HOW TO KEEP YOUR RETAIL
EMPLOYEES HONEST

A study done in 2009 by the National Security Survey showed that of all shrinkage,

As the economy improved in 2010, retail shrinkage decreased as follows:

• 44% was due to employee theft
• 33% was due to shoplifting
• 24% was due to vendor fraud and administrative error

Since so much of shrinkage is accounted for by employees, it just makes sense to remove as many opportunities as possible.

If you have employees you need to be concerned.

If An Employee Steals $100 from you
it will take $2000 in Sales to make up for the loss.

If you are operating at a 5% net profit, it will take $2,000 in extra sales to make up for the $100 profit the employee stole from you. As your net profit percent goes down, the amount of sales required to make up for the lost profit dollars increases. For example, at 3% net profit it would take $3,333 in extra sales and at 1% net profit it would take $10,000 in extra sales.

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Only a small percentage of people are totally honest, only a small percentage of people are inevitably dishonest. The majority of people (employees and customers) are basically honest. However, basically honest people will steal. There are three requirements to be satisfied before a basically honest person will steal:

As a store owner you can not do much about #1 and #3 but you can and must do something about #2 - - eliminate any risk-free opportunities in your store. This is where internal controls and good procedures come into play. Well-defined and written policies and procedures will eliminate most opportunities for theft.

Theft will never be 100% eliminated from the retail environment. Your goal as store owner should be to minimize it as much as possible. The first step to take in setting policies and developing procedures to combat this problem is to recognize the weak areas in your store. With that goal in mind we have developed a questionnaire for the independent retailer that can be used for this purpose. This is based on my years as a retail controller in a 5-store chain and 20+ years consulting with The Retail Management Advisors working with 100’s of retailers throughout the country. As you use the questionnaire to review your current procedures, any NO answer indicates a possible weakness that needs to be addressed.

As a store owner, you are very busy so we have set up the manual in such a way to make it easy to complete the project a little at a time. We have left lines for you to enter the date you completed each section so it is easy to see what areas have been reviewed and which still need to be done as you go through your store.

ABOUT THE INTERNAL CONTROL MANUAL