Loss Prevention: What the Camera’s Can’t See

lossI started my career selling POS systems to retailers.  I’ll never forget my very first point-of-sale deal.   I sold a small beer/wine carry-out its very first POS system, upgrading them from an electronic cash register (ECR).   The store’s new owner was a full-time rep for a cigarette and candy distributor who spent most of his career moving in and out of the back doors or retailers throughout the city.   As I wrapped up my product demo from my laptop, stacked on three milk crates in his back room under the watchful eye of the new security cameras, he asked me a number of questions about the purchase order management capabilities of the software.   

I thought ”Oh boy....they didn’t cover this in the certification class!”  Up to that very moment, I thought that all I needed to know to win business was how to scan a barcode, pop the cash drawer and print a receipt.   The POS software would basically sell itself.  Now my prospect wanted to know “Can I use the system to create purchase orders?”, “Does it have a receiving module?”, “What if the vendor short-ships, will it track the partial receipt?”, “What about direct-store delivery suppliers? Can I create a PO and receive all at once?”.  

There was no way to get out of the questions, so I had to “fess up” that while I knew the software had a purchasing module, I wasn’t familiar with all of the capabilities and I’d have to get back him with answers.

He looked at me and said, “Without purchasing, this thing is just an overgrown cash register.  I’m not looking for a POS system to track sales - my cash register can do that already. I need a system that can keep track of purchasing."  He then went on to explain that there are three different groups that steal from retailers. His camera system would help to prevent the first two, customers and employees; but, the biggest threat, he explained, were suppliers.

From his perspective, he said, "Every day they steal more from retailers, both intentionally and unintentionally, than employees and customers combined.”  From the bread delivery guy who bills for 12 loaves, but only delivers 11 to the beer distributor employee who offers hockey tickets to your cashier, so she doesn’t check in his delivery to the candy distributor sales representative who negotiates $10/carton for Wrigleys gum and then charges $11.50.   

It turns out this customer was not the typical retailer I’d encounter over the next 10 years - and still isn’t.  We are amazed at how intricate their security systems are and the strategies they use to minimize loss. But even today, they don’t use the POS system for what it can do best - minimize loss!  

I don’t sell POS systems today, but I do help retailers better manage retail operations.  While the POS systems today have become more sophisticated, many retailers don’t follow simple processes that could save them lots of money and increase cash flow.  No system can help you do this unless you have a diligent, replicable process that every employee knows and lives by.  

Here are two things you can do to better monitor and manage the back of the store

  1. Always create purchase orders when ordering inventory and Sales Orders when ordering out of stock or special orders for customers.  The purchase order is your record of what you’ve ordered.  We’re shocked by the number clients that want us to help them improve inventory visibility and want to invest in systems to help them.  Don’t bother investing in automated systems if you don’t have a disciplined purchasing process in place - automation won’t help you if you don’t have a consistent process in the first place.

  2. Always do a three-way match once you receive an invoice from your supplier.  Ensure that what you ordered (quantity and price) matches what was delivered and what was invoiced.

Sounds simple right? It is; but, when you don’t follow the processes meticulously (and don’t insist that employees use the process), your process falls apart.  Here’s an example of a solid process that ensures improved inventory accuracy, improved cash flow, and helps you improve customer satisfaction.

  1. Create a Sales Order in POS for customer orders (when you’re out of stock or capturing a special order).

  2. Create a Purchase Order for the supplier.  The PO should contain - in addition to a PO number - a sales order number IF the item is ordered for a customer or IF the total quantity you’re ordering includes an item for a customer.

  3. Inventory Arrives - pull up the PO and check it against the packing slip - Is what you ordered, what you received?  Were any of these items ordered for customers?  If yes, place these items in a special area - not with the rest of the inventory intended for store shelves.  Close the PO.

  4. Call the customer if applicable and pull of the sales order from POS.  Accept payment and close the sales order.

  5. The invoice arrives from the supplier.  Pull up the Purchase Order and Sales Order (if applicable).  Conduct a 3 way match.  Did you receive the items you ordered?  Was the price you paid what was invoiced?  If yes - go ahead and create a payable in your Accounting System.

Sounds like a detailed process - and it is.  These steps are critical to ensure customer satisfaction, increased revenue capture and ensuring you’re not overpaying supplier - or that you’ve captured sales before you pay your supplier.

Once you’ve got this process down and every employee that touches inventory follows the process, you’re ready for investing in a POS system to make the process faster and easier.  Investing before you’ve got this process down is wasted effort.  All the slick technology in the world is not going to help you if you aren’t diligent in watching the back door and putting processes in place that help you better manage cash flow, quickly capture sales, and improve customer satisfaction.

About the Author

Lisa Steinhart is the Marketing Director of nChannel.com. nChannel provides an easy-to-use, cloud-based management platform for multi-channel retailers that enables the management and exchange of sales, customer, and product data from transactions that occur at a register, in the warehouse, or via a web-store. Using nChannel, subscribers can link their existing financial and POS systems with any number of external sales channels including websites, marketplaces and wholesale customers.


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