Business owners outside retail sometimes dismiss loss prevention as a challenge just for retail stores. But every business can benefit by implementing loss prevention strategies that protect their inventory and accounts.
A strong loss prevention strategy will help you:
- Protect your bottom line.
- Improve customer satisfaction by keeping an accurate inventory.
- Develop a culture of safety and responsibility that leads to happier, more invested employees.
What Is Loss Prevention?
Loss prevention is an organized effort by a business to reduce any and all losses of revenue. Losses generally occur due to problems with accounting or inventory controls. Specific causes include:
- Supplier fraud or error, such as when you receive an understocked order
- Employee theft, which costs 2.9 trillion annually
- Administrative errors, such as an accounting error or an incorrectly listed sale price
- Inventory damage, like waste or spoilage
Why Every Business Should Have a Loss Prevention Strategy
Ideally, whatever strategy you decide to take should fit into your overall physical security management plan. But even a small investment in loss prevention will improve your profit margins.
Loss prevention also has some useful indirect benefits.
Employees notice when theft is happening all around them and when administrative errors impact their work. Those issues can have a serious impact on morale. Making a proactive effort to prevent losses shows employees and customers alike that you are invested in running a high-performing business. They will respond positively to that effort.
8 Proven Strategies for Loss Prevention
Here are some proven loss prevention strategies that will protect your business and help develop a culture of safety in your workplace:
1. Leverage Your Employees and Encourage Buy-In
Loss prevention experts have found that encouraging employees to buy into a new loss prevention initiative is usually more effective than simply offering rewards programs or punishments to coax them into compliance. They need to see the initiative as a good cause that they can rally behind. When employees are invested in the success of the business, they will be much more likely to protect it from losses.
Explain to employees that you want to create a better work environment for them and that loss prevention is part of that plan. To reinforce your message, you can find other ways to show employees that you value them and care about their personal success.
Connect your loss prevention strategy to other efforts to support your employees.
Consider also implementing:
- More frequent employee appreciation events
- Career mentoring
- Performance-based raise schedules, when they are an option financially
2. Have Clear Policies
Loss prevention needs to be enforced regularly and consistently for your efforts to truly take hold. The fastest way to lose employee buy-in is for them to see the business inconsistently apply loss prevention procedures. Your best tool to enforce a new loss prevention program is a well-documented policy.
Everyone in your company needs to know how they are expected to help prevent losses. They need to understand what the company’s responsibilities are. Additionally, your policy should detail all necessary procedures for preventing and responding to losses.
If your business has dealt with internal theft in the past, you might want to consider adjusting your hiring policies. Although you need to treat employees as assets in your loss prevention strategy, you should ensure that you’re hiring staff who will protect your company.
Consider whether additional reference checks or background screenings might be worthwhile for warehouse staff positions, for example, and whether credit checks make sense as part of screening candidate accountants.
3. Use Clear Communication & Training
Make loss prevention part of your new employee orientation. Explain that your business cares about its employees and wants them to work in a safe environment.
You need your employees’ help to remove people committing theft from the workplace before they become a danger to their coworkers or the business. You also need them to alert managers as soon as they catch any accounting errors.
After orientation, make sure loss prevention stays at the front of your employees’ minds. Send status reports to managers so they get regular feedback on how their department, store, or team is preventing losses. Communicate regularly, perhaps in a company-wide email, to remind everyone of the importance of loss prevention.
4. Update Accounting
Remember, loss prevention is about more than dealing with theft. Sometimes, losses are only noticeable on the balance sheet. Consider whether you may need new accounting practices.
Many businesses only perform cost accounting, meaning they track inventory based on the cost they paid for full lots of items. Instituting retail accounting takes more work, but it usually catches more administrative errors. This accounting method tracks actual retail prices over time, including markups, markdowns, and sale prices on individual items.
You can more easily identify shrinkage by using retail accounting than you can with other methods. The trade-off is that inventory tracking under retail accounting must be much more rigorous. For example, a markdown error will look like shrinkage if it is not immediately identified using this method.
5. Automate Inventory Controls
Identify which measures you can automate. Using automation will help offset the extra labor required to perform better loss prevention
You can deploy intelligent asset lockers to prevent the loss of your own expensive business equipment. Asset lockers automatically record every transaction so you always know who has signed out which items, without any chance of human error.
Content surveillance systems in lockers can verify that the correct items are placed in compartments. Each piece of equipment is tagged with a short-range wireless RFID tag. Those tags are read in the locker system when equipment is taken or returned.
This reduces internal theft and honest mistakes. A user can’t falsely claim to have returned a laptop to an unattended locker, because the system can verify whether the laptop was actually placed in the compartment. You can even configure the locker system to send an alert to supervisors if assets aren’t returned or if a false return is attempted.
6. Use Strong Deterrents
Presenting the appearance of strong security is just as important as actually having strong security. Demonstrating that you take losses seriously with conspicuous security measures can be very effective.
Do you currently have dedicated staff working to prevent shoplifting or shrinkage in person at any locations? Can you instead deploy surveillance cameras? The presence of surveillance cameras can be a strong deterrent to theft, even if they’re not recording.
Visible anti-theft tags on inventory items will also deter thieves. Simple signage by entryways warning that you are monitoring for theft can send shoplifters elsewhere for a less vigilant target.
7. Monitor Loss Trends
Some losses will only be apparent over time. Accounting errors often reveal themselves that way, and small inventory losses can accumulate over time.
You need to collect a steady stream of data on those inventories and accounts. Watch for trends to emerge. Analyze data for patterns or unexpected losses.
Perform regular, scheduled audits of those accounts. Ask managers to perform a certain number of surprise audits every quarter. Regularly evaluating the performance of your loss prevention program will keep it cost-effective and prevent you from overspending on new initiatives or unnecessary technology.
From time to time, remind everyone in your company of the goals of your loss prevention program. Be open and transparent about how your loss prevention strategies are working. Give feedback to managers and employees about how their departments and the company as a whole are performing.
Make sure you continue to give that feedback on a consistent basis. Employees will develop the habit of assessing their work, which will in turn lead to more improvements. Your loss prevention strategy will become a self-perpetuating loop.
You can pick and choose from these eight different ideas to see what works. But, as recommended by security experts, make sure you have an integrated strategy. Make sure each loss prevention measure you apply works as part of your overall security program.
Learn More About Loss Prevention Strategies
You’ve invested a great deal of time, effort, and money into your business. Putting an effective loss prevention strategy into place is an excellent way to protect that investment.
Loss prevention is just one component of a strong physical security program. Start by applying your new loss prevention strategy, and then see how else you might be able to improve your business’s performance.
Do you want to build a better security management program? See how much time and money you could save by switching to an intelligent secure storage solution like a smart locker. Try our Smart Locker ROI Calculator.
About the Author
Jay Palter, VP of Marketing