Most restaurants are finally reopening to in-person dining. And while you may be thinking about customers returning, hiring enough workers, and managing supply-chain shortages, one issue has remained the same: fraud. Restaurants often face fraud threats from employees, customers, and vendors. So, now is not the time to drop your guard.
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 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 it is less common, intangible property theft is 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 employee takes such secrets to a rival, it could threaten your restaurant’s survival.
Watch Bookkeepers & Vendors
Owners often employ bookkeepers to manage back-office operations but may neglect to give proper oversight. Such an environment provides criminals — or even ordinary people experiencing unusual financial pressures — with opportunities to alter 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 they control.
Even when bookkeepers are honest, the invoices they process may not be. It can be hard for managers to keep track of the daily stream of food, beverage, and supply deliveries. Vendors might 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.
Multipronged Approach to Prevention
Successfully combatting restaurant fraud takes a multipronged approach. For example, if you have not already, integrate your accounting, inventory, and sales systems. In addition, 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 instance, keep your eye on servers who are always flush with cash or purchasing managers with unusually cozy relationships with vendors.
If you do not have one, set up a confidential fraud reporting hotline. Also engage a CPA to review your financial records at least once a year for discrepancies. Contact us for assistance. We can investigate fraud suspicions or simply review your operations for potential fraud gaps that can be closed with better internal controls.