5 Tips on fighting financial loss in your franchise


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Fighting financial loss in business

You’re working hard, the sales numbers are good and yet the profit is not what it should be. While not easy to contemplate, your business may be suffering by losing money due to theft or fraud. If this is the case, take action to identify and tackle these two common causes of financial loss.

The leaky bucket

There are two types of financial loss in a small business; from outsiders and insiders.

  1. Theft from outsiders is relatively easy to detect and prevent. Unfortunately, in most instances theft comes from within the business. Here the leak is slower and often harder to detect. It’s also more difficult, as the loss due to the actions of a trusted employee, can be doubly painful.
  2. Not every financial loss in a business is due to theft or fraud. In some cases, your employees may be unintentionally wasting product, undercharging or forgetting to invoice for services. Here, training and regular communication regarding problem areas should go a long way to prevent this type of loss.

Preventing theft and fraud

Here are five tips to help you root out theft and fraud.

Tip 1: Know who you’re working with

Have some type of background screening on employees – phone references and conduct criminal and credit checks. If you’re hiring someone who handles money who filed for bankruptcy, you want to know that. If you’re hiring someone who has been arrested for substance abuse, you want to know that too.

Tip 2: Understand the weak moments

Know the weak moments in your business – the busy times where illicit activity may go unnoticed.

Tip 3: Monitor stock levels

Monitoring stock precisely is one of the best ways to determine whether you are the victim of theft. Often, it’s not only stock that goes missing. Other consumables including printer cartridges, cleaning material and even toilet paper may go missing too.

Tip 4: Watch the numbers

Keep a close eye on your bank account and flag irregular transactions. In a retail environment, make sure that staff ring up every transaction – charging the customer and pocketing the change is one of the easiest ways to steal money.

Tip 5: Know your regular visitors

Commercial bribery is all too common. For example, someone comes in to see the same employee all the time. After a while, they develop a relationship, and your employee may give them free merchandise to get a split of the profit.

Lie Detection Test in FranchisingLie detectors and the law

A polygraph or ‘lie detector test’ can be used to verify a person’s truthfulness. Employers are allowed to use this test in the case of suspected fraud and any dishonest behaviour. It is against the Constitution to compel a person to undergo a polygraph examination, unless she or he consents to it and this is in writing.

The employee should be informed that:

  • the examinations are voluntary;
  • only questions discussed prior to the examination will be used;
  • he/she has a right to have an interpreter, if necessary;
  • should he/she prefer, another person may be present during the examination,
  • provided that person does not interfere in any way with the proceedings;

Polygraphists have been accepted as expert witnesses at CCMA hearings whose evidence needs to be tested for reliability. The duty of the commissioner is to determine the admissibility of the evidence. A polygraph test may not be interpreted as implying guilt but may be regarded as an aggravating factor especially where there is other evidence of misconduct.

Ask the experts

Have a query about dealing with financial loss in your business? Ask the financial expert at whichfranchise.co.za for their advice on how to best combat this.

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