How to Prevent Employee Theft

You are a business owner or manager. You want to hire good people to help you run a profitable business. Some people appear to be trustworthy, but later prove to be otherwise. Employee theft is not something you want to think about, but it’s incredibly relevant to running a successful business. Take a look at these staggering employee theft statistics in a report from Static Brain:

  • 75% of employees have stolen at least once from their employer
  • 37.5% of employees have stolen at least twice from their employer
  • 33% of all business bankruptcies were caused by employee theft
  • 42.7% of inventory shrinkage is due to employee theft (35.6% is due to shoplifting)

Those numbers feel a bit grim right? However, there are measures you can put in place to make employee theft more difficult to achieve and easier to discover. Before we get to those, let’s first look at why employees steal.


Why employees steal

Employees steal mainly for the following reasons:

Financial stress The employee has college or credit card debt, personal or family medical bills, gambling debts, or drug addictions and their needs might outweigh their morals.

Dissatisfaction The employee who feels undercompensated or undervalued is able to justify the theft based on performance or how they are treated at work.

Opportunity The employee has access to enough inventory without oversight to feel that they can successfully steal and believe they will never get caught.


How employees steal

Employees steal through various ways, such as price overrides, discount abuse, fraudulent returns, and inventory or cash theft. For example, they can charge the customer extra, if the price isn’t displayed, the item doesn’t have a scannable barcode, and if they are able to override the price in your POS system. The employee then keeps the excess. Or, an employee could steal cash from the register or deposit bag. An employee could also enlist the help of a friend who returns stolen goods for cash.


How to detect employee theft

One way to detect employee theft is to know your employees and watch for changes in their behavior. Here are some employee behaviors that could be key indicators of potential theft:

  • Strong objections to procedural changes related to financial, inventory, or supply matters.
  • Avoiding spending time with you one-on-one. If an employee has changed from being social with you to distant and avoiding eye contact.
  • Sudden devotion to work and working late.
  • Lifestyle well above salary levels.
  • Drug and alcohol abuse.
  • Evidence of compulsive gambling or persistent borrowing.

Another important way to detect employee theft is to use a POS system that allows you to closely track inventory, balance your cash drawers daily or at the end of each employee’s shift, and to monitor financial reports. If theft is occurring, you may notice issues with inventory counts, an increase in how often you need to reorder supplies, or lots of voids, discounts, and cash drawer imbalances.


What to do if you detect employee theft

If you suspect an employee of stealing from you, be sure to thoroughly investigate and possibly seek legal advice before contacting law enforcement. False accusations can lead to lawsuits. When you have enough evidence, do not shy away from disciplinary actions and from having law enforcement come to your store to make an arrest. This will serve as a deterrent to other employees who see this because they will know you do not tolerate theft.


How to prevent employee theft

There are proven ways to prevent theft-related losses within your business. One excellent way is to put systems in place to monitor inventory, cash flow and receivables, such as using a good POS system. Here are some other ways to prevent employee theft:

  • Pre-screen applicants. Check references, order a criminal background check.
  • Make employees feel valued. Create a workplace that provides meaning and purpose so employees feel they are making a difference in the lives of your customers.
  • Lead by example and be a positive role model. Maintain a positive attitude and do your best to discourage negative behavior because it can undermine employee morale.
  • Arrange employee schedules responsibly. The probability of employees getting away with committing theft in the workplace increases when they:
    • Work in isolation.
    • Control too many aspects of any financial transaction.
    • Lack third-party scrutiny.
  • Carry out impromptu audits. Carry out random, spontaneous cash counts at different times of the day. Your employees will be unsure about when the cash drawer will be checked, so they’re less likely to take the chance of stealing from it. Inventory should also be counted on an unplanned basis. Inventory management tools can help you to track suspicious inventory trends. Review the number of returned or damaged goods to try to identify any unusual activity.
  • Review financial reports often. Look for changes or discrepancies, anything that stands out, such as a large number of voids or returns performed by the same employee. If your sales are up and your profits are down, somebody is probably stealing.
  • Put your workplace under surveillance. Install cameras in key places, such as near the cash drawers and by high dollar merchandise.
  • Set up a confidential whistleblowing line. Let employees know that their report will be kept confidential and that there will be no repercussions for them. Chances are good that another employee will see evidence of theft before you do. If you don’t set up a third party reporting line, then you will need to be approachable so employees will feel safe coming to you directly with information.
  • Spell out the punishment for theft. Talk to your employees about theft and have a clear theft policy and code of ethics for them to read and sign. Make it clear that your company will not tolerate illegal or unethical behavior. Having policies that are signed by each employee can save you a huge headache and legal fees in a situation where a former staff member sues for wrongful dismissal—it’s easier to prove that the employee was aware of regulations if you have proof that they read them.


How you can utilize RepairQ to help prevent and detect employee theft

  • Reconcile your VCT (cash drawer) daily, or with each employee shift change if you tend to have a lot of cash transactions.
  • Set up maximum discount limits for each employee user login.
  • Log out of RepairQ when you walk away from a terminal so employees can’t use your Admin login.
  • Set employee user roles, which define what areas and tasks each employee has access to in RepairQ. The default user roles can be further refined for certain subscriptions via custom permissions.
  • Set up IP address whitelist for each employee to determine allowed RepairQ login locations. Also prevents an employee from clocking in or out off site.
  • Track employee activity via system logs, ticket logs, inventory logs, and more.
  • Print inventory labels with barcodes and SKUs so they can be easily scanned into RepairQ to be added to a ticket more efficiently and accurately.
  • Check employee timesheets for accurate clock ins/outs. Employees cannot adjust their own timesheets.
  • Perform regular inventory counts by sections of your store or by Item Type (for example) to see how your physical inventory compares to the inventory records in RepairQ. You can assign inventory counts of the same items to multiple employees to see how their counts compare to each other.
  • Use Purchase Orders for tracking and adding inventory to RepairQ.
  • Utilize RMA Tracking for damaged items.
  • Set up automated notifications so you will be notified of certain changes to inventory, purchase orders, RMA items, and more.
  • Create Custom Forms to set requirements for various ticket types (such as adding an image of a customer photo ID or requiring a customer signature for item returns).
  • Monitor financial reports, such as revenue, profitability, employee productivity, returns, price overrides, waived charges, cash flow, summary report, and more.

Renee Stelle

Renee is the Customer Support Manager for RepairQ. She has years of experience as a Support Tech and over a decade in the telecom industry as a phone switch provisioner. She enjoys drinking a mocha while reading a book, playing board games with family, hiking, camping, cross country skiing, and snowshoeing.