Employee theft has become a problem in several industries and more common than one might imagine. In a Midwestern credit union company, a vice president abstracted more than one million dollars from the institution (Swedlberg 42). Although at a much higher scale than the Douglass Cafï¿½ or any food industry, the robbery at the credit union outlines a perfect example of how theft could easily occur within a company.
Thieves within a business are usually people in the high ranks; a manager, vice president or even CEO’s. The vice president of the Midwestern credit union company was “a master of trust”; she was the one individuals consulted when there was a problem in their bank accounts and who they trusted to fix the situation (45). Similarly, the accountant for 14 Discount Department Stores in the district uncovered the reason why one of these 14 stores lost money consistently for three years and eventually went bankrupt. Again, the case of a fraudster was presented and the manager of that particular branch was the one who stole thousands of dollars throughout three years. Managers compose the largest group of thieves within industries due to their control of cash and operations within the company (Wells 90).
Rite Aid, although a different industry, reported that 46 percent-$14.9 billion-of their losses are due to employee theft (Kolettis, Mesenbrink 16). Betsy Crespo, a student manager who has worked for the for over three years, stated in an interview that full time employees have a habit of taking inventory home. They take home everything from whole turkeys to cases of drinks, and student employees will do the same in a smaller scale, where they may take a couple of drinks and some sandwiches. However, all the inventory not calculated in sales goes towards the losses of the cafï¿½. My former supervisor stated that the financial statements for the past year reached an approximate 250,000 dollars in losses. These losses, he explained, related greatly with the issues many organizations and business deal with on a daily basis.
Employee theft and poor management are some of the many problems involving the termination of a business. As in the case of a Discount Department Store that went bankrupt, private investigations led to the sad truth that any employee can be the thief, but managers are the ones most likely to commit the crime (Wells 91). On February 14th, 2003 my supervisor was fired due to cash discrepancies and thousands of dollars missing from the safe along with other allegations. Employee theft does not only constitute cash when dealing with a food company; in the United States, hundreds of companies go bankrupt due to employee theft and “virtually no antifraud training” (Wells 89, 92).
A specific incident I encountered was with the former manager at the Douglass Cafï¿½. He was a simple man, pleasant to work with and extremely concerned about the well-being of the cafï¿½. Working as a student manager for him, I did cash transmittals, inventory and all the filing of income statements. I never noticed any ambiguity in his character, and it was not until his termination that I realized the severity of the allegations. Aside from taking money from the safe, the former supervisor also forged signatures of other student managers on the cash transmittals. Figure 1 is a graphic representation of the different areas in which a business or organization might lack proper supervision and will therefore suffer losses. Figure 1 shows that more than fifty percent of the time, a manager of a small business or the CEO of a company are the ones responsible for cash discrepancies. The other forty-five percent of theft occurs within employees or by shoplifters.
In figure 2, the approximate percentage of losses is shown from 1998 until 2001. Income statements, cash flow and industry sizes differentiate for each industry presented above; therefore, the numbers might vary for each one. The Douglass Cafï¿½ is a much smaller industry in comparison with Rite Aid or Discount Stores; however, it suffers higher losses percentage wise. Starting in 1998, the losses from each of the three industries were extremely high. Moving along from 1999 until 2001, losses went down due to new technological improvements and loss prevention tactics to tackle employee theft, shoplifting, and cash flow management (Jennie, Blaine 60). In the next section, four methods that have helped Rite Aid and other companies fight losses are discussed.
As can be seen, employee theft can be classified in many ways, and even though cash constitutes for most of the losses (because cash is more liable), theft of inventory is also at stake. Technology is expensive, but so are losses to a business. Rite Aid, a retailing company suffered drastic losses in 1999, averaging more than $32.3 billion of inventory shrinkage due to internal theft ( Kolettis, Mesenbrink 16).
However, with the help of Loss Prevention Solutions director, Reed Hayes, and the National Retail Security Survey, Rite Aid implemented the electronic article surveillance or EAS. The system tracks the amount of inventory from the computer to the register, allowing for the perfect count of items sold in a day (17). Another method used is the StoreVision, by CA Technologies. Giant, another retailing company, uses this option. The system provides information from the register or from a camera directly to a PC in the loss prevention office where information can be reviewed in 5 to 30 minutes. Sales for the company increase approximately 12 percent (Muzzi).
Although EAS is widely used by department stores, it is not a system well fit for the Douglass Cafe. EAS is composed of a tag that is attached to all the products within a store, a wiring system that tracks the purchase of all the products, and a software that detects all of the sales information into a PC. However, for a food industry such as the Douglass Cafï¿½, it would be extremely hard to tag all of the products, given that we are a dining facility. Figure 3 represents the StoreVision system, where cameras are implemented throughout the store, and items purchased are accounted for without a tag. The system works given that cashiers ring up the exact item purchased, and with the re-enforcement of the camera, transactions are reviewed in minutes.
Similarly, supermarkets found that implementing security video surveillance allowed for an increase of 10 percent in revenues ( Seideman 120). Video cameras allows cash management companies to monitor and control movement of money with greater accuracy and effectiveness than ever before, for managers and supervisors will be more reluctant to tamper with cash and illegal transactions such as voids and refund discounts knowing that they are being watched ( Swedberg 45).
Along with surveillance cameras, Seideman states yet another vital tool to cash based businesses (118). In order to accurately monitor company’s transactions, Crate & Barrel added a digital safe to their stores. The safe has the ability to communicate, collect information and change combinations at a moment’s notice (119). Figure 4 illustrates a cashier counting out a till and the digital safe where all the cash should be stored. The surveillance camera together with the luxury of a digital, steel safe creates a well-watched environment for managers to supervise.
When dealing with inventory in the food industry, and menus that change frequently, a periodic inventory-turnover analysis can be an option when looking to increase revenues (Reynolds 54). The focus of the turnover analysis is simple management practices where food operation can provide efficiency and profitability. Reynolds explains that inventory should be treated as an asset; there should be neither excess nor shortage leading to theft.
This method of operation can tell whether the food is being used properly or simply being used by the employees who take it home (Reynolds 56). This inventory analysis is very similar to the one used by Rite Aid, where everything is accounted for, however the turnover is conducted in a periodic manner where technology is used to count the inventory sold. Both methods will aid a business in detecting employee theft.