Inventory shrinkage -- financial loss caused by wastage and theft -- is a real problem that demands real solutions. And the best solution, hands down, is a rugged loss prevention program, which can protect both you and your merchandise, not to mention your bottom line.

Of course, loss prevention is about more than inventory shrinkage. In fact, while they’re especially relevant in retail, loss prevention strategies are useful across the board for any business that needs to protect its money, its equipment, its integrity and its information. In essence, loss prevention is strategic insurance, and everyone needs the coverage.

A strong loss prevention program addresses the most common causes of inventory shrinkage and financial loss, including:

1. Employee theft, which is the No. 1 source of inventory shrinkage.
2. Shoplifting, which costs retailers approximately $10 billion every year and is therefore a major focus of all retail loss prevention efforts.
3. Administrative error, due to paperwork and pricing snafus that are often overlooked, even by a loss control consultant.
4. Vendor fraud, a rare but real occurrence that deserves loss prevention attention.
5. Computer fraud, a growing concern for the modern-day loss control consultant.

Action Steps
The best contacts and resources to help you get it done

Loss Prevention Step One: Hire and Train Honest Employees

Your employees are your first line of loss prevention defense. It therefore pays to hire trustworthy employees to begin with, and to create a culture of honesty and integrity within your workplace.

I recommend: As part of your preemptive loss prevention efforts, perform background checks on new hires. You can search for a professional screener via the National Association of Professional Background Screeners; choose a company like DISA, which also performs drug tests.

Loss Prevention Step Two: Invest in Loss Prevention Equipment

Tools like burglar alarms, mirrors, security cameras, counterfeiting detection devices and electronic article surveillance (EAS) tags can be a huge help to your loss prevention efforts.

I recommend: A loss control consultant, such as those at Loss Prevention Specialists, Loss Prevention Systems and Howard Services, can help you outfit your business with the right loss prevention solutions. Do-it-yourselfers should turn to loss prevention equipment vendors such as IndustrialSecuritySolutions.com and ADT Security Services. Find more specialists in business property safety and security at Business.com.

Loss Prevention Step Three: Protect Valuables

Make it part of your everyday loss prevention routine to lock up laptops and other valuables, including important files in secure cabinets and desk drawers, at the end of the day.

I recommend: Every business ought to have a secure safe in which it can store extra cash and valuables; buy one online from companies like Nationwide Safes and Corporate Safe Specialists.

Loss Prevention Step Four: Secure Your Data

A successful loss prevention program includes electronic measures, too. Consider installing firewalls, for instance, and password-protecting important files in order to keep proprietary information private and secure.

I recommend: While companies like Vontu and Orchestria specialize in data loss prevention, high-profile software companies also offer loss prevention solutions. Consider, for instance, McAfee’s Data Loss Prevention.

Loss Prevention Step Five: Purchase Extra Insurance

More insurance is always better than less when it comes to loss prevention. Look for policies that explicitly cover outside crime, internal theft and computer fraud.

I recommend: Companies offering crime or loss prevention insurance include Nationwide, State Farm and The Hartford.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you're worried about theft, include police outreach in your loss prevention program; make sure your local police department knows your business hours and adds your company to its beat.
• •  Retailers should utilize their POS system as a critical tool within their retail loss prevention program. Closely reviewing register transactions and reports every day is the easiest way to fight and monitor inventory shrinkage.
• •  A good loss prevention strategy is to alter your routine. Making bank deposits at different times, for instance, can throw both internal and external thieves for a loop.
• •  The design of your store or office can easily impact loss prevention. Consider reconfiguring your desks, offices or aisles in order to maximize light and minimize privacy; spaces that are dark and secluded are more theft-friendly.