Protecting Against Theft with ERP Software

Employee theft goes well beyond loss of cash or product to get to your bottom line. It can affect your customers by way of higher prices and inferior shopping experiences, which can have a direct impact on your reputation. Imagine what your customer thinks of your business when he or she is promised an item by a specific date because you think you have it in stock. Although your (paper) records showed you had the item, it was ultimately backordered. Unfortunately, the item was stolen by an employee and you were not aware until the customer was already disappointed.

And speaking of your reputation, you don’t want to invite even more shoplifting because your business is known as an easy target.

Employee theft can also affect other employees. Stealing from you indirectly steals from them. How many times will it happen before other employees question whether you’re competent enough to keep the business strong and safe? After it happens, will you unfairly limit the freedoms of the rest of your staff?

Software Advice™, a consultancy that analyzes inventory management software, recently released the results of a study exploring how inventory management software can detect employee theft.

The survey questioned U.S. retail employees about store types, job titles, inventory management methods, theft perception, and outright stealing from their employers.

According to the report, the National Retail Federation (NRF) estimates that employee theft accounted for almost 44% of total losses for US retailers. Some of the data revealed from responses to the survey from Software Advice™ included the following:

  • 85% of national retail chains, 53% of local and regional retail chains, and 37% of small stores surveyed use inventory management software.
  • Only 28% of employees whose stores use inventory management software said internal theft is a problem, compared to 37% of employees whose stores use other methods for managing inventory.
  • 22% of employees at stores without inventory management software openly admitted to stealing products, compared to 15% of employees whose stores use inventory management software.

As explained in the report, modern inventory management systems can be integrated with other software and hardware to detect suspicious patterns, providing data for management involvement.

InOrder ERP Audit TrailFor example, when you use a quality ERP system, your inventory availability is tied directly to your order system. The InOrder ERP system includes audit logging, which provides dates, user names, and tasks each user performs. The inventory on hand is tracked for the duration of its time in the warehouse. Any inventory transactions including receipts, sales, returns, as well as all types of adjustments, such as kit assemblies, facility transfers, inter-facility bin moves and replenishments, cycle count adjustments, damaged write-offs, etc. are tracked to allow precise SKU audits. Additionally, full warehouse “snapshots” of quantity and value on hand are taken whenever an accounting period is closed, allowing reports to show beginning on hand, activity, and ending on hand for an accounting period. Inventory accuracy typically approaches 99.9%.

How else can InOrder help detect theft?

Because InOrder’s Purchasing, Payables, and Inventory systems are all connected, you can compare what was ordered to what was received, to what you are paying your vendors.

The system tracks all purchase orders placed with your vendors, and any subsequent changes to those orders. Inventory receipt transactions are linked to purchase orders, recording what happened to each carton entering the facility. Vendor bills are entered into the system before or after inventory receipt. These bills get linked to the receipt and the purchase order. Any inventory that is received damaged is tracked as it gets routed back to the vendor for credit, and the credits are tracked. These processes enable control over what you receive and approve for payment with your vendors, stopping vendor billing fraud in its tracks.

Then these processes directly feed G/L, thwarting the rogue accountant who tries to skim by charging higher expenses on the G/L than the expenses actually incurred on your vendor bills, and then pocketing the difference.

Finally, InOrder’s tracking auditing enables you to isolate and trace other types of employee theft, such as generation of bogus customer refunds, gift cards, or credit memos issued to friends of employees. Seeing who performed a transaction and when is helpful, but forensic analysis of suspicious transaction patterns in the database can also help to isolate the employee(s) involved.

With a good ERP system, employees discover that they can trust the system, and you in the process. With their trust comes respect and confidence that their jobs will be secure and the business will continue to grow. A good ERP system helps you improve your customers’ shopping experience, achieve their trust that you keep your word about your products, and you take their business seriously.

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