• Opportunities for abuse
• Policy and Procedural Guidelines
• Discount Information
• Stock Control Procedures
• Gift or Sales Coupons
• Control on Coupon Stocks
• Redemption of Coupons
• Privilege Cards and Staff Discounts
• Reservation of Merchandise
• Incentive Gift Programmes
• Control Over Stock of Gifts
• Management Reports

Opportunities for abuse

• offering unauthorised discounts
• pocketing discounts
• non-recording of transactions using such privileges

Policy and Procedural Guidelines

• lay down the written policy for incentive programmes and the procedures for the administration of these programmes
• devise pricing and discount policy, eligibility criteria, stock management and control procedures as well as cash handling procedures
• define the levels of staff for authorisation of privileges (e.g. discounts, coupons, etc.) and their financial limits
• compile a Code of Conduct covering ethical rules such as declaration of conflict of interest etc. for compliance by staff

Discount Information

• disclose the discount information on reduced pricing and the period of special discounts only at the commencement of the sales promotion period unless business strategy determines otherwise
• protect the information before its release and released the information to the one who needs to know
• publicise sales promotion or discount schemes (e.g. corporate discount rates, trade-in incentives or bulk purchase discounts) as openly as possible, e.g. by posting prominent notices at the office and placing advertisements
• input the discount rates for sales items in the retail sales computer system by an authorised staff member
• check the input for accuracy on a random basis

Stock Control Procedures

• carry out a stock-taking exercise before commencement of a sales promotion to check the accuracy of inventory records and identify any obsolete or missing stock
• inspect the outlets and spot check the marked prices to avoid the stock for sale being mixed up with those of normal price

Gift or Sales Coupons

• print coupons of high value with security features, such as a special imprint, logo or the signature of an authorised person, as far as practicable
• pre-print serial number on each to facilitate stock control and redemption checks
• securely keep the stock of coupons under the centralised control of a designated staff member of the appropriate level
• return unused or obsolete coupons to the responsible staff member
• properly record the handover of stock of coupons including issue and
• disposal for audit check
• check coupons returned against the records of issue so that fraudulent coupons could be detected

Control on Coupon Stocks

• draw up guidelines on the replenishment level (i.e. the stock balance at which requests for replenishment should be made) and the maximum stock balance allowed at each outlet
• make requests for replenishment of coupons by way of a formal requisition approved by the store or shop manager
• state the stock balance and the required quantity of coupons (and their denominations as applicable) in the requisition form
• require the staff member responsible for keeping the stock to submit the required coupons with the requisition form to the authorised signatory if he is not the issuing authority and enter the details into the master stock records
• record the details of the issued coupons (e.g. the serial number, issue date, the requesting outlet, and the authorised signatory) on the requisition form and copy the requisition form to the accounts department
• adopt effective security measures to protect the coupons against possible loss or theft during handling and delivery to the outlets
• the outlet cashier should check the coupons and acknowledge receipt on the requisition form and return a copy of which to the accounts department or issuing person
• report immediately any discrepancy between the quantity issued and received to the management
• unused coupons should be kept under lock by an authorised staff member (e.g. the cashier or the shop manager)
• regularly reconcile the coupon stock and coupon sales records and report any discrepancy to the management
• conduct surprise checks on the coupon stock
• appoint independent staff to investigate any loss of coupons
• compile regular summaries of lost coupons that have been written off for the information of the outlet concerned and the management
• establish procedures for the handling of lost coupons reported by customers

Redemption of Coupons

• require the cashier to verify the details such as the value, serial number, expiry date, validation signature, special imprint and/or logo before acceptance. Cancel valid coupons after redemption (e.g. stamped “cancelled”)
• place cancelled coupons in the cashier register for return to the accounts department

Privilege Cards and Staff Discounts

• require staff handling the transactions to verify the identity of a client claiming eligibility for such discounts
• use a VIP/staff card with a unique user number
• consider using a Personal Identification Number (PIN) or other identifying information available in the ‘smart card’ technology
• verify the signature against the one on the card
• within the constraints of the privacy ordinance, request further information to verify the cardholder’s identity, such as comparing the name on the VIP/staff card with his credit card if there is any doubt
• set out clearly the terms and conditions for the use of privileged cards (such as restrictions on transfer of cards and the maximum quantity of discounted items a card holder can purchase)
• establish procedures for dealing with lost cards
• inform cardholders of the policies to at the time of card issue

Reservation of Merchandise

• establish a policy for reservation of merchandise (such as the need for deposits, the maximum number of items on hold and an expiry date after which the deposit will be forfeited) and make it known to all clients
• devise guidelines on the reservation of goods for clients before the commencement of the sales period (e.g. whether holding beyond the sales period is permitted at all or requires special permission from the manager)
• keep reserved goods separately from normal stock
• maintain a register with description of the reserved merchandise, date of reservation, name and contact telephone number of the client to facilitate supervisory checks

Incentive Gift Programmes

• obtain confirmation from their clients as to whether their employees are permitted to accept incentive schemes, gifts, etc

Control Over Stock of Gifts

• maintain proper control over the stock of gifts to prevent manipulation or theft by unscrupulous staff
• keep an inventory record should be kept, particular in respect of expensive items, and the issue of gifts should be authorised and documented
• produce a report listing the corporate clients participating in the incentive scheme and the dates of issuing gifts should be produced for management review. Conduct surprise checks on the stock to ensure the accuracy of the inventory record

Management Reports

• an analysis of sales turnover including the discount rates and profits of different merchandise
• types and amount of discounts granted (e.g. VIP discounts, staff discounts, discounts for promotional items, etc.)
• a list of discounts granted to major VIP customer and staff
• a list of sales transactions and discounts granted
• an analysis of the value of staff purchase and discounts
• any irregularities