GNYADA April 2019 Newlsetter

Employee Steals $250,000 in Parts BEST PRACTICE: CoNDuCT REGuLAR PARTS AuDITS

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To avoid a similar situation, dealers should do the following: 1. Implement proper inventory counting procedures. Split responsibilities so different staff members are responsible for distribution and receiving, and control access to inventory. 2. Monitor all inventory at irregular dates, including slow moving products (these items are more susceptible to theft as it may take time to notice missing items). 3. Hire a professional. Increase productivity and detect fraud by outsourcing inventory counting services, particularly for large jobs. 4. Install security systems and instill a work environment focused on over the phone, collect as much information about the card as possible. In addition to the expiration date, get the cardholder’s full name, the address and phone number associated with the card, also ask for a driver’s license number. The higher the likelihood of being caught in a lie, the more likely a criminal is to abandon the scam. Watch for these red-flags: first time customers (those who are not in the dealership’s customer database) attempting to make large purchases over the phone, or making large transactions at the parts counter. If a purchase doesn’t “smell right”, enlist third-party help! Ensure all employees are trained on your dealership Red Flags Rule n n

Ineffective inventory controls and internal fraud can have a significant impact on a dealership’s bottom line. Recently, a dealership was the victim of a car parts fraud which was run by one of its own employees. For nearly four years, the employee stole parts – totaling nearly $250,000 – to sell online and falsified inventory to cover their tracks. Controlling inventory may have additional benefits. Dealerships that manage assets and physical inventories can reduce inventory storage costs and better service customers by having the right inventory on hand when orders come in. Last month, GNYADA learned that a dealer was a victim of credit card fraud. The parts department received a phone order for $25,000, which the customer paid in full, using a credit card. When the parts arrived at the dealership, the customer sent a courier to pick up the order. Two weeks later – when the parts were long gone –it was learned that the transaction had been fraudulent and the entire $25,000 was charged back to the dealership. Chargebacks are a costly and unfortunate fact of life for many businesses that accept credit cards. However, there are ways dealers can protect against chargebacks, reduce your risk, and provide higher levels of security for your dealership and your customers: 16

integrity where employees feel valued. 5. Treat physical assets like monetary assets, taking appropriate steps to protect and easily assess them. While computer programs make inventory management easier, they can also be used to hide fraud. Nothing can replace physical inventory counting as an essential process to protect against fraud and loss. GNYADAAllied Member, H and H Dealer Services can help audit your parts inventory. Email Devon Hodgson devon@handhdealerservices.com or call 908.979.9717 or 908.929.9001. Policy’s Identity Theft Protection Plan (ITPP). Dealers are required to: 1. Identify the Red Flags that affect your dealership 2. Determine how you will detect those Red Flags, and 3. Decide how will you respond when you detect a Red Flag. Dealers must evaluate their ITPP each year and make changes to improve security where necessary. All GNYADA members can contact Xenex Payment Systems, a GNYADAAllied Member, if an employee isn’t getting the proper information on a cardholder. Xenex’s support team (888.918.4409) can offer coaching tips on what questions to ask and how to prevent a fraudulent transaction from occurring. For information on how Xenex can help secure your credit card transactions contact the Association, at 718.746.5900.

Credit Card Fraud Cost Dealer $25,000

When taking credit card payments

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10 Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • April 2019