Archives for posts with tag: security

In this ongoing series we look at ways of preventing employee theft. In part one we looked a cash handling methods, in part two we looked at credit card theft, in this part we take a look at best practices for preventing theft from inventory.

As with credit cards, and particularly cash, inventory control and theft prevention are a matter of sensible precautions, double checking, and never allowing any one person too much control. Video cameras are also a prerequisite for any kind of inventory theft protection. The deterrent factor alone makes them a worthy investment. It is important to consider placement with video cameras, however, and to consider this when placing items in storage that are more likely to be stolen.

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Image courtesy of Pixabay

Risks

Identifying the high-risk items that desirable to a thief is an important first step in any prevention strategy. What makes items desirable to a thief? High value, small size, and / or easy to sell or use themselves. In a veterinary practice, controlled substances would be at the top of this list for obvious reasons, but pet food and treats would also make the list as they are routine supplies for any pet owner. Any establishment that sells alcoholic beverages, needs to consider just how easy, and desirable, it is to steal them – particularly hard liquor. It is informative to walk around your local grocery store and check out the different levels of security in different items and then apply those to your own business. Alcohol, of course, has additional measures in place in a grocery store, but so do razor blades (due to their expense and small size) and movies (due to their small size and ease of resale.) High risk high value items should have significantly higher levels of security and scrutiny than other items. That means that only key people will have access. This will make things more complicated for their handling, but the alternative is no security at all.

Certain items are always at risk of theft due to their ubiquitous nature: toilet paper, stationary, and cleaning supplies. Keeping an eye on reorder quantities is really the only way to ensure that a problem with theft is not missed; however, just watching the cameras on the employee entrance/ exit can often be enough.

Businesses that have significant issues with employee theft, will often ask to look in employee bags before as they leave the premises. While this can seem overly intrusive, it is important that your employee handbook contains language to make this a possibility if required.

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Image courtesy of Pixabay

Ordering & Receiving

Ordering in any business needs to be controlled. The person that is responsible for ordering, should not be the same person who is responsible to receiving goods and ensuring that what was ordered has indeed arrived. In addition to having multiple people involved, there also has to be a paper trail. When an item is ordered, the order has to be logged through a purchase order record of some description. When the item arrives, it should be received by someone other than the person who ordered it, the packing slip should be signed off on (or a packing slip created if the goods did not come with one) and then forwarded to accounts payable.

The packing slip should be matched to the purchase order which it turn is then matched to invoice. When things are paid for by credit card, it should be indicated on the purchase order, and then the credit card bill should be reconciled against packing slips and purchase orders.

The above may seem over the top for most small businesses, but the question that has to be answered is what is to stop an employee ordering an item from a supplier, destroying any paperwork, and taking the item home? Is your accounts payable person, assuming that they are not the same person who has been ordering, going to be able to find that one uncounted for item in amongst everything that is ordered when a supplier’s statement comes in weeks later?

On a side note, it should be made abundantly clear to all involved with ordering and receiving that “free product” or “gifts” from suppliers belong to the business, not to whomever receives them. There is sometimes the impression that because items have not been ordered, or have been nominally given a $0.00 value, that they are free to anyone who wants them. This cannot be the culture in your business.

Items which arrive outside the hours when they can be received properly, and by the appropriate members of staff, should be locked away unless there are serious reasons why they should not be (items that need to be refrigerated for example.) This prevents well intentioned, but misguided attempts to “help” and also more nefarious outcomes. It also prevents the frustration of knowing that an item is in the building but being unable to find it due to it being put away somewhere other than where it should be.

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Image courtesy of Pixabay

Stock

In order to sell products, employees need to have access to those products. That does not mean; however, that all employees need access to all products, at all times. A limited amount of non-high risk non-high value items should be placed on employee accessible shelves. Your main stock should be under lock, key, and camera. The inventory manager, or a supervisor, should be the only one who moves stock from one location to another. For high-risk high-value items, senior members of staff should be the only persons who can have access, and they themselves should have a strict protocol (a log book at minimum) which they have to follow when retrieving an item.

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Image courtesy of Pixabay

Counting

Inventory has to be tracked. If you order 10 widgets and have 5 widgets in stock your inventory system should be able to tell you that after you have received your new widgets that, yes you can fill that order for 15 widgets.

The reality, of course, is rarely that simple. When it comes to inventory control you get out what you are prepared to put into it. An accurate inventory management system, where you can spot that five items are missing almost as soon as they are gone, only happens through hard work and effort. Good systems that are easy to use will work well, but they have to be maintained and repaired. Not just so that the system is correct, but so that the faith of employees, and managers, in the system is maintained.

High risk items should be counted once or twice a week. Discrepancies should be resolved or reported. All inventory items should be counted once or twice a year and the running count in the inventory control system reset. Constant shortages should be investigated as to whether it is shrinkage (theft), orders in process, or the mis-selling of items.

This level of effort put into inventory control can seem expensive and wasteful; however, you cannot track what you do not count. And you cannot know what is going on with inventory unless you count it.

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Auditing

In addition to counting, there is another way to see if items are walking out of your premises and not being accounted for. At the beginning of the year you bought 100 fidget spinners. You look up the invoice from Fidget Spinner Inc. and confirm that you were billed and paid for 100 units. At the end of the year you have 10 fidget spinners on the shelf. You run a report from your sales software on how many fidget spinners you have sold. Hopefully, it says you have sold 90. But what if it says you sold 80?

The inventory control side of things says that there should only be 10 in stock, which there are, but you have not sold 90. The problem could have been in the number that were received originally from the supplier, or whomever received them, or someone with access to the inventory control system has manipulated the system to make it appear that 10 fidget spinners are not missing.

You’ll notice in the above example, that it does not rely on inventory management to find that there is a problem; but it does allow for the problem to be narrowed down. This can really only ever be used for spot checking, but it does provide a backup system to the general inventory control system.

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Image courtesy of Pixabay

Employee Sales

Sales of items to employees can be tricky to navigate from a theft prevention standpoint. An employee leaving the building with a bag of dog food from the vet’s office looks identical to an employee stealing a bag of dog food from the vet’s office. Having a strict protocol in place for sales of items to employees so that all items can be accounted for is essential. Do not allow employees to process their own transactions; there is just too much opportunity for issues to arise. All items should be billed for at full price and then a senior member of management should handle any discounts.

Inventory can be difficult at the best of times. Employee shrinkage; however, can be a serious problem and significant inventory controls will not only serve the needs of the business, but protect it from those should have its interests at heart.

Next week we will look at Time Theft.

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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.

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.

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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.

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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.

 

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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!

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