Do you know how much money you lose every month as a result of employee theft? You can’t ignore the fact that 35% of those that participated in a recent U.S. Department of Justice study admitted to stealing from their employers (Note: those are only the ones who admitted it). Don’t fool yourself into thinking that it’s not happening to you. The U.S. Chamber of Commerce estimates the loss from employee theft at $40 billion to $60 billion per year. Falling profits, inventory shortages and discrepancies in other areas are usually the early warning signs that you probably have a problem.

So why not try stopping theft before it begins? Take cautionary steps now to save yourself the cost and headaches associated with having to fire employees who are helping themselves to your wallet. 

1. Don’t Make Stealing Easy. Sometimes even the most honest employees can be swayed to steal when a storeowner makes it easy for them. Letting an employee borrow $5 from the register to go buy lunch or allowing them to make long distance personal phone calls from the store telephone is just the start. Next thing you know you’re forgiving them for a cash error because they promised to pay it back. Stealing is stealing. Conduct unscheduled audits of inventory and never leave only one person in charge of the money.

2. Set up cameras. Cameras in the workplace will always be a topic of debate. You need to know what’s going on when you aren’t around and many of your employees will feel that cameras are an infringement on their privacy. But the numbers don’t lie. Every year, millions of dollars worth of stolen products and cash disappear due to employee theft. When you have cameras in place, you can literally watch money walk out the door and stop it in its tracks. New technology allows you the ability to see exactly how much change is being given, monitor the amount of ingredients being used by line cooks and keep an eye on your refrigerators temperature—all from the comfort of on off-site computer. Let employees know there are cameras installed. Tell them that it’s both for their safety and to help you run your business better. Knowing they’re being watched should automatically cut down on a good chunk of theft activity.

3. Check References. While not foolproof by any means, taking appropriate steps before hiring an employee can help lower the incidence of theft once hired. Run a formal background check by contacting previous employers, references, and, if necessary, hire a third-party investigator (speak with an employment lawyer before doing in-depth background checks as there are several legal formalities that must be followed in order to avoid possible lawsuits).

4. Show staff the numbers. Let your staff see how much money was lost last year from theft and wasted supplies. Help them understand that if not lost, that money could have ended up in their pockets by way of raises and/or bonuses.

5. Involve your employees. Many employees know that theft is happening around them but are hesitant to tell their managers. Set up a system wherein your employees can anonymously report theft that they witness in your store. By letting them do this anonymously, they won’t feel that they’re tattling on anyone, but they’ll be helping the company and possibly themselves.

6. Change passwords and access regularly. The restaurant industry has a well-known turnover rate. Former (possibly disgruntled) employees can still have access to your systems if you aren’t careful. Change passwords often and install locks that require keys that can’t be duplicated for all entry doors (many restaurants now use controlled access such as magnetic card readers and keypads instead of keys).

7. Have a written plan. Make sure there’s a clearly defined policy in place for internal theft and make sure everyone on staff is given a copy of the plan and knows what the consequences are—suspension, firing, arrest, etc.—so that company procedures are clear before anything happens.

8. Pay attention to warning signs. It’s important to keep an eye out for the tell-tale signs that someone in your establishment may be stealing from you. One of the more obvious signals is a sudden rise in their living standards—new clothes, car, appearance. Maybe some of your clients have been complaining about overcharges or one of your management-level staff members wants to be the only one in charge of closing the registers every night. Be on guard, but also careful not to accuse someone before doing all your research. A false accusation can put a strain on workplace relations or even lead to a lawsuit.  

9. Help employees before they feel the need to steal. Oftentimes, employees aren’t stealing for the “fun” of it. They may have serious financial burdens like medical expenses, late rent payments, bill collectors calling them, etc. They may feel desperate and their stealing is seen as a quick fix. Why not let employees know that they can approach management if they are in need of assistance? You may be able to help them locate financial assistance, provide a short-term loan for reliable staff members, or give them an advance on their upcoming paycheck. You’ll find that some employees steal to support drug habits, so consider adding a drug screening to your hiring process and make numbers to substance abuse hotlines available.

Common Stealing Tactics

It’s important to be able to recognize the three most common forms of employee theft—larceny, skimming and fraud—if you expect to be able to stop it in your establishment.

• Larceny: the taking of cash or property. This is often the easiest theft to detect because the cash or item usually has already been recorded on the books. Different ways this can happen include pocketing loose change or stealing products before they reach the shelves.
• Skimming: the embezzlement of cash before it’s recorded. This can happen when an employee has the customer pay him/her directly for goods or service.
• Fraudulent Disbursements: This includes billing, payroll, register disbursement and expense reimbursement schemes and check tampering. In retail, the most popular one is for a salesperson to charge a customer one amount, ring up a receipt for less and pocket the difference.

Camera Support
A DTT customer for three years, Scott Hellam says he had the camera surveillance system installed in all three of his Little Caesar’s franchises in central California after he saw its point-of-sale capabilities. “I can search for the word ‘Void’ and the system will show me video of all transactions done using the void button that day,” says Scott. “I can then burn clips I choose onto a CD, which I did recently when an employee was stealing.” Scott notes that police were pretty impressed with the CD he was able to deliver as evidence. Mostly Scott uses the system for store security and to check procedures. He admits that 95% of the time it’s not theft, but rather errors that he catches, but it’s still important to pull the management team together and keep people on the straight and narrow. He says it also helps as a training tool because he can show new hires exactly what they may have done wrong in a transaction so they can correct it in the future. “As long as you have a good rapport with your employees, they will understand your reasons for installing a surveillance system,” says Scott. Because of the cost of the system, Scott says it’s probably more practical for owners of multi-location pizzerias so they can be in more than one place at the same time. “I have much better control over things now,” he says. “Before I could only see the start and finish of the race, now I see the entire thing.”

In Your Words
PMQ recently requested your feedback via our online Think Tank about what tactics have been used in your store by thieving employees. We got some common—and not-so-common—responses.

• “I received an email a while back about a pizza manager inputting the wrong credit card total into the POS when reconciling their till at the end of the night. They’d pocket $50 cash at the end of the night, increase the credit card total by $50 and the POS report wouldn’t show short. Many people don't check credit card deposits often so this may very well slip past an owner too busy to pay close attention to their bank account.”
• “I caught mine stealing on camera. It was the best thing I ever bought for this place!”
• “Before I had my cameras installed, staff members kept complaining of having their cigarettes missing. One day one of my employees came by my office while I was researching cameras online and asked what I was doing. When I told her I was looking to add more cameras, she said, ‘Oh!’ and resigned the next day.”
• “One day my license plate went missing off my car. I never knew what happened to it, so I went and got replacements. Time went by and one Friday an officer stopped in to tell me they arrested my driver for driving with stolen plates...Mine! Seems he didn’t want to re-register his car, so he took my plate.”
• “I used to work for a pizza shop that tracked their coupons by applying the discounts when the pizza was delivered, then at the end of each shift, the discounts were applied (the customer would say they had a coupon for $2 off a large pizza, they’d be quoted the regular price and when the pizza was delivered, the driver would discount the $2). Of course you’d always start to see extra coupons coming in, but the drivers were never smart enough to spread them out. So all you had to do is connect the coupons and say, ‘thanks for the effort, but you’re terminated.’ By the way, this can be tracked by your coupon percentage or by doing customer call backs.”
• “I’ve caught managers voiding or partially voiding orders. Either way, it's stealing. I keep extensive stats at my place, so I can tell when a percentage is a little out of whack. Of course they always start out small and let it grow, so you need to keep your eye on it the whole time. A simple way to check on it is to do call backs to the customers.”
• “I’ve caught employees taking orders down on paper and then never entering them into the computer. I usually find out when they toss the paper in the trash and then forget to throw out the garbage.”
• “I just fired an assistant manager last week for clocking himself in and out for hours he didn’t work using the manager override function; taking cash for cigarettes and balancing the till by not ringing up slices; processing carryout orders without entering them in the till and pocketing the cash; adding coupons to completed orders that didn’t have them at close and pocketing the cash; using the store charge account at a local copy/shipping store to ship personal packages and presenting himself to other business owners and people in the community as the general manager rather than the assistant manager.”
• “I’ve found that one of the easiest ways for drivers to steal is by adding tips onto credit card slips. They don't give the slip to the customer to sign (many customers won't even realize there was a slip to sign in the first place), then they sign the slip themselves and put in a few dollars tip. Sometimes the customer just signs the slip and doesn't mark the tip area or total the slip. Again, they write in whatever tip they want. Amazingly, I've never had a customer notice this and call about it—and I've caught at least three drivers doing it; one admitted to doing it for more than a year! There’s really no way to prevent it, other than depending on the thief being stupid, like putting $2 on every slip in exactly the same writing, etc.”
• “I don’t have any cameras or POS. One of my employees went and purchased guest checks that were just like mine, wrote orders up, then just pocketed the money and got rid of the tickets (the driver’s didn’t notice a difference). He was also re-using old sub cards where people had already received their free sub, and claiming another free sub. Now he’s in prison—four months after I fired him, he did an armed robbery at a Subway.”
• “We have a waitress who no longer works for us as of last week. After a review of her tickets by the district manager it turned out she hadn’t been charging people for drinks for at least four months. She was fired the next day.”

Employee Surveillance Systems

Ready to start researching surveillance companies? Here are a few to get you started:
DigiCapture, www.digicapture.net
Digital Witness, www.digitalwitness.net
DTT Inc, www.dttusa.com
EagleVision, www.eaglevision1.com
Envysion, www.envysion.com
FireKing Security Group, www.fireking.com
Vidient, www.vidient.com

Five Things Operators Should Consider Before Selecting a Video Surveillance Provider
Courtesy of Envysion

1. Can the system help you decrease not just employee theft but other negative behaviors as well? A good video system can help you avoid false lawsuits by employees and patrons, open-hours burglaries, and after-hours vandalism and break-ins. Consider all of these uses and make sure the vendor can provide a system that is comprehensive enough to protect you from multiple threats.

2. Does the system allow you to easily share video with others (preferably without having to burn a DVD)? Sharing video of incidents is a very powerful way to influence employee behavior—and not just negative behavior. Share clips of employees doing things well and you'll see improvements in employee productivity and professionalism.

3. Can you access live video of your store from off-site? Many systems today enable you to "check in" and see your store from home using the Internet, giving you peace of mind.  If you run multiple stores this can be a truly life-changing feature. It might even allow you to spend some time with your spouse or friends!

4. Does the video system integrate with your other business systems? Employee theft is easier to spot if your video system is tied to your POS or operating system. For example, isn't it interesting that your new cashier had five voided transactions yesterday—all with the same customer in the green shorts and white t-shirt! Also, ask if the system can proactively alert you when patterns of unusual activity occur, so you don't have to waste your time searching through video to find incidents of interest.

5. Is the system flexible enough to grow with you or does it lock you in to technology that will be obsolete and features that won't meet your needs? Ask how easy it is to change user access when your store manager leaves the company, or whether you can use the system to monitor multiple stores when you open a new location. Try to anticipate your needs and get a system that will work for your business today and tomorrow.

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