UNEXPECTED STORE CLOSING
If you have good internal control measures in place, you may notice when cash, office supplies or inventory goes missing. However, if like most small businesses you are overwhelmed with all the duties of running an independent store, you may not notice what is happening behind your back or under your nose. I know at this point a large number of you are thinking, I don’t have a problem with my employees; I know them and I’m friends with them. That’s good. But, do you think anyone sets out to hire a person who would steal from them, someone who is mean, someone who is a thief? The answer is of course not!
I sincerely hope that your “friends” have not fallen on hard economic times, gotten a bad medical report, developed a secret passion for gambling, or an ego that just wants to see what’s possible. These are the main reasons loyal employees have given for past thefts. Statistically, one of four people is or has stolen from their place of employment. So, if you have 3 employees and you are the fourth in your store, more than likely someone is stealing or has stolen from you at least once. Those are the statistical facts.
The problem with the human psyche is that the first time a person tries something new, exciting and dangerous, like stealing, it is very difficult and nerve-wracking but . . . it gets easier each time it’s re-tried. Example: a bookkeeper needed money to care for an aging parent so she “borrowed” $900, without permission, to get a much-needed wheel chair. Nothing happened; so, a few months later she when was short of funds, she set up a new vendor and paid her personal mortgage payment with company funds. Nothing happened, except that she had some extra money, so she changed the store’s vendor records to make her mortgage payment happen automatically each month from the store’s funds. Everything was well in her world because the company was paying more and more of her bills each month.
A few years down the road, the store had maxed out its letter of credit and did not have money to purchase sufficient merchandise for the new season. While they may never know exactly how much the bookkeeper stole (as they lack the funds to hire an accountant to verify the books), a significant amount was taken and now the store is dealing with huge financial problems that may result in its closing.
A few years ago, another small independent retailer discovered that his long-trusted bookkeeper had purchased herself an expensive new luxury car and wonderful vacations including an African safari on company funds. The store was forced to close.
Following are a few facts concerning employee theft. These facts are from statisticbrain.
• 75% of employees have stolen from their employer at least once.
Want some more facts? Consider these from the 2012 Marquet Report on Embezzlement:
The annual retail theft survey shows a marked increase in both shoplifting and employee theft and the situation is not predicted to improve. With today’s economy, store owners are stretching every penny and cutting costs by eliminating background and credit checks, drug testing, and honesty testing to “save money.” Furthermore, business owners are now forced to use more part-time employees and even less pre-employment verification is performed.
However, there are some things you must make time for, even if you have only honest employees. It’s your store. Nothing should be hidden from you! Review the bank statement every month before any employee sees it. Occasionally set up the registers in the morning or close them out in the evenings for your cashier/bookkeeper. Present this action as a favor you are doing for an employee—something you do to show them your appreciation. Hopefully, all it will cost you is time, but if not, you may find a problem that can be corrected without going out of business.
Mark Doyle, president of Hayes International has even more to say about the example you, the owner, and your family make to your employees regarding honesty. During the release of his annual theft report in June, 2013, he said: “We have found creating and maintaining a climate of honesty within the company is of utmost importance in controlling employee theft. Employees must feel valued, appreciated, and there should be no double standards among employees. Employees must realize through word and deed that honest and ethical behavior starts at the top and is expected of all employees.” Doyle continues, “A dishonest employee is in the store or warehouse for 20, 30, 40 hours a week and knows the company's internal controls so he or she can wait for an optimum time. On the other hand, a shoplifter is in the store for a matter of minutes.”
If you have noticed some discrepancies, you have a problem. If you have not yet noticed any discrepancies, you may be enjoying a false security. I hope not. Our internal control manual may be able to help you locate and resolve weaknesses within your store.
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