When it comes to your business, you might think the adage old saying of “10% of people will always steal from you, 10% never will and 80% of people will if given the chance” doesn’t apply to you. No one wants to think that someone they have hired is dishonest – or has the capacity to steal from you. But unfortunately, the reality is that employee fraud is far more common than most businesses realize. According to the US Chamber of Commerce, employee theft accounts for billions of dollars in losses for restaurant owners each year.

We recently caught up with FoodTec’s Daniel Flaherty to talk about the most common types of employee fraud, how they can easily occur right under your nose and the measures that you can put in place to help reduce, if not remove the problem.

Employee Fraud: Theft in the workplace affects many restaurant businesses

Dan: From working with clients over the years, when it comes to employee fraud, there are three different areas where it most commonly occurs;

  1. Clipping from the drawer: You would think in an era of increased digital transactions that clipping from the drawer i.e., taking cash, was a thing of the past. But cash is top of the list when it comes to employee fraud. It can as simple as pulling a $20 bill out of the drawer. As a result, the drawer is going to be short, which in turn means the shift will be short, which in turn means the day will be short. What we have experienced over the years is that there is an alarming number of operators that depend on the cash total at the end of the night being accurate. They often overlook, how much money is going into the drawer on the left versus how much money is going into the drawer on the right of their counter. If you don’t know until the end of the night that you’re short, you don’t know was it the daytime shift or was it the nighttime shift. Was it this cashier versus that cashier? By not looking at it on a per shift basis you cannot tell whether a particular cashier was over, or short, or dead on. If you don’t have these practices of cash control day in and day out, the money is lost.
  2. Shift recording: Second on the list is shift recording. In other words, “non-cash stealing”. For example, clocking in early, clocking out late, perhaps texting your friend to say, “Hey, I’m scheduled at four, I’m not going to get there to 4:15. Clock me in when you get there.” While this might seem extreme or being picky in terms or time keeping, you are absolutely stealing from the business.Coupled with shift recording is giving away extra food to a friend or, not ringing in an employee meal. In this scenario, the employee knows that are taking advantage of the business but it’s not necessarily taking money out of the cash drawer. A lot of employees will justify that as a victimless crime.
  3. Erroneous discounting: When it comes to erroneous discounting there a number of areas where this can come into play. It can be as straightforward as applying false discounting such as “your friend” comes in and you give them a “police” discount or, it can be applying false loyalty point attribution – more specifically, theft afforded by your rewards program. For example, a customer walks in and asks for a “hamburger to go”. The employee adds their own reward account to that order to mimic the spending. When this account earns a reward or discount, they wait for a cash order to come in and pay. They then apply their reward to it and take the cash. On paper it will never show short – there will be no cash shortages, but it is an improper discount which results in a 100% loss. The customer has no idea that their order was used to enrich the employee. They paid their $15 for their chicken, but the employee discounts $10 because they had a reward. They put $5 in the drawer and the employee takes the $10.

Employee Fraud: What you can do about it.

Understandably restaurant managers and owners have a myriad of responsibilities during their shifts and do not have time for manual intervention to track any suspicious activity. But there are a number of solutions that restaurants can take advantage of to mitigate employee fraud, such as;

  1. Cameras: It might seem obvious but the best mitigation is a POS system that has integration with your camera system it goes a long way toward deterring and identifying employee theft and expediting investigations. Camera integration with your restaurant POS system allows you to quickly view and monitor transactions and automatically see what’s happening in a single click. It can flag and review questionable transactions and provide exception reporting, along with identify unusual cashier patterns in real-time and in the process send alerts about irregular transactions such as erroneous discounting or suspicious refunds. In short, a POS system that has integration with your camera system can uncover theft and fraud within minutes
  2. Fingerprinting: When it comes to shift recording and keeping track of employee start and finish times, business have a number of solutions at their disposal. First off is using a fingerprint solution for clocking in and out. While it might sound like something from James Bond, it is quite common in the business world and very useful. If you think about it, most, if not all smart phones use this technology for security. Fingerprinting takes away all the ambiguity and eliminates a third party from clocking someone in for the sake of gaining the payroll system. Of course, a manager can always override that in case the employee did not clock in in time of a specific reason – but at least the employee has to go to their manager or owner and say, “Hey, I did not clock in when I got here at four o’clock. Can you please punch me in?”In addition to this, business can also use our labor scheduling module. With this not only can you can record an employee’s punctuality but the system can also prevent clocking in and out at incorrect times. For instance, if an employee is scheduled from 4:00pm to 9:00pm you can set system to allow, the employee to clock in starting at 3:55pm and no later than 4:10pm. If you arrive outside those time parameters you need to go to explain to a manager why you either want to check-in early, or why you are late.Controlling, or enforcing what it is that people are scheduled for, not only is a great way to deter or eliminate an intentional thief but it is also a great way just to make sure what you want to happen is happening. Yes, it is very common for an employee to get to work early and ask “Hey, I can go help with so on and so forth, I’ll clock in 20 minutes early.” But by the employee making that decision, they’re going to clock in early. Whereas, if the system says you can’t clock in yet, they then have to speak to the manager on duty to say, “I want to clock in early and I’m going to start folding boxes or doing dishes” –whatever it may be. Irregularity is fine but with the system in place, there’s transparency between the employee and employer.
  3. Good Reporting: Reporting can be tedious and but it can also help you identify any issues. “It may not be fun, but every week or two weeks, go through your reports, pick the next three, read them, look at them. There are reports that show you exceptions, sales reports that can marry the data between locations so that you can see from the top down. If you have five stores, 10 stores or 500 stores, a report can quickly tell you who has the most common occurrence of ringing in a police discount or applying rewards. If you have one or two of those people in your restaurant or across your business every day, you could lose $50 a day – multiple by seven days a week, you are talking about a $1,500 a month bleed. And those are the dangerous parts because they can go on for weeks, months, sometimes years. And the only time that those people end up getting caught is if the thief starts getting greedy and they go from $30 a day to $50 a day to $80. But by checking the reports, reading them – yes, hopefully there are days where you waste an hour or two and you don’t find anything. But by not doing that, you’re almost inviting it to happen to you if you just think it’s not going to.
  4. Business Culture: While technology can assist in reducing and eliminating employee fraud an area often overlooked is corporate culture or behaviour. Regardless of having cameras and all the right tools in place, if you don’t build an ethos into your business processes that includes awareness and education around security and fraud, it’s not going to work anyway. The goal isn’t to secretly trap the erroneous employee. The goal is to create an environment where everyone knows it’s a tight ship – that there is awareness and understanding that work practices are monitored and observed. Employees’ who understand what the company expects of them and that they actively monitor and observe work practices, are less likely to engage in theft.

Culture does take conscious effort before it’s effortless, but it is worth it

Employee Fraud: Upgrade Your Loss Prevention Strategy Today!

No matter how well you think you know your employees, unfortunately employee fraud does occur – and quite a lot it would seem. According to research 95% of business owners at some time fall victim to internal theft. Recognizing the signs are important but having the right tools in place to prevent theft, is even better.