If you run a business that does a large volume of cash transactions, you're at a heightened risk of employee fraud. Good hiring practices can cut fraud, but you never know when you'll make a hiring mistake or a good employee will go bad. Implementing strong internal controls can help you deter and detect cash skimming.
Give Customers a Reward for Not Receiving a Receipt
Employee cash thefts often occur when an employee charges a customer the regular price but pockets the cash without ringing up the transaction. Customers who aren't paying attention may not notice the cash not going into the register, and if they do, they may not think anything is wrong.
When a customer needs a receipt, the employee has to ring up the transaction using the cash register to print a receipt. Customers often won't want their receipt for small transactions, but they will if you have a sign offering a free meal or gift card if a receipt isn't provided.
While customers taking advantage of the offer should be a clear sign that something is amiss, this practice is more likely to act like a deterrent than a red flag.
According to Harvard Professor Tatiana Sandino, employees are less likely to steal when their wages are higher. In many employee thefts, there is a rationalization process such as "it's only a few dollars, and I need it more than the big, greedy company."
The more valued employees feel, the less likely they are to rationalize a theft, and the more likely they'll want to help the owners succeed. Even a small increase over surrounding competitors can be enough to cut theft.
Can't afford to raise wages? Consider that finding ways to improve employee loyalty will have the same affect on reducing the employee's likelihood to steal.
Use Strict Inventory Controls
Cash theft is especially problematic in businesses with loose inventory controls such as food or bar service. However, you do not need to accept this as a cost of doing business.
Set standardized portions for all food items and require that employees strictly adhere to them. Teach bartenders to pour according to specific measurements and make a public display of regular inventory. Take a similar approach with non-food bulk items, such as mulch, by strictly following a standardized measuring and inventory system.
Your point of sale system should be set up to record the quantity of each individual item sold. Don't use a generic system where employees only enter prices.
You can then compare the purchased inventory with your sales records and actual inventory to see if all inventory is accounted for. If not, you can investigate the cause whether it's waste or theft.
Don't Let Cashiers Be Accountants
Many small businesses or franchise locations only have one or two employees at a time who are responsible for running the entire store. Keep risks of theft low by separating accounting from their duties. Allowing cash-handling employees access to your books gives them a chance to adjust sales records to cover up any theft. Our best practice for any company is to make sure the person paying and filing the bills isn't the person signing the checks but especially in the case of managing the cash.
Instead, tie your point of sale system directly into your general ledger program. This gives you independent verification of all cash transactions entered into the cash register.
Monitor for Unusual Transactions
Use an outside bookkeeping service to break down returns, voids, no sales, and other unusual transactions by time, day, shift and employee. Unusual transaction patterns could be a sign of employee theft, or you could have a particularly fussy group of customers coming in on a certain day.
To determine the cause, rotate your employees through different shifts to see if the pattern follows a particular employee or shift. Sharing these metrics with employees can help provide a further deterrent to theft as they'll know you're monitoring for unusual activity. As always, the greater your transparency, the greater the likelihood your employees stay on track and avoid illegal acts.
Need help evaluating your bookkeeping processes for major risks? See if outsourced bookkeeping services are a good fit for your organization.