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- Subscribe - Contact Us - Rate Card - Place an Ad Archives Revels Classifieds Real Estate Menu Guide Wedding Weather Subscribe Contact Us February 11, 2006 Marketing Today Thoughts on loss prevention Anthony Hernandez You may want to keep a bottle of antacid nearby as you read this. Dishonest employees are the single largest source of business theft and fraud, eclipsing shoplifting, vendor fraud and other external sources. Seventy-five percent of employees have stolen at least once, and 50 percent of employees steal more than once. Employee theft costs up to 3 percent of a company’s gross sales (one study even goes as high as 6 percent). Assuming a net profit margin (what’s left over after paying all expenses) of 5 percent of your gross sales, then employees are walking off with up to 60 percent or even 120 percent of the total profit (3 is 60 percent of 5). The United States Department of Commerce estimates that 30 percent of business failures are caused by poor hiring practices. The average family of four spends over $400 per year because of inventory theft, which is only one of the many ways employees can steal from a business. This is not a drill, people, nor is it a scare tactic. No, dear readers, this one means you. If you have employees, then chances are excellent that your business is part of these statistics whether you want to believe it or not. Feeling a little ill yet? The good news is that there are some simple things you can do to greatly reduce (and possibly eliminate or prevent) internal loss in your business, none of which requires a “get tough” attitude. Getting tough won’t work because it will expose the inevitable loopholes in your system as clearly as stars on a cloudless night and give your employees all the motive they need to exploit them in a classic example of “F--- me? No, f--- you!” Good management is the single largest factor behind preventing internal theft. I covered this last week when I advised you to be firm, be fair and be a leader. It’s easy to steal from the jerk boss. It’s much harder to steal from one’s own team. Forge a tight-knit team and never be anything less than honest with them and you’ll solve most of the problem, in addition to reaping the other benefits I mentioned last week. Education is also key to reducing losses. Your employees know how much money is coming in and how little of that makes it into their paychecks. What they may not know is that 95 cents of every dollar your business earns gets spent before you get to keep any of it. You need not make business majors or accountants out of them; that said, I encourage you to practice an “open book” policy so your employees can see the money going out just as easily as they see it coming in. Implement a few common-sense controls such as: • Have your accountant examine your books regularly and have another random accountant audit them from time to time. • Match every line of every packing list with every item you receive and report overages or shortages. • Take regular inventory and match that against your orders and receipts. Keep a closer eye on especially tempting items. • Periodically remind employees that theft hurts everyone, including themselves, whether or not they get caught. • Study other prevention methods in use by other businesses in your industry and decide which ones are appropriate for you. • Be alert for any sudden changes in employee behavior or circumstances. • Remember that if it seems too good to be true, it could well be. Some of the worst theft comes from the employees who seem to be going the extra mile and then some, such as working long hours, never taking vacations, etc. I don’t mean to imply that your best employee is your worst enemy. I am telling you to remain alert. • Become a technophile. A well-managed computer can be your best friend in many areas, including loss prevention, the key words here being “well managed.” Are you seeing a theme here? I hope so. The best hiring and management practices can’t prevent everything but they can reduce problems from potentially fatal to the business to occasional annoyances. Should you ever find a problem, respond appropriately and then put it behind you. Never succumb to the temptation to take out your justifiable shock and anger on your other employees — because doing so may just cause more headaches than it solves. Above all, don’t be paranoid. Be the best leader you know how to be, use your head, and you’ll have little to worry about. Yes, I am harping about this. You may notice that I haven’t covered external losses such as shoplifting. I did this for two reasons: First, external losses are a much smaller problem. Second, the same common-sense methods you implement to prevent internal theft will help alleviate the external problem as well. Next week: the joys of technophilia. I am thrilled to announce that my new book “The Enlightened Savage: Using Primal Instincts for Personal and Business Success” will be available sometime this month. Please visit www.theenlightenedsavage.com to learn more about this exciting title. I always welcome questions, feedback and suggestions. Please e-mail me at [email protected] with your ideas and suggestions. My invitation for you to schedule a free session with me is always open and there is never any obligation. You may also visit me on the Web at www.coachanthony.com. Anthony Hernandez is a local business consultant with more than 19 years of business and marketing experience. He lives in Ashland with his wife Robyn, son Logan, and their two dogs. 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