How service depts. can get ahead of theft

Theft is a substantial risk facing dealerships. However, the sources might surprise business owners. Often, their own employees can pose equal or more significant risk than those on the outside.

A 2020 study from the Association of Certified Fraud Examiners estimated the median loss from employee fraud cases at $125,000. Unfortunately, many initially go unnoticed, with approximately 71 percent of employee theft cases lasting more than six months.

Troy Tepp, 55, director of safety services for commercial lines at Sentry Insurance, which insures more than 3,000 dealerships and automotive service shops, spoke with News Editor Dan Shine in December to discuss the steps fixed ops departments can take to prevent theft. Here are edited excerpts.

Q: In a service department, what are some areas where theft could occur, and what are some common items stolen?

A: Dealership service departments typically carry a higher risk because of their more extensive inventories and how easy supplies can be sold. This includes parts like rims, alternators and tools. We also see theft related to financial statements and services. These can include an employee fraudulently writing off the internal cost of a dealership service or pocketing cash payments. As more operations rely on technology, dealerships now face an increased risk of sensitive data theft as well.

Service departments are already busy places. There are staffing shortages. How can these departments carve out the time and resources to prevent theft? Is it worth it?

Service departments are a large revenue source for most dealerships, yet they're also the primary target for theft. Preventing just one incident could save a dealership thousands of dollars. Fortunately, most safeguards shouldn't interrupt daily operations. Dealerships can incorporate passive technology like video surveillance and conduct background checks as part of their hiring process. Owners can also limit access to inventory, on-site cash and sensitive information to reduce their risks without added time commitments.

What are some suggestions to reduce theft?

Theft can happen both inside and outside your dealership, and therefore your plan should address both. To help protect against outside risks, secure entry points to your building. You can do this by maintaining proper lighting, using security cameras and limiting the number of employees with access to keys. Your internal risks require a similar commitment. Develop a written policy outlining your business's disciplinary actions if theft is identified and require employees to acknowledge your document by signing it. Frequent inventory checks also can help dealerships detect signs of theft earlier rather than later.

Is there one person who should be given the responsibility of monitoring operations to reduce theft?

We encourage dealerships to separate duties among employees to allow for more cross-checks during every stage of a transaction. For example, the employee responsible for record-keeping should be different than the employee who signs checks from your business. Due to smaller staff sizes, we also encourage owners to stay actively engaged with daily operations as an additional layer of supervision.

Are training or consultants available to help service departments take stock of how they operate and where improvements can be made to curb theft?

A second set of eyes can help prevent theft from going unnoticed. As an insurer, we have safety consultants who can provide employee training and help dealerships create an official theft prevention plan based on their risks and operations. An independent auditor can also help review financial statements and discover red flags. Collaboration helps ensure you stay ahead of theft instead of months behind it.