Many of the opportunities common to tradesmen and delivery drivers exist for outside salespeople, as well. This is attributable to the autonomous nature of these away-from-office employees.
Different opportunities present themselves, dependent on whether the sales representative is a commissioned, salaried or combination worker.
Outside salespersons also have greater authority regarding purchases, refunds, returns, exchanges and credits, along with special pricing and deal-making.
Refunds & Returns
Excessive refunds for merchandise should be analyzed for patterns that may reveal select clients or select items have higher than normal refunds and returns. This pattern and ratio should be consistent with other sales reps’ data. Particularly if the sales rep is not required to account for an turn in the refunds and returns, the practice may allow them to create false refunds, splitting the amount with the retailer or customer. As well, if the rep does not return the items, they may be creating a return for which the client gets credit, then reselling those items elsewhere for cash, or swapping goods with other salespeople.
Problems with refunds, returns and credits were some of the most prevalent fraud and theft concerns with which we dealt regarding salespeople.
Scoring (Low to High) 0-20
Rebates & Credits
Providing credits, rebates and incentives to a client is a proven sales technique that may boost the employer’s sales. However, it also is an open door for fraud. Some small retailers purchase minimal quantities or may be incentivized to buy a new product with a cash credit. The salesman may have authority to conduct these cash transactions but may be falsifying those transactions to their benefit.
Sometimes, the client claims to have not received all the goods and the salesman issues a credit, which the two split.
Rebates and credits offer an avenue for the sales rep to move goods from one client to another surreptitiously.
In other instances, the collusion may exist between your bookkeeper and the sales rep or even the shipper.
Scoring (Low to High) 0-20
Simple theft
This is the most common method of loss. Whether the sales rep steals from the stock area, from outgoing shipments or from returns, he can explore the opportunity that autonomy creates.
Scoring (Low to High) 0-10
Bonuses & incentives
One buyer for a large pharmacy chain would “provide” incentives and bonuses in the form of specialty items. In one instance, he supposedly gave a vey high-end set of dressing robes to a client as a loyalty reward but kept the items for himself. Another rep kept a sample table saw for himself, while another claimed to have provided a large beverage cooler to a client, while keeping it. We have seen several instances of salespeople (as well as pharmacists and employees) hoarding sample medicines, makeup and over-the-counter samples, intended for the s=client but never reaching them.
Scoring (Low to High) 0-10
Forged and false documents
A salesperson we apprehended routinely created a couple of duplicate invoices for clients, then picked up those payments and pocketed one. Another also created both an invoice and return of those goods. By forging a signature on documents, one rep was able to generate thousands in illegal income.
Scoring (Low to High) 0-20
Mileage & expenses
This is very common among all employees who are paid an allowance for meals, entertainment and travel. False claims amount to huge losses for employers. However, contract salespeople also benefit from these false expenses.
Scoring (Low to High) 0-20
Commissions
Salesmen tend to promote the items that generate the highest commissions. When those products fail to sell, they may be provided under a “guaranteed sale” agreement, allowing the buyer to return them. Some businesses fail to recapture the commission paid, while other salespeople process returns based on damage, so that the recapture is not triggered.
Scoring (Low to High) 0-5
Rerouted sales
Contract (non-employee) salespeople may be brokers, carrying more than one product and representing more than one company. Where they receive bulk pricing for the client who purchases larger quantities, the opportunity exists for them to create a dummy company that makes the bulk purchase, capitalizes on the desal and then resells the merchandise to smaller purchasers for a higher price.
Scoring (Low to High) 0-10
Under-the-table sales
One route operator who worked on commission regularly loaded his vehicle with more goods than the bills of lading showed, selling the items to private clients.
Scoring (Low to High) 0-10
Quid pro quo
Deal-making is at the heart of sales and offering a deal in exchange for another item or service is used as an incentive to create sales. Salespersons who use this to create cash back or merchandise exchange do so at the cost to their employer. This may include such items as cooperative dollars for advertising, free items for a draw or event and complementary goods.
Scoring (Low to High) 0-10
Sweetheart opportunities
One dairy processing client was experiencing inventory shortages in the butter category. We placed an undercover operator in the plant. Within two weeks, we uncovered two problems. The first was a collusion arrangement between the shipper and one of the home delivery sales contractors. The shipper was allowing the driver to load additional merchandise on his truck for private sale to several residential clients, in exchange for a part of the proceeds. The other was caused by carelessness of the shipper. A second delivery driver who delivered to numerous restaurants and small grocers would accumulate cases of butter on a pallet near the loading doors. Whenever the shipper left the area, the driver would slide the pallets onto his vehicle, for sale to select clients. One was a sweetheart deal between shipper and driver, the other a sweetheart deal between driver and outside clients of the company.
Scoring (Low to High) 0-10
Lax cash transactions
Where salesmen or franchise operators carry such items as chips, soft drinks and other impulse buy items and are allowed to sell goods directly to the stores, an opening for illicit sales emerges. Without proper purchase orders (or work orders, in the case of tradespeople) that originate in the business office, the tradesperson, operator or salesman can create his own transactions with select, willing buyers.
Even government is not exempt from risk. One parking meter collector routinely skimmed cash from the meters that he serviced. While most meters now are digital or connected directly through electronic purchases, there are other cash devices, vending machines and ATMs that either capture and record sensitive banking information or still collect cash (specially in remote areas).
Other areas where money can easily be skimmed include VLTs in private bars and facilities, if there are not proper controls in place.
Scoring (Low to High) 0-10
Close relations between clients and salespeople
A trusted employee of a small pharmacy retained close friendships with two salespeople who delivered confectionery and giftware. The employe would receive goods, verify the counts and sign for the merchandise, but, very often, some of that merchandise was missing. At least, it was missing from store inventory. She would leave her vehicle unlocked and the salespeople would put the items that she had diverted into her car. Later, she would split the proceeds of selling these items with the salespeople, who also were friends outside of work. Be aware of close relations with suppliers and suppliers’ representatives. Rotate staff irregularly and unpredictably through the receiving function if you do not have a designated shipper/receiver. Use outside cameras to monitor your parking lot.
Scoring (Low to High) 0-10
Bills of lading and purchase orders
Matching bills of lading and delivery slips to purchase orders or work orders to purchase orders seems tedious but is a vital part of loss management. We have often found that bookkeeping staff neglect to match prices quoted on the purchase order with final prices charged, and also often find that the discrepancies are not in favour of our clients. While some may be inadvertent or careless, many also were intentional.
Matching paperwork is imperative to ensure weight, quantity and price are all consistent with the original orders. In some cases, the office staff were working in collusion with the suppliers, but in most cases the problems were solely created by the supplier or workman.
Scoring (Low to High) 0-10