

Once the day’s cash is counted, is found to be correct, and the cashiers drawer has the correct float, the cash should be sealed, with a deposit slip, and secured; ideally in a safe.

A senior manager, not one that helped settle the cashier’s drawer, should then double check the settlement, usually the next day, with the sales system. It is important that a copy of the deposit slip that actually goes to the bank is kept on site. The senior manager, or a 3rd party, should then deposit the cash at the bank and the deposit receipt should be matched to the deposit slip. These, of course should also match the sales system and ultimately the amount recorded on the bank statement.

Next week we look at Credit Cards!