2011 June: Theft Deterrent

No one likes to think about it, but employees do steal from their employers. The SBA reported that 10 percent of businesses filing bankruptcy cited employee theft or fraud as major causes. Pizzeria operators have two options: ignore the possibility or take proactive steps to protect the business.

The three main kinds of employee theft in restaurants today include swiping inventory, pocketing till money and fudging the books. Even in this age of computerized controls, employees find ways of taking product or money that can’t be easily detected. When it comes to the books, the most common methods of embezzlement include forging checks made out to phony accounts or vendors. Frequently the employee who embezzles is a “trusted” employee and therefore avoids close scrutiny.

Hence, here are several suggestions that serve as either positive or negative deterrents:

Give employees generous discounts on offerings. Many employers allow a free meal for each shift worked. The staffer’s rationale might be, “The boss is being reasonable, so I’ll be fair with her.” Even with a liberal employee discount, don’t ignore potential product theft. Have two people do an inventory count, one at the beginning of the day and one at the end. Occasionally switch counters. Notice holes in shelves.

Set up computerized systems to prevent cash withdrawals. This is especially easy to do with a POS system. Each clerk has a register and returns the same amount at end of shift. Only that employee can work his register. Set up computerized registers so that if the order isn’t punched in, it can’t be processed. Provide customer displays so that they see what they are paying for.
Michael DiBona, general manager of Mamma Mia’s, a five-store company in the Boston-area, says of such procedures: “If the clerk is over or under bank, that’s technically theft, and we’re very watchful. ”

Do cash register spot checks. If nothing else, it will alert employees that you are trying to keep tabs of the cash situation. If a spot check reveals a discrepancy, try to isolate it. Is it occurring in the morning, during certain shifts? If the problem persists, switch staff assignments around in order to isolate the possible thieves.

Install video cameras. Set them up behind cash registers, in storage areas and even in the basement — and connect them to an office screen. This makes an excellent deterrent, as well as investigative tool if someone is suspected of stealing. Alert employees that they are there, and monitor off-site if the systems allow.

Study management reports for potential problems. When reviewing routine business reports, be on the lookout for irregularities, changes or inconsistencies. For example, if you find the cash in/out discrepancy becoming larger and larger, you can be sure someone is taking money from the till. Or if you see your gross margin down from last month, for no apparent reason, a good bet is that someone is pilfering product. If one shift has much more cash register errors than another, it’s probably due to some unwarranted employee withdrawals.

“We have discount codes,” says Chris Wolff of Dewey’s Pizza, a 15-store chain in Cincinnati, Ohio. “Employees can key in these discount codes and pocket the difference. We examine these discount code use reports carefully to see if something’s going on. ”

Hire spot checkers. If you suspect a problem, hire a spot checker to act as a customer. This person doesn’t have to be an expensive security expert. Your next-door neighbor, a cousin or a family friend will do. By paying cash and saying he doesn’t want the sales slip, the spy gives the clerk an opportunity to pocket the transaction. The important thing is to make it clear to your spy what to look for. Does the clerk make change from the register? Does the clerk fuss with the register after the sale?

Create a profit bonus system, in which all employees benefit if the restaurant does well. This turns employees into committed company staffers.

Discuss the theft issue with employees. At company meetings, let your staff know that you are aware of the temptations. Point out that taking money from the till is not only a crime punishable by time in prison, but that it also is a despicable act that unfairly puts all staffers in a bad light until the perpetrator is caught.
If you catch a thief, work with your attorney to make sure you properly dismiss him or her immediately. Do not give second chances. No matter how long-term or how valuable the employee is, trust is broken.
As for bringing criminal action, that seems like a logical step. Be forewarned, however, that successfully prosecuting a dishonest employee will cost you a lot of effort, time and money. The chance of recovering any lost money is remote. u

Howard Scott, a former business owner, has published 1,400 magazine articles and four books. He is a former accountant.