Cash register shortage control: is compulsory return effective?
The high school senior was very excited for her upcoming school dance. Her dress was exquisite, and her shoes and handbag matched perfectly. She was saving money from her job at the local fast food restaurant to pay for everything she needed to make the event so special. There were flowers to choose from, a limo for her and her date and a few friends, photos, and plenty of extras that would make the evening a lasting memory. She had all of her future earnings planned for the next few weeks and had saved them for the special occasion. What she hadn’t planned on was the unexplained shortage of $20 in her cash until work. The restaurant had a policy that all missing cash had to be returned. “Oh no!” she thought she. “I didn’t steal any money, what am I going to do? I need every penny I earn to pay for the dance.”
Mandatory return policy
When consulting with retailers and restaurant owners, the conversation will often revolve around cash shortages. Some have bragged that they were simply not short of cash because of the policy they implemented. The policy required tellers to pay shortages at their checkouts. They further stated that stockouts may occur once or twice, but after paying for stockouts, a teller was rarely out of stock again. The shortage required no investigation, no investment of a manager’s valuable time, no disciplinary action, and no complicated cash-handling policies.
political implications
So, having investigated many, many cash shortages and implemented effective cash control programs for retailers and restaurants, paying for cash shortages is not part of the equation unless, of course, a thorough investigation has been done, the cashier he admitted to the cash thefts and restitution was part of the resolution. Reducing pay or making an employee pay the employer for lack of cash could result in the employee earning less than minimum wage and put the employer in danger of violating wage and hour laws.
unintended consequences
Making cashiers pay for shortages can also backfire on their intended purpose. Suppose the young cashier is making preparations to go to the special dance, as in the previous scenario. He needs money for his dress, matching shoes, tickets, hair and makeup, and maybe to share the cost of a limo. It’s all a big expense for the young woman, but she’s budgeting carefully and every dollar she earns is allocated as she prepares for her special event. She is a very good cashier and an even better employee. But unfortunately, her cash register falls short. She didn’t steal cash from the till. An error in counting change or mishandling of currency may have been the problem. Perhaps there are other possible explanations. Perhaps there was a mistake on the part of a manager in removing the excess cash from her register. Maybe another teller sorted transactions into her register while she was on break and mishandled the cash, or she stole it.
According to the rules, our cashier has to return the missing. She panics because she imagines that her perfect evening will be ruined. She can’t afford to pay for the shortage. Could she ask permission not to pay the shortage? Sure. Could she ask someone to lend her the money? Yes. But, she is desperate. She decides to get the money back by methods she knew other tellers were doing. They had been flagging fraudulent transactions and stealing money for longer than she had worked there and no manager asked them about it. They had often boasted about her “extra” money. She had always disliked her arrogant attitude about theft. She makes the decision for her. She would only take the amounts necessary to make her dance special, and then she would return them.
He calls dummy employee meals, overrides, refunds, and price reductions and pockets the cash. He’s stealing! It was so easy that he continues to take money that far exceeds the amounts he intended to pay back. The manager can quickly spot the shortage of cash registers, but neglected the other parts of cash management. The robberies continue long after his dance and his cash drawer is never short, and he never pays it back. She crossed the line, and now she’s a thief. If she gets caught, she could be arrested.
cash management
This story is true and has happened in many retail stores and restaurants. A strong cash management program does not require cash shortages to be financed. Cash shortage incidents should be recorded in the teller’s performance history. Cash management programs must include investigations of significant cash variances and implementation of progressive disciplines for each incident that requires additional training where necessary. Acceptable tolerance levels must be established for each component of customer transactions, such as voids, refunds, price reductions, and no sales. Performance in these areas must be monitored and disciplines established for poor performance. Every time an exception occurs outside the acceptable level of performance in handling cash transactions, the discipline is stronger. For example, the first time a teller is more than $3 short, a written warning is reviewed with the teller. The warning includes more serious repercussions with subsequent violations that can lead to suspension and possibly termination. The concept is called progressive discipline. The warning alerts the employee that his or her performance is being monitored, that proper cash handling is important, and establishes documentation of poor performance. The idea is to change behavior.
Effective loss control programs contain these elements of cash management. They are fair and equitable, setting “ground rules” for cash handling performance, and providing accountability for those employees who may be stealing through transaction manipulation. Requiring cash shortage recovery as the basis of a cash management program does not adequately address poor cash handling performance. It can even cash registers, but it does little to address the exploitation of the lack of cash controls.
By DB “Libby” Libhart, CPP