By Darren Schulte
Depending on what article you read, between 65 percent and 80 percent of your shrink is employee related. Some experts believe the number is higher than 90 percent. Shrink is the profit losses your store experiences due to theft.
Shrink loss is made up of employee theft, vendor theft, customer theft and financial accounting errors. With the majority of these losses coming from employees, the majority of your focus should be on preventing employee theft.
How Do You Calculate Shrink
Shrink is usually figured as a percentage of sales, either cost or retail. EXAMPLE: If after performing your yearly inventory audit, you report losses is $12,000 and retail sales is $50,000, your shrink would be 2.4 percent of your sales.
What Should Your Shrink Number Be?
The national average for retail shrink is less than 2 percent to sales. However, in the truckstop industry, the average can be much higher.
How Do Employees Steal?
Most managers make the mistake of thinking all shrink loss comes from stolen product. However, the opposite is true. The majority of the loss comes from cash. Here are three examples of how employees steal cash.
1. Over ring: An over ring is when a cashier states the price of an item incorrectly. John buys a candy bar and the cashier tells him the price is $1.50. The cashier has the screen hidden so the customer can’t see the price. The real price is 99 cents. The cashier takes the money from the customer and does not give them a receipt. Later the cashier will get the 49 cents out of the register and pocket it.
2. Voids: A cashier will ring up the item as normal. Once they receive the cash instead of entering it, they um will hit the void. This erases the transaction and causes an overage in the till.
3. False returns: This can be completed in several ways. One example is when the cashier keeps receipts from a prior transaction and pulls the product from the shelf and creates a return. Many times, if not monitored, they will just do a return in the register and take the money.
How to Prevent Employee Shrink Loss
To prevent shrink loss, use a proper shrink prevention checklist and enforce the rules associated with it. Here are three general rules for taking away the opportunity to steal.
1. Stay Over rings are hard to spot unless you are present when it is happening. The register system you use should have a screen for the customer to see and this should be facing them and in open view at all times. This is one of the many reasons that companies offer rewards for not receiving a receipt at the time of purchase. If cashiers are stealing in this manner, they do not want to give the customer a receipt.
2. Your register should have a way of tracking how many and when a void was created. This is a metric that you will need to measure on each cashier. All voids should be explained on the end of shift paperwork. No Sales should be treated in the same manner.
3. Preventing false returns start with enforcing a return policy. You should require an original receipt as often the cashiers will print a duplicate and use that receipt for the return. Management should also be present for all returns. You should not give this ability to every cashier. A returns authorization form should be filled out that requires some information from that customer as well.
Editor’s Note: Schulte is teaching a bonus workshop on Wednesday morning of The NATSO Show on shrink management. Attendees will learn more actionable take-home ideas to immediately improve their shrink loss and will leave with an actual shrink management plan to use as a building block for their own.
Photo Credit: arenacreative/bigstockphoto