How Loss Prevention Audits Are Used

Loss prevention audits should help drive performance.

inventory shrinkage, how to calculate shrinkage in retail, loss prevention audits

An audit is a tool – not a test. Loss prevention audits should serve to make a store or other facility more efficient and more profitable, working with the store teams and providing a means to train and develop the associates. It is vital that we approach our audit functions with the appropriate understanding of our role in order to most effectively serve the company, the store, our associates and our customers. That understanding should be reflected in the way that loss prevention audits are constructed, completed, and presented. The spirit of the entire audit process should be one of growth and progress.

There will be challenges and opportunities, which should be addressed accordingly:

  • This is what we found…
  • This is why it’s an issue…
  • Here is how it should be corrected…
  • Establish an action plan that facilitates correction and improvement…
  • Establish a timeline to follow up on the areas of opportunity…

 

However, there should be few, if any, surprises. The purpose is to reinforce guiding principles and practices that should already be familiar to those being audited and evaluate compliance with known standards of performance.

While there may be a natural tendency to focus on challenges and opportunities, it is just as important that we identify strengths and recognize positive performance when reviewing compliance. Too often, there is a failure to acknowledge achievements during the audit process, which as a result tends to emphasize a negative undertone. This tendency can and will influence the entire process, and must be addressed in order to make the impression and realize the results that we hope to accomplish. Our methods and mentality should reflect the approach of a teacher, recognizing the importance of training, education and awareness as a means to send a message and improve our stores.

A loss prevention audit should do more than evaluate performance. A well-managed program should also serve as an effective training tool that enhances performance. The auditor must demonstrate a strong working knowledge of the company’s operations and be viewed as a subject matter expert in regards to shrink and operational controls. But information alone doesn’t make the auditor an “expert” any more than it will ensure successful results. There has to be a skill beyond the statistic or the policy or the practice that models execution.

Driving Performance with Loss Prevention Audits

The auditor must learn to stir performance through training and development. Compliance is a result of information effectively learned so that it can be applied, and behavior effectively inspired so that it will be modified and maintained. While results may occasionally improve otherwise, only when both exist in concert will we see consistent success.

In that same light, it is important that we recognize and communicate the difference between “doing something” and “doing something the right way.” The process is often just as important as the end result, and it is critical that the auditor keeps this in perspective when they conduct loss prevention audits and interact with the staff.

For example, a refund document may have an “Approval” signature, but if the document was “approved” four hours after the transaction took place, then the policy would not have been appropriately enforced and the purpose of the “approval” will have been defeated. EAS tags may be placed on designated products, but there are often specific tagging standards that determine where and how it is tagged in order to maintain consistency, improve service, limit product damage and enhance product merchandising. Register tape may be “secured” in a drawer, but may not be properly secured in a locked drawer. Ensuring that policies are correctly followed must be an emphasis of the audit process.

It is no coincidence that there is a direct relationship between audit performance and inventory shrink results. Performance is fortified when a well-managed audit program is used to improve operational compliance. Loss prevention audits can be a tremendous tool in helping us to validate performance and bring attention to store strengths and deficiencies, but it is how that information is used that will add value to the organization. We have to maintain a positive, objective approach when evaluating compliance. We should recognize exceptional performance when it exists. We should not only identify opportunities for improvement, but educate the store on the reasons why it’s an issue, how it can potentially impact the store, and how we can make improvements. This requires thought and creativity, not just marks on a scorecard.
LPF LogoBy capitalizing on opportunities to enhance our knowledge and education, we are making an investment in our own future. To learn more about developing your leadership skills and the certification process, visit losspreventionfoundation.org.

 

This post was originally published in 2016 and was updated July 17, 2017. 

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