Fight Back When Cash Flows The Wrong Way

Loss prevention industry experts address the growing retail cash shrinkage problem and how technology can help.

By John Roach, Editor, Retail Solutions Online

The economy's downturn brought with it a double whammy for retailers: a drop in sales and a rise in theft. Who knows when the former will correct itself, but retailers have already begun efforts to combat the latter.

Cash shrinkage has been particularly troublesome for retailers during the recession, largely because shoppers are turning to cash for their retail purchases. There are several reasons behind this trend:

• Consumers are tightening their budgets, using cash to limit their spending and their credit card debt.
• North America has experienced a population increase among cash-centric cultures, such as those from Latin America.
• There has been a rise in "unbanked" consumers — those who spend cash because they don't have a bank account — particularly at convenience stores.

"We're seeing an increase in cash transactions at all types of retailers in all of the major retail economies of the world," NCR industry marketing director John Saccomanno told me.

With that as a backdrop, I decided to speak with several top loss prevention experts about the rise of cash shrinkage and the role that technology can play in stopping it. The experts included Saccomanno, Tellermate president Rick Bellerjeau, Epicor Software executives Diane Neaven (director of product management) and Darlene Bogusz (product analyst – audit and operations management), and Loomis VP of business and product development John Rhoads.

Why is cash shrinkage such a big problem for retailers today?

Bellerjeau: Cash is an area of retail that is largely overlooked. It is absolutely stunning to me how little process people put around their cash and the counting and managing of it.

Rhoads: One of the biggest problems is that most retailers manage cash today the same way they did 40 years ago, despite the opportunities to create a more seamless solution as it relates to cash. We know that cash skimmage is a crime of opportunity, so the less seamless your solution is, the more opportunities there are for theft, and the more you're going to see it.

Neaven: We're hearing about increased employee theft, which may be a byproduct of the economy. As a general trend, employees are seeing stores close and retailers cut back, and they're afraid for their jobs. As a result, maybe they don't feel the same kind of loyalty and are more inclined to take risks, like theft.

How are retailers reacting to the growing problem of cash shrinkage?

Saccomanno: You could fairly say that most retailers are better at merchandise inventory loss prevention than cash inventory loss prevention. But when we've talked to retailers recently, they seem to be putting more focus on implementing stricter processes and disciplines for managing currency, things like automation of cash counting.

How is technology addressing the cash shrinkage problem?

Bellerjeau: Every LP manual in America tells companies to conduct POS spot audits daily, but can any loss prevention person say with assurance that it's happening? The primary reason is a lot of loss prevention products take so long to count down the till. So you shut down a lane for 15 to 20 minutes while you do a spot audit. And customers look at you like, "What are you doing?" Our mobile cash-counting device, for example, lets retailers count the till in 45 seconds. It doesn't disrupt store process, doesn't negatively impact customer service, and absolutely shocks the shrink number when it comes to money vanishing off the POS systems.

Rhoads: A retailer can save time and money with electronic safes by counting a bill only one time. It comes across his transaction plane, he makes the drop into the safe, and it's accounted for. In the past, we'd go out to retailers and watch a bill flow through a retail operation, and we were finding that an individual bill got handled and counted anywhere from five to seven times. And each one of those times is an opportunity for theft. There's also an opportunity for simple mistakes.

Bogusz: Retailers can identify problem employees by using software to analyze the transaction data over an extended period of time. Every software application is going to look at returns and voids, but the right software can help retailers identify certain patterns that they otherwise wouldn't have noticed. They can flag special transaction conditions, monitor them, and see what kind of activity comes up. And by having these predefined rules in the POS system, they're able to get the most out of their transactional data. There's so much information there, but you don't want to get lost in it all.

What are some of the barriers to implementing technology-based cash shrinkage reduction plans?

Rhoads: In some cases, you'll get resistance to technology by employees. Plus, if you have someone engaged in nefarious behavior, they may have a vested interest in seeing the technology fail. And that's not just employees, but possibly even managers. Many times you'll find the hole in the bucket is not where you thought it was.

What are the keys to successfully implementing a cash shrinkage reduction plan?

Rhoads: A large part of solving cash shrinkage is simply creating accountability. You want the ability to drill down to specific information about cash transactions. In the case of our technology, you can drill down to the person who made the drop and the amount of the drop, and you can match that information with POS data.

Bogusz: Getting a closer look into what's happening in the stores is vital. One of the hot things right now is integration with video footage. So besides transaction analysis, retailers want to tie that back to footage so they can analyze particular transactions — a single return, for instance — to learn how to combat criminal behavior. They want to see if there was a customer standing in front of the employee at the time, for example. That's very useful in limiting cash shrinkage these days.

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