2013 Food and Hospitality Roundtable Using Technology to Prevent Manager and Employee Fraud Presented By: Robert D’Ambrosia Ctuit CEO & Founder
The Hospitality Environment – Hospitality operations are notorious for theft given the nature of distributed cash handling and high-turnover employees. – Employee theft is worse than consumer theft. Both include financial loss, but employee theft abuses a trusted relationship, damages morale, and is more likely to spread among employees.
ROI on 10 Minutes per Day – The US Chamber of Commerce reports that up to 75% of employees have at one point or another taken product or cash from their employment – Between 5 and 7% of gross revenue is lost due to employee theft – This means a restaurant doing $2 million per year may be losing $100,000 to $140,000 per year. – www.cbsnews.com
Prevention is Better than Prosecution – As tempting as it may be to catch theft in the act, prosecutions can be expensive, distracting from your business goals, and if mishandled, can backfire on you. – When you do catch someone, work with HR and your legal counsel to make sure you protect yourself from repercussions.
Have a Documented Fraud Policy Work with your HR department to make sure that in the event of a disciplinary termination, you are protected from being accused of discriminatory practices. – Create a written policy of active steps – Create a schedule of daily spot - audits to make sure all cash- handling employees are periodically checked. (Compare mid- shift checks for accuracy, then confirm they haven’t change post – EOD) – Log the results – 2-3 audits per manager will take 5-10 minutes per day – Let your employees know that you perform spot audits daily
Finding Theft – Bad news, there’s no “Magic Bullet” Every restaurant will have nuances that need to be taken into account – employee meals, coupons, bar transfers – Good news: theft usually leaves a trail. – Use spot audits to discover suspicious activities, then go data sleuthing – For the most part, look at baselines and outliers – Don’t jump to conclusions. Use reports to determine where theft is likely, then you’ll still need to catch someone in the act. (Spot audits will often suffice.)
4 Theft Detection Tools – Surveillance / Security Cameras – Spot Audits – Data Analysis – Using a Shopper / Spotter
Accounting Department – Embezzlement is often not POS related – Don’t allow POS check adjustments by accounting staff – Perform external accounting audit annually
Managers – Editing Checks after servers have turned in paperwork Look for checks with comp/void/promo activity significantly after the last item ring time. Compare manager activity % to other managers Graph out manager activity over time, compare managers to each other. Are any spikes towards the end of shifts? Sometimes Manager Activity will be disguised as Server Theft
– Abusing the “spill check” Compare the ratio of spills in between bartenders – “No Sales” instead of closing cash transactions “Get a receipt or it’s free” policy Review “No Sales” on video if you have a camera system Compare bartender ratios of Cash vs. Credit card tenders
Servers – Be sure to verify it’s real server activity, and not a manager. (check transaction times.) – Server theft will often show up as higher CC tip percentage Look for checks with unusually high CC tip %’s. – Abusive Manager Comps Insure that table is still present / hasn’t paid and left – Coupon Redemptions Compare redemption %’s on a per-guest or per-check basis – Buffets / Salad Bars (Another Self - Transfer) Compare guests served to host’s count Look for tables open longer than expected Cash tender ratio works here too (Like the bartender example) Spot Audit checks – Self Transfers / “Wagon Wheel” Compare self-service transferred items as % of total items sold
Preventions – Make your spot-audit policy known to everyone – Establish a “Ring it before your bring it” policy – Don’t allow shared POS accounts (“AM Bar, PM Bar” etc.) – Don’t allow managers to change employee checks after employees have clocked out – Limit employee’s discount / promotion capabilities as much as possible – Eliminate employee ability for table or item transfers if possible – (recognize that voids / transfers are often result of server error / lack of organization)