The restaurant business is notoriously tough — even without the many fraud threats. The fact is, when you’re operating on very thin profit margins, you can’t afford to lose a cent to thieves. To protect your business from ill-intentioned employees, customers and vendors, take steps to fortify your restaurant against fraud.

Gaps for exploitation

Your restaurant may have high transaction volumes but lack the technology linking point-of-sale, inventory and accounting systems. This leaves gaps for fraudsters to exploit. Employees could, for example, provide food and drinks to friends without entering the sales — or ring up only a portion of their friends’ bills. They might issue voids or refunds when there was no original sale and pocket the proceeds. Or they could overcharge customers by, say, charging for premium beverages but serving cheaper alternatives.

Although intangible (intellectual) property theft is less common, it’s another risk. Your restaurant may use proprietary recipes and confidential marketing plans to compete in the dog-eat-dog world of food service. If a departing worker takes such secrets to a rival, it could threaten your restaurant’s survival.

Inside jobs

Restaurant owners often employ bookkeepers to manage back-office operations but may neglect to provide proper oversight. Such an environment may enable criminals — or even usually honest people experiencing unusual financial pressures — to cook the books. In one frequently seen scheme, the bookkeeper creates a fake vendor account, submits and approves fraudulent invoices, then directs payments to a bank account he or she controls.

Even when bookkeepers are honest, the invoices they process may not be. Managers may find it difficult to keep track of the daily stream of food, beverage and supply deliveries. Vendors could exploit such chaos by inflating their bills to reflect more or pricier items than they actually delivered. When vendors collude with restaurant employees, particularly receiving or accounting staff, theft can exact a heavy financial toll.

Multi-pronged approach to prevention

Successfully combatting restaurant fraud takes a multi-pronged approach. For example, if you haven’t already, integrate your accounting, inventory and sales systems. And to manage potential occupational fraud, conduct background checks on new hires, install video surveillance throughout your restaurant and know how to spot red flags. For example, keep your eye on servers who are always flush with cash or purchasing managers with unusually cozy relationships with vendors.

If you don’t have one, set up a confidential fraud reporting hotline that’s open to customers, vendors and workers alike.

(This is Blog Post #1531)