Small business retail advice: how to manage an employee theft situation

This article is another in our series of advice for small business retailers. It comes from our experience running a POS software company that serves small business retailers and from running our own retail shops.

How to deal with an employee theft situation in small business retail

Discovering theft by an employee can be debilitating and destabilising. To help you through this, we provide here our advice on what to do once you discover employee theft. The goal is to offer straightforward steps to help you get through as it is on the other side of this where you can find the opportunity to move on from the feeling of violation that often accompanies employee theft in small business.

1. Be sure of the facts, gather the evidence. Evidence could include, video footage of cash being take from the business, business records being modified to cover tracks, stock being stolen and more. Evidence does not include gossip, feelings and opinions. Without evidence you have nothing to proceed with.
2. Once you have all available evidence and if this clearly implicates one or more employee, quickly work out what you want.
   1. If you involve the police, they and, subsequently, the courts, will control the process including getting your money or goods back, an apology and more.
   2. If you don’t involve them, think about if you want the money or goods back, an apology, the person to stop working for you without negative impact on you – or a mixture of these.
   3. Check your insurance policy. Be sure you understand what you might be able to claim and in what circumstances. For example, your policy may require a police report. This could determine your next steps. If you are not sure what your insurance policy says, call the insurance company for advice. Knowing your insurance situation early is vital.
3. If the person committing the crime is a minor:
   1. Advise their parents or guardian by phone. Invite them to the shop or an independent location to see what you have. Have someone else there with you, as an observer. This meeting needs to happen quickly.
   2. Present the evidence.
   3. Listen for their response.
   4. If they (their parents) ask what you want, be clear.
   5. If agreement is reached, put it in writing there and then and all involved sign it, so there is clear understanding.
   6. If agreement is not reached you need to decide your next steps and engage them with haste.
   7. A return of the money, likely by the parents, should be in a lump sum, immediately. I have seen a parent pay $22,000 where a uni student studying psychology stole and out their career at risk by being caught. I have seen another situation where a 75-year-old mum repaid the $12,000 stolen by her adult daughter so the daughter did not have to tell her husband about her gambling problem.
4. If the person committing the crime is not a minor:
   1. Get an opportunity to speak with them face to face, ideally with another person there as a witness.
   2. Tell them you have evidence of them stealing from the business.
   3. Ask if they would like to see it. If they say no, ask what they propose.
   4. If they do want to see the evidence, show it and ask what they propose.
   5. If there is an offer of a full refund, an immediate resignation and never entering the business again it could be a good practical outcome. The challenge is you may not know the value of what has been stolen. Experience indicates that someone stealing cash will understate the amount considerably. I was involved in one case where they said they stole $10,000. The irrefutable evidence showed it was $75,000.
   6. Get any agreement in writing. If there is an offer to repay, our advice is to only accept an immediate lump sum. If the proposal is payment of, say, more than $10,000 over time, involve the police.
   7. If the person denies any wrongdoing, go to the police immediately.
5. If you have suspicions and do not have the evidence, put in place opportunities to gather the evidence without entrapping the target, without setting them up. I have seen situations where local police have provided advice and support for this. It could be worth asking them if you are in a regional or rural situation.

If you are nervous about meeting the person or their family, write down what you plan to say. Keep it short. To the facts. No emotion. Having a script prepared can be useful even if you do not read it.

If there is any risk of violence, do not have a meeting. Go straight to the police.

Time is of the essence here. The longer you know about the situation and the longer you do not act the less useful the outcome is likely to be.