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Safeguarding Against Fraud and Theft at Your Restaurant

By Rick Braa, CHAE

Q: I’m noticing my cash balance is declining even though my EBITDA (earnings before interest, taxes, depreciation and amortization) is growing. Nothing has changed on my balance sheet to drain cash, and our team has experience and good longevity. Where should I check to find some potential reasons why this might be happening?

A: Employee theft and fraud is not uncommon today and it’s often perfected by the least likely long-term employees. Fraud is a three-legged stool of motivation, opportunity and rationalization. Motivation can vary and is often brought on by financial pressure or hidden or embarrassing conditions. Opportunity knocks when the risk of getting caught is low, and rationalization logically presents how much more deserving an employee is than what is being provided. When questioned about whether employee theft or fraud is a possibility, an owner’s response is often, “I trust my staff.”

Trusting staff is imperative. Trust is paramount to a healthy culture, but verifying and inspecting results and behavior is a critical counter-balance. “Trust, but verify” is the best policy. When it comes to verifying whether sales are making it to the ban, there are several good areas to inspect. Comps, promos and voids are among the leading culprits of employee theft and are deserving of study. Make sure these best practices are in place:

Limit comps and promos to authorized personnel. Only managers should be authorized to comp and promo. In the absence of a manager, lead personnel can be given authorization. If the crew is working by themselves, require crew members to manually record all comps or promos on a tracking sheet with the reason for each. Employees with codes and keys often provide them freely to the crew. They shouldn’t.

Visit the table every time a comp or promo occurs. Manager visits can be awkward. Use your best judgement whether a visit should be paid immediately or when dropping the check, but with any comp or promo requiring validation, ensure that a manager interacts with the guests prior to their departure. The goal of the visit is guaranteeing the guest is happy and intends on returning.

Require comps and promos to be adjusted in the moment, not at the end of the shift. Often restaurants allow comps or promos to be recorded later, rather than when the activity occurred. This limits the ability to validate the legitimacy of the comp or promo. Deviant behavior is reduced if the risk of getting caught is tightly correlated timewise.

Examine every comp, promo and void on a daily basis. Look at the time stamp of when each table was opened and closed. Both should be within the limits of what is reasonably expected. If a table shows a long span of being open and a comp, promo or void occurs on the ticket, nefarious behavior is likely occurring. Also, check to see if managers have a disproportionate amount of comps, promos or voids during their shifts.

The hardest theft to find is when a manager alters a check and steals cash after hours. What makes detection especially difficult is the fact that a manager can alter a check, reprint and replace the check, and steal cash using several sources. After examining all tickets, question both the manager and the server occasionally to let them know every ticket is being examined even if nothing odd is found.

Employee theft and fraud starts small and increases over time. By installing good controls around comps, promos, and voids, while strengthening the awareness of those controls, you can kick out more legs of fraud’s three-legged stool. You’ll reduce the possibility of employee theft and more cash will make it to the bank.

Author: MRA
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