January 5, 2014

Chances are, your employees would never steal from you.

Even so, as Ronald Reagan advised, “Trust but verify.”fm0114g

Waiting too long could limit your ability to prosecute when theft does occur. Before it’s too late, nip pilfering in the bud. Here are six steps to follow:

1. Compare gross sales to net sales. The difference between the two is generally returns. Legitimate returns should be documented with customer receipts or return forms. If not, find out why.

2. Measure cash returns from one period to the next. Watch for unusual increases. If the totals are rising, determine if the increase is due primarily to one employee. Watch for round figures – for example, a cash return of $300 is unlikely and should raise a red flag.

3. Watch for inventory shrinkage. Inventory shrinkage could mean outright merchandise theft, or represent fraudulent returns or fraudulent voided sales, both of which depend on falsified inventory records. Solve the problem by requiring approval of returns and voids over an established low limit, and by watching for patterns, like increased voids or returns from one employee.

4. Create a written ethics policy. This is a nonthreatening way to let staff know that you are aware of the possibilities of fraud.

5. Provide anti-fraud training. Training will help staff spot unusual behavior.

6. Set up an anonymous method for tips. A system should be in place for employees to anonymously report fraud when they suspect it.

This article was originally posted on January 5, 2014 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at marketing@grfcpa.com.