Legal Corner: Loss prevention is worth a pound of proaction
Loss prevention is a monumental issue in the retail industry. It is one that can decrease the amount of revenue a retailer ultimately brings to the bottom line. Additionally, it can cause headaches of many kinds for a business owner. Despite this, there are procedures and protocols that can be implemented to minimize the loss.
There are multiple areas where loss can occur. The most common are internal and external theft; these account for nearly two-thirds of retail loss.
Internal theft occurs when an employee or someone who is “in the know” within a business steals from that business. There are a variety of ways this can be perpetrated, and there are many ways to minimize internal theft and fraud.
First, business owners should have an employee handbook with policies and procedures to follow. This accomplishes two goals: it gives a set framework for the employees to follow, and it also allows the owner to determine where the theft or fraud may be happening if an employee is not following company procedures.
Second, only allow certain employees to have access to the financials of the business. If all employees have access, it makes it more difficult to narrow down where and how theft may be occurring.
Finally, in addition to having policies in place for employees, owners should have regular store meetings to go over loss prevention issues and store policies. If an employee breaks a loss prevention policy, the owner must then decide what the consequences are. Those consequences can range in severity from an informal reprimand to criminal prosecution, depending on the violation.
There are other proactive steps business owners can take to minimize loss. First, using an outside accountant or third-party bookkeeper will help catch errors or discrepancies. Then, invest in a point- of-sale (P.O.S.) system. This system can track types of transactions and who was working during specific times. If loss occurs at a specified time, that is something that the P.O.S. may be able to track. Finally, retain a loss prevention specialist. This person can find areas in your business where security measures or procedures are weak.
External theft, or shoplifting, happens when someone who is not employed by the business steals. Store owners can strengthen their store’s security by implementing a number of practices.
First, vet all potential employees. Second, establish and enforce rules and procedures for customers, and require employees to enforce the same rules. Third, take inventory regularly. By doing so, owners will have a clear idea of what they have on hand and when loss is occurring.
Additionally, train employees on loss prevention and how it impacts the productivity of the business. Next, have video surveillance in strategic places both inside and outside the store, and post signs stating that the establishment is under video surveillance at all times.
Finally, a metallic tagging system that triggers alarms if the tag is not removed also prevents loss.
OTHER TYPES OF LOSS
There are other types of loss in addition to internal and external theft — for example, natural disasters, fire and administrative errors. These types of loss account for one-third of loss in a business. Preventing natural disasters is impossible; in that situation, the owner must mitigate or lessen the potential impact of such an occurrence. The most effective way to do this is being properly insured. With regard to fires, being properly insured is imperative. One, however, must also ensure there are no fire hazards, such as using too many plugs for one outlet or putting merchandise where it is in direct contact with an electrical outlet. Finally, administrative errors will happen. Having someone check the work of another, however, will help to lessen those mistakes.
Often there is legal recourse, depending on which type of loss that has occurred. Before an owner can seek legal recourse, though, the owner should establish as many of the loss prevention procedures or action steps.
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