Employee Theft: What are the red flags?

Loss Prevention experts agree that about one in 10 employees steal from their employer, and the average dishonest employee steals about seven times more than a shoplifter. So, how do you know you have an employee theft problem? What are the red flags that indicate dishonesty?

There are several, but there are three big indicators that are the most glaring red flags.

1. Unexplained Losses

Any type of loss that can’t be explained or traced to a mistake is an indicator of potential theft, and some indicators can only be the result of employee behavior. A large incident of missing cash, or a series of ongoing cash shortages are strong indicators. Refunds of expensive items that can’t be located in the inventory, large inventory losses, or shrink or losses of over 1.5% of sales are usually signs of internal dishonesty.

2. Disturbed Back Rooms

Back rooms can be messy, and dishonest employees prefer it that way. But when product is found in an odd place, like near a door, hidden, or staged, or when product wrappings are found concealed, these are all red flags that someone is stealing or is about to steal.

3. Falling Profits

An often-overlooked red flag is falling profits. When transactions or foot traffic remain constant, but location, department, or product type margins fall, it is an indication of theft.  Every item stolen has a cost for replacement, and ultimately to maintain our sales we must bring in more and more product to offset the items that disappear.

There are, of course, other things to look for, things like trends in sales per shift, or lifestyle changes that reflect increased personal wealth, but these three are a great place to start.

About the Author

Raymond Esposito is President of Loss Prevention & Compliance for HS Brands Global. He has over 30 years of loss prevention experience and has spent the past two decades building premier LP outsource programs for some of the world’s most well-known brands. He has worked with over 130 retailers within the department store, specialty, restaurant, grocery, and pharmacy industries in the US, Canada, and the United Kingdom.

His articles and interviews have appeared in various magazines, including Security Source Magazine, LP Magazine, Family Circle, and Small Business Radio.

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