There’s an old saying that “you have to spend money to make money,” but it’s also true that one of the best ways to make money is to avoid spending money in the wrong places. If your business is spending too much money on unnecessary business expenses – or worse, if your business is losing money due to theft by customers or employee fraud – you are letting good money go out the door. And this makes it harder for your business to be profitable because you have to work that much harder.
Here are a 20 ways to make more money and boost your profit margins by minimizing loss in your business:
- Reduce Administrative Errors: Many businesses make seemingly simple mistakes in their pricing, paperwork or bookkeeping that lead to big losses over time.
- Prevent Employee Theft: Employees stealing from their own companies is a major cause of “shrinkage” or business profit loss. According to RetailNext, employee theft makes up almost half of the $42 billion in retail shrinkage each year.
- Deter Customer Theft: Customer theft, such as shoplifting, leads to $10 billion in shrinkage each year.
- Get Inventory Management Software: Getting the right inventory management system in place can help you track your inventory, assess pricing and ensure greater accuracy and efficiency in your daily business operations – and you don’t have to be a big company to use inventory management tools. There are great online tools available for even the smallest retail businesses.
- Train Employees in Loss Prevention: Employees need to know that their job is not just to sell to customers – it’s also to help the company avoid losses due to shoplifting and fraud. Teach your team how to recognize shoplifters and explain to them the suspicious patterns of behavior that are often a sign of employee fraud.
- Protect Your Cash: Do you have lots of cash sitting around at your business in the cash register? That is a loss waiting to happen. Protect your cash with secure cash drawers or cash boxes on-site to keep your cash safe until you take it to the bank.
- Install Security Systems: Look into getting security cameras installed at your retail store location to help discourage potential shoplifters or catch thieves in the act.
- Perform Employee Background Checks: Do you know the true story of the people you’re hiring? Running a simple pre-employment background check can often help weed out potential thieves. Look for prior criminal convictions, especially for theft or related crimes, and talk to previous employers to make sure your new hires are trustworthy.
- Audit Your Inventory and Bookkeeping: Occasionally perform unscheduled inspections to double-check and audit your business’ books and inventory. Look for errors, missing inventory or suspicious activity. Consider hiring an outside accounting firm or auditing firm to help perform an annual audit of your business’ books.
- Use Mirrors in Your Store: Adding mirrors throughout the aisles of your store can help prevent shoplifting as it makes shoplifters feel like they’re being watched It also gives your salespeople better visibility around the displays.
- Warn Shoplifters with a Sign: It sounds like a small gesture, but it helps. If you put up a sign at your business in a prominent place saying, “Shoplifters Will Be Prosecuted,” this can be an effective way to warn shoplifters that there are big consequences if they choose to steal from you.
- Keep Dressing Room Doors Locked: Many shoplifters put merchandise into their purses or backpacks while in a dressing room, so make it harder for them to find a private place to steal from your business. Count their items before and after they use a dressing room.
- Say “Hello” to Every Customer: Simply greeting each customer as soon as they come in the door can help discourage shoplifters because they know that store employees have noticed their presence and are paying attention to them.
- Put Locks on Expensive Items: If you have any big-ticket items in your store, put them inside of a locked counter so customers cannot access the items without working with one of your employees.
- Do Your Due Diligence on Suppliers: Just like you need to run background checks on prospective employees, you should also be vigilant about prospective suppliers. Read reviews and ask for references. See if anyone has filed a complaint against the supplier for fraudulent behavior.
- Ask for Packing Slips: Every supplier delivery is an opportunity to prevent loss. Make sure you’re getting the right quantity and quality of items that you paid for. Sometimes simple mistakes or innocent misunderstandings can add up to big losses for your business.
- Monitor Perishable Inventory: Especially if you sell food or other perishable products, make sure that your inventory is not sitting too long on the shelf. If your inventory is stagnant, and your profits are literally rotting on the shelf, this is a sign that you need to change your inventory management practices and order less inventory of certain items, or hold a special sale on expiring inventory to get those perishable items out the door more quickly.
- Avoid Unused Space: If you have unused space in your retail storefront or storage facility, this is another area to save money. There’s no point in paying for unused space. Try to rent out the vacant space to another business, or renegotiate your lease to shrink the size of the space that you’re responsible for.
- Monitor Your Employees: Some small business owners make the mistake of being too trusting and too hands-off in managing their employees. The fact is, some of your employees might try to steal from you. It doesn’t mean you should be suspicious and overbearing, but try to maintain consistent standards of supervision and transparency. Don’t allow any one employee to have too much power to issue refunds or spend money on the business’ behalf. This is where employee fraud can happen.
- Put “Eyes” on Your Anti-Shoplifting Signs: According to Shopify, anti-shoplifting signs with eyes on them have been proven to double the rate of compliance against shoplifting.
Small business profit loss is a common part of doing business. Some people might steal from you, some employees might betray your trust or sometimes mistakes will be made. Profit loss can make work tougher on you, or you might have to take out loans when you might not need them. You can’t stop every single instance of these losses from happening, but with smart strategies and loss prevention tools, your business can reduce the amount of money that you lose to everyday shrinkage. Take aggressive action to reduce profit losses, and your profits will stop shrinking and will start growing!