When it comes to loss prevention, you may have heard the saying "Better safe than sorry!" which is used a lot for good reason. A 2018 survey by the National Retail Federation found that in 2017, shrinkage cost businesses 1.33% of their annual sales.
This may seem like a small percentage, but if you're managing the books at a small business, you know that every penny counts!
Shrinkage can potentially happen in your small business in a lot of different ways — from admin issues and external theft, to inventory mishaps and security issues. And while you may typically hear about shrinkage being a more common occurrence in retail businesses, other small businesses (like general contractors, for example) are also at risk.
In this article, we'll cover 7 suggested ways your business can consider to practice loss prevention to both help save you money in the long run and also potentially avoid costly insurance claims.
For a lot of small business owners, whether you're making a product or performing a service, your tools and equipment are crucial to getting a job done. And if you use equipment or tools in your work, then you also know that they can cost a lot of money.
If that’s the case, you want to make sure you do everything you can to protect your equipment and tools. There are a few things you can do to protect these valuable items:
You can invest in EAS (electronic article surveillance) tags. There are many types of tags available that you can attach to tools or equipment that you either keep at a physical location or that you bring along with you to your job.
At the end of the workday, you should always make sure to take your tools and equipment out of any vehicle you use to transport them to a job. This can help reduce the risk of a break-in.
You can lock up your equipment in a secure location once you're finished using it.
We don't like to admit that it may happen to us, but the probability of external and internal theft for small businesses can be real.
Theft prevention isn't always what you want to cover with new employees, but it's necessary. When onboarding new employees, review the signs of what theft could look like. There are signs of shoplifting you can review and practices you can put into place in your shop to help prevent it. For example, hang signage that lets shoppers know you have security cameras and are watching, or place mirrors around the entrances of the shop so you can see otherwise-hidden angles.
However loyal and trustworthy you deem your employees to be, it's still worth taking precautions to ensure theft prevention from the inside. This means remaining hypervigilant and involved as a business owner.
One way to ensure that your employees aren't committing internal theft is to take control of inventory management. Depending on your business size, you can choose to utilize a tool like an asset tracker.
If your business isn't large enough to warrant the cost of an asset tracker like the one above, don't worry — there are plenty of options when it comes to managing your inventory. However you choose to do it, ensuring that you have a way to carefully track and manage your inventory is a good way to stay on top of products both coming in and going out of your business.
There are many ways to track your inventory, and one way is to make sure that all of your business's software systems are up-to-date.
Connecting your point-of-sale (POS) system to an inventory management tool could help you keep track of your inventory. But remember, your employees (and you) are human, so making sure that you both keep your systems and softwares up-to-date, and that you all understand how to appropriately use them (and any new features) is important.
Administrative errors by employees can potentially contribute up to 21% of shrinkage in a business. So it's important to take time when learning and using new software.
If your business has a physical location and you store and sell goods inside, then it’s highly likely you’ll want to protect all of your hard work and inventory. There are a few ways to do this. You can consider allocating employees to secure your location, either officially (such as having them stand by entrances for theft prevention) or unofficially (like training them to be vigilant of a customer's in-store journey) for in-store loss prevention.
You also want to ensure that your business's maintenance is up-to-date. Is the building up to code? Ignoring any fixes that are needed could result in an accident like a leak, fire, or flood that could ruin your inventory and prevent your business from operating until repairs are made. You can help protect your business by taking care of those things ASAP.
The above mentioned measures could also help protect your customers. 10% of small business claims each year are for slip & fall injuries. And those injuries could mean not only a lost customer, but also the possibility of a claim.
Finally, do you have a company policy when it comes to your security measures? If not, you may want to set one up. Keep an updated record of who has keys to which entrances, rooms, and safes within your business. Who has access to get in or out? Be sure to keep documentation of this in case of any accident or theft.
Did you know that you could potentially be losing money due to your return policy? Customers can buy items and return them once they've used them, or even steal them and later attempt to return them for cash.
To prevent this, make sure that your policies are well-documented both internally and externally. Create documentation to be reviewed by employees when they're hired and on a regular basis, and be sure to display your policy at a checkout point, whether it's in-person or online.
Does your business perform services instead of selling products? This tactic can still be used. Before you agree to work with a customer, have documentation in place to note your policies around redoing certain services and what is and is not a reasonable expectation. If you need help, we suggest consulting with a lawyer on the best language to use specific to your business. You also may be able to find guidance at a local SBA center.
If you have a physical location, it's a smart idea to invest in a security system for theft prevention. Having security cameras that are apparent to customers can be a great way of potentially deterring theft — and of course, if you do have a theft, the security system can help provide a video record of the theft.
What if you bring your work on-the-go? With today's technology, there are options when it comes to loss prevention for you, too. Investing in a security camera for your vehicle can help monitor your tools and equipment; there are both wireless products and vehicle-powered options available on the market.
The functions and features do vary depending on the brand and make of the tool, but some features that are generally available with these surveillance tools are: controlling it via an app, real-time GPS location, streaming, and motion and sound detection.
You may be thinking that with tips like the 7 above, your business will be protected from all sorts of loss.
But the reality is that as business owners, we're only human, meaning there will always be room for error, oversight, or accident. Having business insurance coverage can help ensure your business is protected in the event you suffer a loss — whether it be stolen tools or a customer slipping and falling at your business location
If you're unsure of what to expect when it comes to coverage, you can check to see what coverage options the nation's top providers have available by using our free quote comparison tool here.
A business owner's time is valuable. Investing in a small business insurance policy can help ensure that in the event something happens, there are people ready to help you with those claims.
But while your policy is protecting you, you also can take proactive measures to protect your business by putting the above 7 steps into practice.
It's never too late to start protecting your business!
I’ve told stories since I learned to talk and written since I could hold a pen. As a small business owner myself - I'm a freelance writer and yoga teacher - I love contributing to the entrepreneurship community in different ways (including writing for Simply Business!). When I’m not drafting articles for SB, I can be found on my yoga mat, perusing an indie bookstore, and writing (with my cat nearby of course).
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.