Between 2014/15 shrink cost retailers $123bn – a sobering amount. With loss at the point of sale a large proportion of this overall figure, it’s clear that cash loss/theft still has a significant impact on a retailer’s bottom line. But outside of hard cash loss statistics there’s often a hidden layer of cost that goes unreported – the expense of investigating these losses. It’s these costs that although often overlooked – can amount to a significant dent in profits…
Cash loss is still a big problem for global businesses according to a recent study – and one that companies are keen to address. In fact, 70% of respondents stated that addressing cash loss was a strategic priority for the next twelve months.
But the reality is that the sources of cash loss can be difficult to identify. Whilst actual cash loss itself can be relatively easy to detect (when cash drawers are reconciled or safe deposits are counted), determining whether this was an accidental loss or intentional theft is tough. Even costly CCTV systems can be blind to clever tricks or scams that dishonest staff use to pilfer cash from the drawers.
For loss prevention teams then, the most effective way of determining the true cause of cash loss is through an investigation. But far from recouping the losses; could the time, effort and resource that go into these investigations actually be exacerbating the cost of cash loss to the business?
Of course there’s the hard cost of the investigation to consider. These include of the cost of any technology, external agencies or services used to provide evidence for the investigation.
Prosecution of the cash loss can also eat into profits. Litigation doesn’t come cheap and companies that have strict policies to prosecute all incidents of theft could find the cost of litigation a heavy burden.
For many though, prosecution of cash theft is unlikely – especially if the quantity of cash stolen is relatively small. A recent study of small business found that despite 64% of these businesses experiencing employee theft, only 16% reported these thefts to the police.
When the cost of prosecution firmly outweighs the benefit of recouping the losses it’s easy to see why many companies instead opt to terminate the employee (in the case of internal theft) and cut their losses.
Perhaps the biggest cost of all though is time. A significant chunk of Loss Prevention time is spent investigating, interviewing, and prosecuting the perpetrators of cash loss.
According to our recent study of more than a hundred LP executives across the US and UK, the average incident of cash loss takes one to two hours to investigate; a relatively short amount of time if cash loss is a rare occurrence – but this isn’t always the case. Worryingly, 20% of respondents said that the average instance of cash loss in their business took more than a day to investigate – and up to a week on average. It’s these longer investigations that have the potential to trigger overtime costs, or added expenses if regional LP teams stay on site for long periods of time to investigate.
Plus it’s not just Loss Prevention who spend time investigating cash losses, often other departments will also be brought in for support. These investigations then eat into the time of HR, IT, Operations and Finance teams, not to mention store colleagues.
The “cost” here is difficult to quantify, but when employees are frequently diverted from their normal job roles to support a cash loss investigation there will likely be an indirect impact on the business’s bottom line.
It’s not just time and money that should be considered as a “cost” of an investigation. Other metrics such as morale or staff turnover and retention rates can also be affected by cash loss investigations – especially if employees feel that they are falsely accused.
Loss Prevention teams should consider then, not just hard cash loss stats as a metric for improvement, but also the true “cost” of these cash loss investigations to the wider business.
It’s here where the old adage “prevention is better than cure” rings true. For businesses who truly want to reduce the cost of cash loss, it seems that the best course of action is to prevent cash loss from happening in the first place. Of course this is easier said than done; but there are a number of techniques, tools and policies that retailers (or any other business that takes cash) can adopt to mitigate the risk of cash loss, in turn reducing the cost of investigations and bolstering the business’s bottom line.
Intelligent Cash Drawers for example can help Loss Prevention teams virtually eliminate cash loss at source by reconciling the drawers against the POS in real-time. This means that even the smallest instance of cash loss can be identified on a transaction-by-transaction basis – pinpointing the exact cause of the loss. Plus, if employees are using clever cash scams such as “building the bank” in preparation to steal the excess at a later date, this can be flagged by the system as it happens. Alerts can then be sent to managers enabling them to potentially stop the theft before even it happens.
Stricter cash handling procedures can also help prevent losses. Two-person verification of safe deposits or cash drawer reconciliations will mitigate the risk of lone cashiers simply pocketing takings. And although controversial, blanket zero-tolerance policies towards cash loss could also go some way to deterring employee theft of cash – not to mention make cashiers more contentious when it comes to handling cash. All this means less frequent instances of cash loss, fewer investigations and a reduced cost of cash loss to the business.
Looking to reduce cash loss in your business? Learn how to virtually eliminate cash loss at the point of sale with the T-ice Intelligent Cash Drawer.