Beauty Store Business magazine - January, 2020

Preventing Theft

Follow these loss-prevention tips to safeguard your store against the from shoppers–and your own employees.

It’s only natural for you to place a great deal of trust in your employees. That’s as it should be–but it’s important to keep your guard up. Unfortunately, employee theft is a growing national problem, and our economy isn’t making things any easier. According to the FBI, “employee theft is the fastest-growing crime in America.”

Employee theft occurs when a worker steals merchandise, money or property while on the job. Even wasted or stolen time is a form of employee theft. From a strictly legal perspective, a theft is committed when an employee takes something with the intent of depriving the merchant of the stolen item’s value. Even more important than legal considerations is the devastating damage to the business that can result from employee dishonesty.

Even if you are confident that employee theft is not a problem in your store, it’s important for you to recognize the telltale signs and know how to build and maintain an environment that will help your staff avoid temptation. Arguably, there is no business more susceptible to the harmful effects of employee dishonesty than a retail store.

According to Joseph T. Wells, founder and president of the Association of Certified Fraud Examiners, minimizing the chances of employee theft begins with the hiring process. “Before hiring anyone,” he suggests, “you should conduct a background check to find out as much as you can about the employee’s previous experience with employers and law enforcement.

“Background checks are always a good practice, but each employer must decide whether the time and expense is worth the return. At a minimum, you should check the background of any prospective employee who will have constant access to cash, checks, credit card numbers or any other items that are easily stolen. In a retail store, that covers nearly everyone.”

Wells recommends taking any or all of the following pre-screening actions. However, before taking them, be sure to obtain the consent of the applicant. Numerous federal and state laws, such as the Fair Credit Reporting Act, govern the gathering and use of information for pre-employment purposes. Many of these laws require that you obtain written consent from the applicant before gaining some of the types of information listed below. It is also a good idea to obtain signed authorization and a release from a potential employee. Consult with your attorney to ascertain the laws applicable to your business and to obtain the proper authorization forms.

Here are four pre-screening actions for new hires:

  1. Past Employment Verification: Even though most employers will only verify the position and dates of employment when they call to check a reference, you can also ask whether the applicant is eligible for rehire.
  2. Criminal Conviction Checks: Most public records services (such as LexisNexis or ChoicePoint) have criminal conviction records for almost every large county, but you can also go to a courthouse and search the criminal conviction records in the criminal courts division of the employee’s county of residence (or other counties in which he or she previously resided).
  3. Drug Screening: Many business owners are now conducting drug screenings for potential hires as well as current employees. Frequent drug users are often more prone to theft or fraud.
  4. Reference Checks: Surprisingly, very few employers bother to call the references a candidate provides, operating on the assumption that an applicant wouldn’t provide a bad reference. However, applicants will often list important-sounding individuals as references with the hope that you won’t call. In addition, people often (incorrectly) assume that a former supervisor or coworker will provide a good reference.

"At a minimum, you should check the background of any prospective employee who will have constant access to cash, checks, credit card numbers or any other items that are easily stolen. In a retail store, that covers nearly everyone.”

–Joseph T. Wells, founder and president, Association of Certified Fraud Examiners

“Developing anti-fraud programs can be one of the most important things that you can do for your business,” Wells says. “Prevention, in the long run, is always cheaper than recovering your losses.” He suggests taking the following precautions:

Perception of Detection: Employees who perceive that they will be caught engaging in fraud and abuse are far less likely to commit it. Increasing the perception of detection may be the most effective fraud prevention method. Internal controls, for example, do little good in forestalling theft and fraud if their presence is not known by those tempted to steal. This means letting all employees and supervisors know that programs are in place for preventing internal theft.

Employee Education: Every business should have some mechanism designed to educate all employees about the serious consequences of internal fraud. One way to do this is to make it part of orientation for new employees. Any education efforts should be positive and non-accusatory. It’s important to emphasize that illegal conduct in any form eventually harms everyone, including employees, through lost profits, adverse publicity, decreased morale and lower productivity rates.

Enforcement of Mandatory Vacations: Many internal frauds require constant manual intervention and are often discovered when the perpetrator is away on vacation. The enforcement of mandatory vacations will aid in the prevention of some frauds. For example, manipulation of financial records to steal cash. This type of theft is often detected when someone else takes over the books while the guilty person is on vacation.

Job Rotation: Some frauds are detected during sickness or unexpected absences of the perpetrator because they require continuous, manual intervention by the offender. That’s why it can be helpful to frequently rotate potentially sensitive jobs.

Split Responsibility: If possible, don’t allow the same person who handles incoming cash and checks to do the paperwork accounting for that money.


Trash Control: Make random checks of dumpsters and trash bins for goods that may have been placed there for later pickup. Use clear trash bags for easy inspection and keep the lids of outside dumpsters locked after business hours.

Conduct Frequent Inventories: Do product inventories often and at random times. Examine records of purchases and sales daily. Assigning inventory control responsibilities to specific individuals helps to establish accountability. That, in turn, helps to discourage theft.

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Consider Video Surveillance: Technological advancement has greatly reduced the cost of video surveillance–putting it in reach of even small retail operations. Installing strategically placed cameras can be a strong deterrent to employee theft. However, it’s important to emphasize the program in a positive light, pointing out that the cameras have been installed for the protection of everyone, including your employees.

Despite the fact that sensible precautions can greatly reduce the likelihood of theft by employees, there are no foolproof ways to prevent it. A dishonest employee determined to steal is difficult to stop. If you suspect or have evidence of employee theft, call your local police department. Handling the matter on your own could lead to false or impossible-to-prove accusations, which could expose you to serious legal liability.

In a business such as yours, with loyal and trusted employees, some of whom may be relatives or friends, it’s only natural for you to dismiss any thoughts of employee dishonesty. Still, both you and your employees will benefit from a policy that creates an environment that openly discourages dishonest behavior.

While employee theft is the biggest cause of inventory shrinkage in most retail stores, it’s not the only one. Shoplifting by customers still poses a risk in most retail operations–and it’s not a minor one. According to the National Retail Federation, shoplifting is costing the retail industry approximately $50 billion per year.

While there is no way to guarantee that your store will be completely free of shoplifting, there are a number of easy and inexpensive steps you can take to lower your risk.

Install Security Cameras: Surveillance cameras installed for protection against consumer theft are one of the best ways to prevent shoplifting. Even the most inexpensive cameras now provide sharp, clear images, even in poor light. While the installation of security cameras requires an investment, when properly done, they can provide protection for the entire store during the day and night, especially when prominently displayed signs call attention to their use.

Use Mirrors: When cameras are beyond your financial reach, the use of mirrors, mounted ceiling-high in the corners, are an inexpensive but effective way to reduce shoplifting. They allow you to see a broad view of the store, especially any blind spots.

Use Signs: For retailers that feel comfortable with it, signage is another inexpensive but effective way to reduce the risk of shoplifting. Signs calling
attention to the criminal penalties for shoplifting are best placed at or near the front door, where customers are sure to see them. Research has shown that signs featuring eyes are especially effective.

Enlist Employees for Help: Let them know that shoplifting hurts everyone.

Watch for Suspicious Behavior: Keep an eye on customers wearing large, baggy sweatshirts or carrying especially large purses or bags.

Keep Displays Organized: Sloppy shelves make it easier for shoplifters to steal without calling attention to missing items.

Reducing theft is not a passive responsibility. It calls for vigilance and action. While complete protection cannot be guaranteed, your vigilance will go a long way toward achieving a better environment for your employees and customers. ■

Even with the use of the best internal programs, it’s important to keep yourself aware of the early warnings of possible employee dishonesty. Watch for the following:

✔ Any hint of substance abuse (An employee with a substance abuse problem will need extra money to finance the habit. This is one of the most common scenarios in employee theft cases.)
✔ Those with a disgruntled, belligerent attitude, often complaining about management or their job to others
✔ An employee with a temper or unpleasant behavior who tends to discourage or avoid questions
✔ Inconsistencies in explaining discrepancies or errors in paperwork or cash register accountings
✔ Excessive loitering around the business by off-duty employees, ex-employees or friends
✔ Secretive conversations among employees and phone conversations that stop abruptly when you approach
✔ Unusually friendly relationships or loyalty between employees and customers or vendors (Watch for customers who loiter around for excessive times or who meet with employees around closing hour.)
✔ An employee living a lifestyle that appears to be in excess of what the salary could be expected to support
✔ An employee who habitually returns to the work area after others have left to retrieve something supposedly left behind

[Photos by MonnthiraYodtiwong/; krisanapong detraphiphat,]