To most people, when you shrink something, you make it smaller. In the world of retail, however, the word has an entirely different meaning. Shrink refers to inventory that leaves the store without getting sold. In 2015 alone, businesses lost $45.2 billion worth of goods.
Do the products grow legs and walk out? Not exactly. One cause of shrink is shoplifting, where customers take items without paying for them. The second leading cause, however, is employee theft, which accounts for one third of lost inventory.
How can you prevent employee theft in your own backyard?
1. Implement Clear Policies
Any employee who feels entitled to free goods is not someone you want on the team. Allocating some inventory to workers, like notepads and pens, is an excellent perk. However, make it clear the consequences for stolen items.
Will the employee face a cutback in hours, formal warning or immediate termination? Posts the policy in plain view to ensure everyone is aware.
2. Use a Point-of-Sale System
A point-of-sale (POS) system automatically tracks the dollars in and out of a business. It provides you with a reliable number for what the cash drawer should contain at the end of the day. One simple way for employees to defraud companies with no POS is to misreport the day’s take. Instead of the $100 in the drawer, they write down $70. Then, they pocket the remaining $30.
With a POS system, you must scan every item that leaves the store. It’s a foolproof anti-theft device often taken for granted. Yet it’s effective when you use it correctly.
3. Take Inventory of Products
It may sound like a no-brainer, but many businesses neglect to track inventory. This manual task is tedious, but it’s the only way to prevent potential theft and account for shrink. Businesses that fail to inventory often quickly fall into a disorganized state.
Wal-Mart, for example, dealt with horrific stock issues back in 2013. That year, the store experienced $3 billion in lost inventory and fell into the red zone. Without proper tracking, businesses don’t know how many of a given item they’re supposed to have. As a result, theft is invisible.
4. Increase Security
If you run a business where theft is a concern, invest in video cameras. Ensure they run during both open and closed hours. Look for a model with a motion-activated sensor. Limit access to the camera system and recordings. If an employee can tamper with the tape, the system is useless.
The increased popularity of cameras has been a boon for the security market in the last decade. In 2019, information security products capped a total market revenue of more than $124 billion — up more than $48 billion since 2015. For consumers, the widespread adoption of technology lowers prices.
Adding security gates will help to increase security as well. Give each employee a unique ID number so when they scan in, you know who’s there. If there’s always proof that an employee is in the building, they won’t be able to use the “I wasn’t even there” excuse if they attempt to steal something.
5. Reward Employees Who Report
Some workers don’t believe employers have their best interests at heart. To reduce theft, reward loyalty and good behavior. If the register numbers are accurate for six months, for instance, offer a small bonus.
Implement methods for employees to speak up if they know something is wrong. If they see someone committing fraud, they should have a secure means to report it. For example, an anonymous tip line or locked suggestion box. Thank employees for bringing issues to light, even if you already took notice.
How to Prevent Employee Theft and Reduce Shrink
Shrink will never disappear entirely. However, your business doesn’t have to fall victim.
Preventing the theft of inventory is a time-consuming but straightforward undertaking. You’ll need to implement clear policies, meticulously track products and promote a company-focused culture. Nevertheless, your business will be healthier as a result.