Store Managers: Manipulating Audit Results

Spotting the Signs of Manager-Related Shrink and How to Avoid It 

The single largest shrink risk at store level is from a dishonest store manager. Not always your first likely suspect, but dishonest store managers can steal more money from a convenience store than dishonest vendors, employees or customers–combined! 

With c-store profits reported at $859.8 bn in 2023 and merchandise shrink over $90 bn yearly according to NACS, paying attention to a few indicators at the store level can help senior management reduce manager-related shrink. Start boosting profits with these tips. 

MANIPULATING AUDIT RESULTS 

Spotting the techniques that store managers use to fudge audit results is the number one way to avoid losing thousands of dollars for your company. 

INVOICES THROWN AWAY   The most common form of manager theft is the result of discarded invoices.  Example: At one convenience store chain, a store manager was discovered to have been throwing away invoices for product that was delivered to the store. The outcome was a loss of $50,000 over a three-month period. 

ALTERED INVOICES    Another common technique is when the manager under-reports the true total of an invoice, then pockets the difference. Example: For an invoice that shows a total retail value of $1,200 reflecting a 100% markup in $600-worth of product at wholesale, managers have been found to reduce the wholesale value by half, therefore pocketing $600 in diverted sales. 

FABRICATING AN INVOICE    This is where a manager falsely creates a vendor invoice, changing actual dollars into a desired amount, stealing the remainder. 

COMPANY MONEY FOR VENDOR PURCHASE WITHOUT AN INVOICE    This scenario is when a store manager uses company money to pay for an invoice that was never entered into the system. 

MONEY ORDERS SUBSTITUED FOR CASH    Some deceitful store managers have substituted off-the-book money orders for cash. The money orders are put in the bank deposit according to procedure, but a withdrawal of the same amount is made. 

STOLEN CASH, CASHIERS TAKE BLAME     Managers steal from the register by casting blame on someone else, usually a clerk that runs the register. This employee is written up for the shortage. 

DODGE THE SHRINK AND AVOID REGRET 

Being vigilant and savvy sums up what c-store business leaders must do to avoid manager-related theft at their stores. Knowing trends within your stores can also head off trouble before it gets out of hand. Take this advice on how to outsmart dishonest store managers: 

1. Supervisory Spot Checks–make regular rounds in stores to do mini-audits to verify inventory.
2. Accounting Spot Checks–look for patterns or trends outside of the norm. 
3. Compare Numbers with Like Stores–track and trend store performance with similar locations and investigate deviations. 
4. Keep a vendor log–match vendor invoices with expected vendor delivery days. Cross-reference the log when completing an accounting check. 
5. Be familiar with invoices–identify company logos, columns, and other information so it’s easier to tell when an invoice has been altered. 
6. Research “missing” invoices–investigate any invoices that should have been paid that vendors claim were “missed”. Follow up with vendors to have them reconcile their unpaid invoices within 60 days. 
7. Look for abnormal drops in sales–know what your average revenue should be. 
8. Implement shrink training–conduct specialized training to prevent and identify shrink with supervisors and upper-level management. 

When you want a professional staff to help with shrink problems, call the c-store specialists at Quantum Services. Our trained auditors can help you spot collusion between managers and vendors, and see the trends that can turn into big trouble before it becomes a large loss. 

 The bottom line is to pay attention to your business, know the trends, and head off trouble before it gets out of hand. Our sales team is ready to field your questions! Contact us at 800.777.9414.