This is the third and final installment of our Theft Series. To wrap it up, let’s look at your employees: why an employee would steal, why background checks are important, and how improved security in your warehouse and software can reduce theft and fraud.
Never take shortcuts when it comes to hiring your staff. Be sure to properly educate them on company procedures, communicate with them, and allow them the appropriate clearance based on their position.
Why do employees steal?
There are a few reasons why employees will steal from their employers.
The first is financial reasons. Economic conditions, medical bills, and poor finance management can create desperation for additional income.
Second is self-justification. A mindset of “They owe me,” “I need this,” and “They won’t miss it,” reinforces the urge to pilfer items.
And third is opportunity. The item is easily accessible and the timing is right. “Craveable items” are the biggest targets. They are usually easy to conceal, remove, are valuable, enjoyable, or disposable.
Prevent theft by identifying weaknesses and limiting opportunities.
Educate your employees.
Inform your staff about your policies and procedures related to fraud, the internal controls in place to prevent fraud, your organization’s code of conduct and ethics policies, and how violations of these policies will be disciplined. Be sure to have all your employees sign a form to verify receipt of this material.
It’s important for employees to receive annual training on these topics and on the definition of what’s considered fraudulent behavior.
Reward your employees. Set up a confidential way for employees to communicate any notice of suspicious behavior and offer a reward to staff members who help to prevent theft. “If people know that their fellow co-workers are watching out for theft, they will think twice before stealing because there are higher odds they will be caught,” says Terrence Shulman, founder of the Shulman Center for Compulsive Theft, Spending, & Hoarding.
Who are you hiring?
Conduct thorough background checks on every potential employee. Screen all applicants for criminal records or other red flags.
- Criminal history of violence, theft, or fraud.
- Civil history for lawsuits involving collections, restraining orders, and fraud.
- Driver’s license check for numerous or serious violations.
- Employment verification of positions, length of employment, and reasons for leaving.
Determine which people can be trusted with valuable merchandise and then assign them a specific task. A separation of duties means that multiple employees are responsible for different parts of product storage and distribution.
- Have all employees wear name tags, uniforms, or other identifiers to make sure those who don’t belong stand out.
- Track who enters the building and different zones with sign-in sheets. Knowledge of who has been in what area can be a great tool to identify and prevent internal theft.
- Perform background screenings on all warehouse employees and new hires.
Collusion is a secret or illegal cooperation or conspiracy, especially in order to cheat or deceive others.
This can look like…
Some delivery personnel may give or receive bribes for better delivery times.
Set a schedule for when your shipments arrive so the drivers won’t have to wait.
Indications of changes to the ASN like scratched out items, illegible numbers, and hand-written additions.
Make sure your ASN comes from the company sending the inventory, not from the delivery personnel. Always call the vendor to double-check if you are unsure.
Delivery and receiving staff members can work together to steal incoming inventory.
Rotate your employees who work receiving to keep risky personal relationships between these two departments to a minimum.
Software security & access.
Only allow trained and trusted employees to enter data in your inventory management software. It’s easy to change a few numbers so no one realizes products are gone until they are at the location.
Many software systems require a unique login and therefore updates to inventory can be tracked by user. Make sure employees don’t share their ID or passwords. This will give you an ability to audit changes made to inventory numbers if you ever identify a problem.
Limit employee access so they can’t override admin settings. Update login information regularly to prevent sharing passwords.