Loss prevention is a set of practices used by organizations to preserve profit.
Financial or product loss can be caused by theft, fraud, waste, abuse, or misconduct. Losses negatively affect business processes and procedures. Loss prevention is particularly troublesome within the retail sector, but can also be widespread throughout other industries.
The two main types of external theft are shoplifting and organized retail crime. Shoplifting occurs when a person steals while posing as a paying customer. It can be planned or spontaneous. Organized crime, on the other hand, is a planned form of theft involving more than one participant.
Internal theft is typically identified by reporting systems, visual surveillance, or tips from coworkers. Employee theft frequently occurs via dishonest operation of the Point Of Sale system. The most effective way of identifying this kind of theft is through the use of data analytics software that identifies high-risk activity and flags the transactions and employees for investigation.
Another type of threat is called vendor or procurement fraud. This may involve vendors who don't exist and disappear after receiving payment. Vendors sometimes use bribes or kickbacks to gain an unfair advantage from a client.
Loss Prevention Best Practices
It's impossible to avoid loss entirely. However, following strategies to reduce loss can make a significant impact on how much it affects your bottom line.
- Tips. Set up a secure and private loss prevention hotline that offers employees a range of reporting options. Include a dedicated email address, phone number, and webform that allow whistleblowers to remain anonymous.
- Inventory Controls. Installing inventory controls can boost your loss prevention efficacy. Organizations that deal with dangerous or expensive items should take special precautions.
- Audits. Although conducting regularly scheduled audits can help you find anomalies, they also give employees time to prepare. By conducting supply inventory at different times, you may catch a fraud or theft scheme you never would have noticed otherwise.
- Cash Returns Receipts. Require customers seeking a return for cash to produce a receipt for the items. A potential source of significant losses can be effectively battled with this policy and will lead to reduce return fraud.
- ID Management. A long-term method for loss prevention is to ask customers for identification when they make a return or exchange. This helps you identify and build patterns of unusual or suspicious behavior.
- Security Measures. Security tools are some of the most common loss prevention methods. Cameras, sensor machines, and guards can all help to detect criminals.
- Management Software Services. Special software and services to track your loss prevention incidents can help you identify trends and hot spots. Create charts and overlay reports on maps to instantly visualize incident patterns. By creating customized tools for both employee fraud and supply chain losses, loss prevention software offers valuable insight into your company's vulnerabilities so that you can address them at the source.
Investing into loss prevention is likely to lead to higher profits and stable business growth.