Most store owners and managers associate fraud with large corporations and massive scams and scandals that they read about in the newspaper or on the net.
But every business larger than a one-man news kiosk offers plundering opportunities to the employee who’s looking for them.
Embezzlement is like a silent, insidious cancer, hidden and unsuspected, gnawing at a business’s vitals and sapping its lifeblood.
When finally discovered, the effects of fraud may be irreversible and the damage irreparable. Indeed, with soaring expenses, shrinking profit margins and ever-increasing competition, the owner or manager of a store may be hard pressed to keep the doors open and remain solvent.
Inadvertently sharing hard earned profits with thieving employees, the delicate balance between financial solidity and insolvency may well hinge on the owner or manager’s ability to plug the leaks.
WHERE’S IT ALL GOING?
Most fraud in small business centres around false invoicing, bogus suppliers, staff issuing payments to themselves and concealing the paperwork on the computer or not ringing up cash sales as well as fraudulent credits on the EFTPOS machine.
Shrinkage – that is theft of stock – is another component of fraud.
And just on shrinkage, last year I conducted a workshop where a senior executive who had just joined the organisation from a large corporate retail group related his experience that, for every $1 stolen by customers, $7 was taken by staff!
Successful fraud occurs for two reasons:
How can you reduce opportunities for fraud? Read on…
MINIMISE THE OPPORTUNITIES!
Although you shouldn’t treat the following as a definitive list, let’s talk about some ways of minimising risk.
As managers and owners you should:
REDUCING A “BLIND SPOT”
I know a lot of this is common sense, but experience tells me that some owners and managers do not bring their basic good processes to bear on this area.
As if you needed any further encouragement to address or prevent fraud, remember that, even if the loss is only $1,000, you need to sell $50,000 worth of product (if your Net Profit Margin is 2%) to recover that $1,000!
Any employer who would protect themselves against employee dishonesty must face the facts and then take steps to reduce the risk. If they fail to act and then suffer loss, they have no one but themselves to blame.
As the old Chinese saying goes:
“May the gods protect me from those I trust. Against all others I can defend myself”.
Peter Cox is a senior consultant for Macquarie Advisory Partnership based in Sydney. He has over a decade of experience training and consulting in the retail hardware industry. He conducts key-note addresses, and management and sales workshops, which are aimed at improving profitability and liquidity in one of Australasia’s most competitive retail environments. Phone 0061 438 712 200 or visit www.petermcox.com.au