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How does Cash pilferage happen in Retail Stores? 

Vidya Yedavalli, Retail Industry Expert & Senior Auditor

It is a general practice in retail stores to tally sales with total tenders received at the end of each day. It is part of store manager’s end of day activities without which the store cannot be closed. Most of the current software facilitates this by providing end of day reports. The store manager must only confirm the physical tenders against system numbers, and everything is taken care of. The management believes that when the system takes care of everything, there are hardly any chances of pilferage.  

This is only the partial truth. The system provides the opportunity to capture and report the correct tally between sales and the money received followed by calculation of the variance if any. The crucial responsibility lies with the cashier to record the system transactions accurately while billing and the end of day reconciliation process followed by banking of all the money as collected. 

What are the possible areas of manipulation and pilferage? #CashieringControls #ManualBills 

The cashier does not enter the exact tender received. In a hurry to close the billing, the cashier often chooses Cash as the mode of receipt when the actual mode can be a Card/ Coupon/ wallet payment because he is required to work extra to capture additional details such as numbers, bank details and the additional details, he chooses cash. This is also possible when customer makes the last moment changes. The PoS (point of sale) software obviously takes whatever is keyed in. 

Such swapping of the mode of payments for various transactions cause variance in tenders at the end of the day. To match the physical money received, the software provides a window to the cashier to correct and report the actual tenders before closing the day. This is a control activity. Any errors not corrected at this time stays in the system forever leading to issues in tender-wise reconciliations.  

As a management control, it is seen that once the overall sales vs tenders are matched, the finance team is satisfied with it. The secondary aspect of the impact of swapping the tenders is considered as operational limitation and accepted. 

The second window loss of control is when this cash is banked. The best practice is that the store banks all the sale cash on the next day. When the banking is not done daily and when sale cash is used for petty cash expenses or for any other withdrawals, the backend reconciliation of cash becomes complicated, and some cash is left with the store which is open to manipulation and theft. 

The manual bills made during downtime of PoS also is also a potential cause of siphoning the cash. These sales are not reported which causes inventory shortage on a future day. 

Credit Note and Coupon redemptions, discounts, issuing of freebies – all of these have potential cash pilferage chances. 

Risk Mitigation 

The mitigation of these risks can be done with a mix of several control activities. These include the right systems and processes, maker-checker controls, daily reconciliations, and verification steps that prevent pilferage and most importantly to set up the right environment and enable a ‘values driven system’ within the organization. 

Setting up the best practice is a matter of choice for the organization. However, if the shareholders want to be peaceful about their investments, the only choice is to bring the best possible ethical practices and environment of values followed by testing it from time to time and taking corrective action. 


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