As Good as Caught

May 8, 2002

There once was a pizzeria operator, whose store lost money every time he took a Sunday off.

Befuddled as to why, he began investigating records kept by his point-of-sale system and found an inordinately high number of cancelled orders on those days. As he looked a little deeper, he determined that bad product or late deliveries weren't to blame, his employees were.

"The owner called a few of his loyal customers ... to find out the problem," said Tom Bronson, president of Lewisville, Texas-based Rockland Technology Group, a POS manufacturer. "He discovered that not only did they get their pizza, but that they loved his product."

In nearly every case, the same manager and delivery driver had handled each cancelled order. Going back to his POS records, the operator tracked every cancelled transaction involving the two and then added them up. The math told him the duo had bilked his store out of $40,000 over the course of a year.

The pair was arrested, convicted and even served jail time. Without such detailed records provided by the operator's POS system, the case might have been hard to prosecute, said Bronson.

While this operator's horror story is extreme, it's not unique. According to Profiles International, an assessment survey company, roughly 36,000 U.S. companies are "stolen out of business" every year by their employees. Additionally, the 2000 National Retail Security Survey revealed that light-fingered workers lift more than $13.2 billion worth of goods and cash off American retailers annually.

Rockland Technology Group's Diamond Touch POS.

Closer to the pizza biz, the National Restaurant Association estimates that 2 percent of all restaurants' gross sales are lost to employee theft every year. Apply that to an average pizzeria with $500,000 in sales and you've got an operator who's $10,000 lighter in December.

A large percentage of the money stolen from businesses comes directly from the cash register. Clever thieves know cash can be hard to track, especially if the thief has the authority to void tickets or authorize price discounts.

But as in the case of the aforementioned pizzeria operator, some employees get caught. And more increasingly than ever, it's by a POS system.

Digital Eyes

Many modern POS systems employ what are called order logs, which essentially are records of every transaction. From the time an order is received at the shop, to the time it's delivered into the hands of the customer, a POS system can document customer names, addresses, telephone numbers and payment methods -- not to mention information about when, how and with what the pizza was made.

If an operator questions why a particular order was altered, the log will tell the story.

"The easiest way to do that is to look at what exceptions to the rule are happening," said Brad Van Parys, vice president of SelbySoft, Inc., a POS manufacturer in Puyallup, Wash.

Obvious red flags, Van Parys, said, are tickets opened at 3 p.m. but changed at 9 p.m. Alterations that reduce ticket prices also are obvious signs, he added, but many are done legitimately; a customer might give a delivery driver an unexpected dollar-off coupon that was entered into the system when the driver returned.

Wayne Tyson, owner of a Hungry Howie's Pizza in Greensboro, N.C., said having such detailed information on hand is a huge help to his business.

"There's always going to be theft; dishonest people will still do it the old-fashioned way, like handing the pizza over the counter," Tyson said. "But with our POS ... each employee has their own server number, and I can track suspicious tickets and ask for reasons."

The level of detail delivered in each transaction report depends on each POS systems. Some point out basic anomalies that occur in a given shift or business day, while others provide particulars.

"Reports are produced for each stage, as well as overall reports showing the history of each ticket, including everyone who touched it and the time," said Bronson. The "exception log" utilized by Rockland's DiamondTouch system, he added, flags price changes, voids, manager overrides and late dispatches all in one report.

Should an operator want to check that information while away, those "exceptions" can be sent automatically to a pager or cell phone.

Gary Cooney, owner of four-unit Waldo Cooney's Pizza in Chicago, likes this feature.

"If it's suspicious, I'm able to call the customer and check into it," said Cooney, adding that the pace of modern business necessitates the help of a POS. "Twenty years ago you took orders by pen and paper. You can't do that now; it just keeps getting busier and busier. Plus it's too complex."

Since the owner can't always be in the shop, some POS systems allow them the ability to set specific security levels for each employee. This allows some to have a high-enough degree of access to alter orders, while others may only have enough clearance to enter a customer orders. Cooney personally assigns employee security levels from 1 to 10 -- one being minimal access -- to manage access.

SelbySoft SP-1 POS.

To ensure employees don't access the system using another's password or magnetic stripe card, companies like Rockland are increasingly employing biometric technology, such as fingerprint scans, to pinpoint who gets in.

Still a Cash Business

While operators who don't use POS systems argue that employee accountability still boils down to watching the money trail, pinning the blame on guilty parties is much more difficult without a detailed paper trail. As some operators have found, said Van Parys, computer-generated documentation often can be the smoking gun that sends offenders to jail.

"When you can present that a manager worked on certain days and certain things happened on their watch with their ID number, it becomes pretty bulletproof," said Van Parys.

Bulletproof if operators use it. According to Bronson, many either don't, don't remember how to or forget about such features altogether.

"Many times, when a new (POS) customer opens a store, they get caught up in the day-to-day operation of the business, and forget about the behind-the-scenes functions of their new POS system, such as security," said Bronson. They master the basics alright, such as order taking and inventory, but Bronson added that too few operators will make the effort to regularly analyze what's happening beyond their oversight. "If a store owner watches the tools that are already available in his POS system, he can stop and even prevent this type of theft from occurring."

Topics: POS

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