A study done in 2009 by the National Security Survey showed that of all shrinkage,
- 48% was due to employee theft
- 32% was due to shoplifting
- 20% was due to vendor fraud and administrative error
As the economy improved in 2013, retail shrinkage is as follows:
49% was due to employee theft
32% was due to shoplifting
% was due to vendor fraud and administrative error
However, the telling story is the amount stolen. In 2009, the total of thefts/errors was approximately $33 Billion. In 2012, Statistics Brain listed that amount as $50 Billion an increase of 51.5%. This means that in 2009 the dollar amount due to employee theft was $16 Billion while in 2012 the dollar amount was $21.5 Billion.
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.
You have worked very hard on your store (buying, merchandising, advertising, selling, hiring, etc) and it is only natural that you want to reap the fruits of your labor. But, did you know that your profits could be literally walking out the door due to lack of good internal controls and procedures?
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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:
- a serious need, such as desperate for money
- a risk-free opportunity
- being able to rationalize that it is OK
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
Comprehensive questionnaire developed specifically for the independent retailer.
Based on years of experience working as Controller for an independent retailer and working as consultant with hundreds of retailers throughout the United States.
84 pages covering all aspects of a retail store, from the sales floor to the back office.
Divided into logical sections to make it easy to concentrate on one area of the store at a time.
Table of Contents has place to enter date that section was completed to make it easy for busy retailers to see where they left off on their project.
Easy Yes / No answers with a No answer indicating need for improvement.
To have a consultant come into your store to do this analysis and review for you would take 2-3 days and cost at least $3,000 - $4,500. You, however, can get the knowledge of an experienced consultant for just $197 by ordering this manual and doing the review yourself.