One of the unfortunate aspects of being a restaurant owner is dealing with employee theft. According to the US Chamber of Commerce, an estimated 75% of employees steal from their employers and make a habit of it.
Training and other corrective actions can be taken to prevent fraudulent activity, like creating a loss prevention (LP) plan. The foundation of a restaurant LP strategy rests on two pillars: integrated restaurant POS technology and advanced data reporting. If you’re using modern technology to track your inventory and sales, you’re much more likely to notice something going missing.
Restaurants, as well as other businesses (both online and physical), struggle with fraud every day. Luckily, there are several ways to prevent fraudulent activities.
Designing a restaurant and bar loss-prevention strategy is critical to managing a profitable business, regardless of your size or level of success. Whether your restaurant is brand new or an established chain, the smart business owner devises an LP plan. It’s too risky to ignore preventable measures of profit loss.
Sadly, most of the loss prevention needed in restaurants focuses on employees, but creating a plan that reports all moves made by employees helps to keep employees from scamming in the first place. An integrated reporting system helps you keep track of your funds and spot scams right out of the gate. You can learn more about specific scams here.
Loss Prevention Strategy
A good loss prevention strategy requires three things:
- Detailed Reports
- Diligent Analysis
- Willingness to take action
Create a comprehensive Loss Prevention plan that involves analysis and action using a POS with the technological capability to organize data and identify the sources of profit loss. At the core of your loss-prevention strategy is automated data analysis. This frees up your time, removes human error, and allows you to redistribute resources more effectively. With an LP strategy in place, you can identify the most common scams and use your POS to set alerts.
Typical Employee Fraud Schemes Found in Restaurants
There are quite a few types of restaurant and bar fraud scams. Use data analysis and your POS to prevent them. Here are a few to look out for.
Auto Gratuity or Tip Boosting Scams: While your best servers and bartenders will often have higher tip averages than other employees, you can still monitor the averages of each employee and see if some percentages seem higher than they should be. Look for employees with above-average check counts that have auto-gratuities or high total-tip-to-sale percentages. If anyone is padding tips in the POS framework, you’ll spot the higher percentage and be able to take action. Monitoring this type of activity is made easy with Lavu’s POS integrated reporting available for restaurant management.
Discount & Free Meal Abuse: If you provide discounts for employees and are concerned those discounts are being abused, you can change the access level for servers and instead require a manager to do the discount. Lavu’s access levels help you avoid discount abuse.
Other free/discounted food scams include:
- Friends and family discounts used for the employee
- Making and eating their own food in the kitchen
- Applying their discount to a ticket and then pocketing the difference
Voids/Discounts/Cancellations: Check daily reports to look for voids, discounts, and cancellations, and focus on a variation in metrics. If you see a higher-than-usual activity with a certain employee, you most likely have detected suspicious behavior. Good POS reporting will help you catch this.
Shift Your Cash Handling Procedures and Track Performance
How is cash handled at your restaurant? Taking cash is the easiest way to steal from a restaurant, so refine the cash-handling procedures at your restaurant and bar. Clearly defined procedures will reduce employee theft or error.
When your money handling care plan is set up, continue to monitor reports that feature money over/short for the day, such as Lavu’s Till Out Report and Server Summary Report.
Implement these further strategies to handle cash:
- Organize the drop boxes to be close to the register.
- Throughout the day, make a cash drop to limit the dollar amount of funds at the register.
- Encourage honesty among your employees and implement an accountability program.
- Limit the number of employees who handle cash.
- Assign different cash-management duties to create a system of checks and balances.
Be strict in your rules. Maintaining a loss prevention strategy requires gravity and diligence. Start protecting your restaurant from scams by upgrading your POS system today.