The high school senior was so excited about her upcoming school dance. Her dress was exquisite, and her shoes and purse matched perfectly. She was saving money from her job at the local fast food restaurant to pay for all she needed to make the event so special.

There were flowers to choose, a limo for her and her date and a few friends, pictures, and a whole lot of extras that would make the evening a long lasting memory. She had all her future earnings planned out for the next few weeks and earmarked for the special occasion.

What she had not planned for was the inexplicable shortage of $20 on her cash till at work. The restaurant had a policy that all cash shortages had to be paid back. "Oh no!" she thought. "I didn't steal any money; what am I going to do? I need every penny I earn to pay for the dance."

Mandatory Payback Policy

When consulting with retailers and restaurant owners, the conversation will generally turn to cash shortages. A few have boasted they simply did not have cash shortages because of the policy they put in place.

The policy required cashiers to pay back shortages in their tills. They further stated that shortages may occur once or twice, but after paying for the shortages, a cashier was not often short again.

The shortages required no investigation, no investment of a manager's valuable time, no disciplinary action, and no complicated cash handling policies.

Policy Repercussions

So having investigated many, many cash shortages and implemented effective cash control programs for retailers and restaurants, paying back cash shortages is not part of the equation unless of course a thorough investigation was conducted, the cashier admitted to cash thefts and restitution was part of the resolution.

Docking pay or having an employee pay the employer for cash shortages could result in the employee making less than minimum wage and jeopardize the employer of violating wage and hour laws.

Unintended Consequences

Making cashiers pay back shortages may also have an opposite effect of its intention. Suppose that the young cashier is making preparations to go to the special dance, as in the scenario above.

She needs money for her gown, matching shoes, tickets, hair and make-up, and perhaps sharing the cost of a limo. It's all a great expense for the young lady, but she is budgeting carefully and every dollar she earns is allotted as she prepares for her special event. She is a very good cashier and even better employee.

But, alas, her cash drawer comes up short. She didn't steal any cash from the till.

A mistake in counting back change or mishandling currency may have been the problem. Perhaps there are other possible explanations.

Maybe there was a mistake by a manager removing excess cash from her cash register.

Maybe another cashier rang transactions on her register while she was on break and mishandled the cash - or stole it.

According to the rules, our cashier has to pay back the shortage. She panics because she envisions her perfect evening will be ruined. She can't afford to pay back the shortage.

Could she ask for permission to not pay back the shortage? Sure.

Could she ask someone to loan her the money? Yes.

But, she is desperate. She decides to get the money back by methods she knew other cashiers were doing. They had been ringing fraudulent transactions and stealing money for longer than she had worked there and not one manager ever questioned them about it. They had bragged often about their "extra" money.

She had always been disgusted with their cavalier attitude about stealing. She makes her decision. She would only take the amounts needed to make her dance special, - and then pay it back. She rings fictitious employee meals, voids, refunds and price reductions and pockets the cash.

She's stealing! It was so easy that she continues to take money far exceeding her intent to replace the money she had to pay back.

The manager can quickly spot register shortages, but neglected the other parts of cash management. The thefts continue long past her dance and her cash drawer is never short - and she never pays it back. She crossed the line, and is now a thief. If caught she could be arrested.

Cash Management

This story is true, and has occurred at many retail stores and restaurants. A sound cash management program does not require cash shortages to be reimbursed.

The incidences of cash shortage should be recorded in the performance history of the cashier.

Cash management programs should include investigations of significant cash variances and implementation of progressive disciplines for each incident that require retraining when needed.

Acceptable tolerance levels should be established for each component of customer transactions such as voids, refunds, price reductions, and no sales. Performance in these areas should be monitored and disciplines established for poor performance.

Each time an exception occurs outside the acceptable level of performance in handling cash transactions the discipline is stronger.

For example, the first time a cashier is short more than $3, a written warning is reviewed with the cashier. The warning includes heavier repercussions with subsequent violations that may lead to suspension and possibly termination. The concept is called progressive discipline.

The warning puts the employee on notice that their performance is being monitored, that proper cash handling is important, and establishes documentation of poor performance. The idea is to change behavior.

Effective loss control programs contain these elements of cash management.

They are fair and equitable, establish the "ground rules" for performance in cash handling, and provide accountability to those employees who may be stealing by manipulating transactions.

Requiring the payback of cash shortages as the foundation of a cash management program does not adequately address proper cash handling. It may even the cash tills, but does little to address exploiting the lack of cash controls.

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