Employees also manipulate the POS system to hide theft is by moving orders from one check to another. For example, customer No. 2 orders the same item that was already paid for by customer No. 1. The server moves customer No. 1’s order to customer No. 2’s check and pockets the cash received from the first check. Keep an eye on the average time tabs and keep track of the servers who reprint receipts often. Over a period of time, this can add up to a financial hit in the thousands of dollars.
Altered Documents & Fictitious Vendors: Billing schemes include the creation of a fictitious vendor, where payment is directed to the employee’s bank account. To counteract this scheme, make sure duties are segregated. The employee who receives inventory should refrain from processing the vendor payment. In addition, the employee processing payments should not reconcile the bank accounts.
Check tampering or check cashing is another fraud scheme that can be perpetrated by an employee or by an outsider. Someone may alter the payee information and cash the check. Contact vendors frequently to verify open balances. Check your bank transactions daily and verify the endorsement on the back of checks to ensure it matches the vendor’s endorsement.
Creating a ghost employee is another fraud scheme used by adding fake employees to the payroll system and pilfering their wages. Fake employees can be discovered by reviewing payroll reports regularly. Review employee files to make sure there is a file for each employee listed in the payroll register.
Inventory or Cash Theft
Inventory is a critical aspect of restaurant operations. Inventory can be stolen in many ways including eating, giving free meals to family and friends, taking food home, or over-pouring drinks. One way to minimize this loss is to limit access to expensive items such as high-value bottles of particular alcohol.
Besides inventory theft, rogue employees can steal from the restaurant's cash register. An example might be an employee who embezzles money from the register and alters financial records to cover their tracks because they used the funds for personal expenses, luxury items, and vacations.
It is also important to conduct daily inventory counts and compare them with POS inventory reports to find and investigate discrepancies.
So, while there are many ways to prevent and minimize fraud, the most important is creating a tone at the top and developing strong internal control policies. Employees should understand the importance of integrity and the consequences of committing fraud. Employees should also be able to report suspected fraud to management and/or owners. Anonymous tips are the most helpful tool in detecting fraud.
Employers always hope that conducting an internal audit will only find minor discrepancies in financial reports. However, if (or more likely, when) you encounter fraud in your organization, know that you can count on professional firms like Fiske & Company to bring your accurate financial picture to light.