Employee theft: how can happen & how to prevent it

?Employee theft also referred as internal theft, is when employees take company assets that affect the bottom line of your business. This week I am going to share with you four ways employee theft can occur in a distribution operation, whether it's in your back office, administration, warehouse or your drivers.

Employee theft method 1: Steal from the truck

This occurs when there is no control of what is loaded on the truck. Each process that involves inventory needs to be monitored by two different entities. Many companies let the truck driver load the cargo and it is OK if there is a system that says what should be loaded, a picker who took the products and put them on a pallet in front of the truck, someone who oversees the load and someone who inventory what is left in the truck at the end of the day. That way there is no possibility of loading additional products that the driver could pocket himself. But if you allow the driver to pick up and load you will lose control of what is taken and loaded.

Some operations, however, require the driver to be on the road for several days, selling and delivering. If that is the case there are two ways to control the inventory in the truck.

Number one: every time they come back you do a cycle count and that cycle count will determine whether or not the drivers over or short.

Number two: you can have the driver send you a blind inventory count periodically, and you can utilize that blind inventory to determine whether or not the driver is over or short.

Employee theft method 2: Cash collection

The second way that employees can steal is by pocketing the cash collected. Drivers normally deliver the cash collected along with the corresponding invoices to a back office administrator. These back-office personnel can make a small adjustment to the invoice, such as quantity or price and pocke the difference.

The only way to prevent this from happening is to request the drivers that, along with the money and the invoices, to submit a report showing exactly how much each invoice was, with copy to the back office supervisor. The report must match the cash and you do not have to worry about the back office making changes to the invoices. Also important: if you have a system in place make sure that the system does not allow any back-office administrator to make changes to the payment method.

Employee theft method 3: Warehouse theft

This is the most common practice. It happens when warehouse employees casually pick up products and hide them in their personal belongings. It is practically impossible to prevent this from happening especially in big warehouses. But there are two ways to try to minimize the occurrence.

Number one: implement dissuasive actions. Set devices and rules that discourage employees from engaging in this practice, such as CCTV throughout the entire warehouse and establish strict policies regarding the consequences of someone being caught stealing.

Number two: do periodic cycle counts. The only way to detect if someone is stealing from the warehouse is by periodic cycle counts. Many distributors cycle count once or twice a year because it requires organization, discipline and time. But cycle counts are the only way to detect warehouse loses due, not just to theft, but to mistakes and faulty processes. We have explained the advantages of cycle counts before. It is clear that the count will alert you that there is a problem, not the cause. It is up to the company to investigate and correct the reason why it is happening.

Employee theft method 4: Drivers modifying invoices

This is a more sophisticated method as it requires creativity on the part of the driver and believe me, they do have it. There are many ways this can be done. For example, the driver makes an invoice, collects the cash from the customer and then voids it in our system or in the invoice book, and makes a second invoice with less quantity or less prices pocketing the difference.

How to prevent it? If you have a system it is very easy to prevent this: you don't let the drivers print out anything that resembles an invoice until they finalize. That way you know if voids the invoice. If you have invoice books you have to track your invoice numbers, see what invoice number they started with what invoice number they ended with and you have to make sure you have an invoice for each sale.