Statistics show that employee fraud is the most common type, and that cash businesses are most susceptible. There are certain controls which can minimise the risk, and in my experience, it is an area where restaurants are particularly weak.
I've come across employee fraud whilst working on company audits, and I've experienced it first hand when I was in the restaurant business. Without the correct controls in place, I may never have detected it and would have continued on in blissful ignorance. I know that many restaurants out there exist in this state.
If you own a restaurant, then as an absolute minimum, you should:
- Accept that fraud exists and could occur
- Implement strong controls and procedures
- Continuously monitor and control activities
- Ensure there is clear segregation of duties so that no person is in a position to commit fraud, then cover it up.
I once worked with a client in the U.S who operated bars and restaurants. Initially, he had a major issue with me suggesting that if he didn't know whether his staff were committing fraud, then they almost certainly were.
Over time, when this proved to be the case, he was extremely upset that the person he trusted most was stealing from him. The experience completely changed the way he operated his business, and with the implementation of a few simple controls, he had the peace of mind that his exposure was greatly reduced.
It is very difficult to completely eliminate fraud but the risk can certainly be minimised. In my experience, although all situations are different, the following common threads exist in most cases of employee fraud in restaurants.
- No controls exist or they are weak and inadequate
- Employees are poorly managed and/or poorly treated
- Trusted members of staff have unresolved personal issues such as addiction etc. This is often completely covered up.
So the message is clear. As unpalatable as it may sound, if you operate a restaurant, you are already in a high risk business for employee fraud. If the opportunity exists for your employees to commit fraud, then it is quite likely that it is happening.
If you would like advice on fraud detection and prevention, please email me.
info@therestaurantdoctor.ie
