April 28, 2017

How to Prevent Theft of Inventory During Your Busy Season


How to Prevent Employee Theft During Your Busiest Season

Increased inventory and worker numbers can raise the potential for theft during the busy holiday season. And the last thing a business wants when incurring higher labor costs is a decrease in returns.

According to the National Retail Federation, retailers lost approximately $44 billion from theft in 2015. Of that amount, more than 34 percent was stolen by employees.

A blog post from the risk management firm Pinkerton said that employee theft constitutes the “second leading cause of inventory shrinkage behind customer shoplifting.”

“Whether on the sales floor, in a warehouse, driving a delivery truck or handling returns, employees have easy access to valuable inventory, creating temptations to steal,” the post said.

Small businesses can take several steps to prevent employee theft during the holidays and throughout the year. For instance, evaluating daily transactions, reviewing security camera videos each day and validating each voided or deleted sale can help mitigate theft. Having cameras and supervisors visible on the sales floor may also help.

Other deterrents include communicating company policies, outlining theft protocols with new hires, using behavioral interview methods and conducting extensive background checks.

Scott Humphrey, a senior risk specialist with Travelers Insurance, shared the following theft prevention tips in a telephone interview with Small Business Trends.

Tips on How to Prevent Employee Theft

Hire in Advance of Need

Businesses need to quickly hire a raft of temporary workers during the holidays to keep up with demand. However, to ensure adequate time is available to train new hires properly on policies and protocols and run background checks, Humphrey advises employers to begin the hiring process early — at least a month in advance of the need.

“If you anticipate increased sales, you will need more people working the floor, dealing with inventory and working with customers, give yourself enough time to hire the employee,” Humphrey said. “Make sure that who you’re hiring is the person you want.”

Have an Inventory Management System

Humphrey said that it’s vital for businesses to keep an accurate track of inventory to ensure money coming in and items sold match up. Otherwise, they will experience shrinkage.

Retailers need to have a good inventory management system, to know what items they have in store, he said.

Manage the Register Well

“A common area that contributes to theft is at the register,” Humphrey said. “Some items sold will come back to be returned or exchanged. An employee may take something back in for a certain amount that is different than the cost of the item or imply the item came back when it didn’t.”

As such, there should be controls around the register to mitigate theft. Humphrey recommended the following:

  • Keep credit card and other personally identifiable information away from easy access;
  • Have employees sign in and out of the register so that when transactions occur, the employer will know who handled them;
  • Give managers an override code to ensure oversight of transactions.

Monitor Security Cameras Daily

Humphrey advised that businesses have security cameras in place, particularly at the register, and monitor them daily for nefarious activity. He also recommended the use of security guards on premise as a theft deterrent.

Communicate Policies and Procedures Clearly

“Companies should communicate company values, ways of treating patrons and policies regarding theft to employees clearly,” Humphrey said. “Explain that dishonesty is grounds for termination. Tell the employees what you are going to do and then follow through when necessary.”

It’s reasonable to expect some shrinkage during the holiday sales period, and some of that will come from employees. Taking the steps outlined above can help mitigate loss and make for a more profitable season.

Theft Photo via Shutterstock

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Paul Chaney


Paul Chaney Paul Chaney is a Staff Writer for Small Business Trends. He covers industry news, including interviews with executives and industry leaders about the products, services and trends affecting small businesses, drawing on his 20 years of marketing knowledge. Formerly, he was editor of Web Marketing Today and a contributing editor for Practical Ecommerce.

One Reaction

  1. Aira Bongco

    With all the people and the Christmas rush. Theft is likely to happen. It is even more prevalent in areas where people are generally poorer.

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