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Best Practices on Combating Theft and Shrinkage

Have you ever thought that your employees are robbing you blind? You are probably right. Theft is a huge problem in the retail environment. Studies have shown that shrinkage costs businesses more than $36 billion each year. In simple terms, dishonest employees are reaching into your pocket, via merchandise on the shelf and cash in your till, and stealing your hard earned money. It is estimated that one in four employees steals and that 50% of them are repeat offenders. Also, on average, the value of merchandise and cash taken by employees is approximately 5.5% more than that which is stolen by shoplifters.

What can you do to prevent the theft and embezzlement that may be happening right in front of you? Randall Data Systems has put together this list of BEST PRACTICES that you can begin to implement today to regain control and reduce shrinkage of inventory and cash assets.

Best Practices

Separation of Duties

Balance your cash drawers at the end of each shift. The cashier who initiates the cash drawer count at the beginning of a shift should not be the person who certifies the cash drawer count at the end of a shift. Each cashier should conduct a blind count, and the manager should reconcile the drawer.

Do Not Be Afraid to Audit

Conduct regular and irregular audits. Audits will help you detect theft and fraud. In a small business retail environment, employees may feel that they are being singled out and that they do not have the trust of the owner/manager. However, regular audits may serve to decrease theft and fraud by reducing the opportunity for such activities. Implement a practice of random cash drawer counts. Random drawer counts serve to decrease the opportunities for employees to steal cash.

Educate Your Employees

Have policies and procedures in place to deal with theft and fraud. Inform your employees of these policies and procedures. Your employees should have copies of and know the organization’s code of conduct and ethics policies and the attendant consequences and disciplinary actions for violations. Every employee should sign a form acknowledging receipt of the documents and understanding of the content. Conduct annual training on these policies and procedures, and have each employee sign an acknowledgement of recertification and retraining.

Keep a Virtual Eye on Employees

Install security cameras. By actively monitoring your sales floor and your register areas, you will reduce the opportunities for employees to commit theft and fraud. Post signs that the premises are being monitored. Display signs which inform of your intention to prosecute all shoplifters.

Secure The Premises

Limit unauthorized access and entrance to your shop. Keys should be issued only to Store Managers and Security Directors. Keys should be signed for when issued, and the list must be kept up to date by noting when keys are returned. No one should enter the shop after hours without being accompanied by a manager or security employee. Consider digital keypads which can be configured with different entry codes for each specified employee. The system can track who entered the shop and when. Housekeeping should be done only when shop personnel are present.

Ordering and Receiving

Establish procedures for ordering and receiving merchandise. Audit these procedures regularly. Always use a purchase order to fulfill merchandise purchases. The buyer should check all merchandise received against the purchase order and the packing slip. The manager should check the purchase orders against inventory reports and approve all invoice payments.

Monitor "No Sale"

Retail managers know that a leading indicator of possible theft and fraud is the number of times “No Sale” appears on their drawer report. Know if a particular employee is frequently performing this action and follow up on the activity.

Install Security Technology

Install an alarm on each cash drawer. An alarm can be used to prevent employees from leaving cash drawers open. It should also sound when someone attempts to open the drawer when there is no transaction in process.

Sales Ratios - Cash to Credit

Know your usual ratio of cash sales to credit sales. An increase on either side of the equation should trigger an investigation. Such an investigation will likely reveal indicators pointing to an increase in returns.

Inventory Intelligence

Know what is going on with your inventory. Conduct frequent spot checks of inventory in the various merchandise departments. Does a decrease in the inventory of a particular product correlate to increased sales of that particular item? Know which items in your store are at a higher risk for theft and locate them in a more visible area in your store.

Create a Reporting System

Implement a reporting system to receive anonymous reports of theft, fraud or violations of your Code of Conduct and Ethics Policies. Promote and encourage the use of a reporting system by investigating all reports.

Counterpoint Capabilities

Counterpoint can help you accomplish many of the industry best practices for reducing theft and shrinkage through built-in controls, additional options, and reports.

Ordering and Receiving

Know what merchandise you are ordering and receiving. Counterpoint will generate a Purchase Request for management approval through Purchasing Advice. Upon approval, the Purchase Request can be converted to a Purchase Order which can be sent to a vendor. When you receive merchandise into inventory, you can check to ensure there are no variances between what you ordered, what the packing slip reports, and what you received. In addition, Counterpoint has the ability to alert if there are large discrepancies between the last cost and the cost you entered during receiving.

Counterpoint Unique Login System

Counterpoint’s unique user I.D. log-in system allows you to track every transaction regardless of which POS station is used. Each Employee will have their own unique user I.D., so you can know who processed every voided ticket, manual credit authorization, price override, and discount. The Point of Sale Exception report and the Void History report help you track current and completed voids.

Monitor Voids

Know who is voiding current and completed tickets and why they are voiding the tickets. Counterpoint allows you to set up void reasons code which must be selected before an employee can complete the voiding of a ticket. Your employees will know that you are monitoring voided tickets and can see who is voiding tickets and for which customers and for what reasons. The Voided Ticket History report and the Point of Sale Exception report will help you track who is doing the voids, how often, and why they are processing voids.

Implement Manager Overrides

Determine who is allowed to process returns and voids. Counterpoint’s security features allow you to select which permission levels each user is allowed. Limiting who has permission to authorize returns and/or voids will control fraud by employees.

Monitor Your Discounts

Track who is giving discounts to your customers. Ensure that these discounts are appropriately applied and authorized. Randall Data Systems can provide training on how to use Counterpoint to implement, document and track discounted transactions.

Monitor Price Exceptions

Know who is making exceptions to transactions. Counterpoint can track and print a summary report of price overrides on unposted tickets. Counterpoint’s Price Exceptions report prints a summary of price overrides that are conducted prior to posting and help you quickly identify who is making the exceptions and why.

Monitor Point of Sale Exceptions (Track "No Sale", Completed Voids, Current Voids)

The Point of Sale Exceptions report allows you to track the number of “current voids” (not completed tickets) and “No Sale” activities. The reports will track each user’s ticket counts, average ticket amounts, drawer overages and shortages, hours worked, and other daily statistics. The report also can be customized to track the number of POS exceptions such as price and tax overrides, voided tickets, cash drops and cash loans, and manual credit authorizations that each user performed or requested over a specified period of time. This report allows you to easily monitor and manage your users’ activities and identify patterns that may necessitate the need for additional training in Counterpoint or indicate potential security concerns in your retail setting.

Compulsory Close

Counterpoint has two features to address this issue. An alarm will sound if a drawer is left open too long, and a security setting will prevent movement to the next transaction until the drawer is closed.

Monitor Cash to Credit Sales Ratios

Know your usual sales payment methods and ratios. Counterpoint can be set up to accept the many payment methods of cash, credit cards and gift cards. Counterpoint can also be configured to process payroll deduction payment. Standard reports can help you track payment trends and unusual changes and charges.

Monitor Inventory Returns

Know which customers are returning and which employees are processing inventory returns. Counterpoint can be set up with specific return reason codes and will then track all returns by these codes. This procedure will often prove to deter unwarranted returns because customers will know you are tracking who makes the returns and why. In addition, if your employees have to explain why they are accepting a return via the reason code it will deter random returns. The Return Ticket History report, Point of Sales Exceptions report, and the Price Exception report let you see if particular customers or employees are generating returns at a higher than average rate. Know the usual pattern of sales and watch for significant changes in sales or returns.

Use Cycle Counts to Validate Your Inventory

The best way to compare quantify on hand in Counterpoint to what you physically have in your store is to routinely conduct cycle counts of your inventory. The first step is to identify the items in the store that are at a higher risk for theft/shrinkage. Once these items are identified, conduct cycle counts to reconcile what you think you have vs. what you actually have. Counterpoint supports cycle counts based on category, sub-category, item numbers, or primary vendors. The consistent routine monitoring of Inventory will keep employees honest and reduce theft and other forms of shrinkage.

Messaging Center

Counterpoint’s Messaging Center allows employees to send a message from the register to report incidents of suspected theft and fraud. Although this is not an anonymous message it is a private form of communication from the POS station to a manager.

Smart Alerts

NCR Smart Alerts is a real-time notification service that allows merchants to monitor their operations. It provides timely, actionable alerts that reduce fraud, improve operations and provide better customer service. The alerts are sent to you via email or text message. Below is a list of a few of the alerts you can set:

  • Excessive or Large Price Override Applied
  • Price Override Summary
  • Excessive Return Transactions
  • Refund Before Or After Close
  • Sale Before Or After Close
  • Excessive Voided Tickets
  • Excessive No Sale Transactions
  • Excessive or Large Discounts Applied.

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