Question

Employee thefts are costly to restaurants. One common way restaurant workers steal money is by undercharging customers and pocketing the difference. For example, a customer orders a $10 beer, and the server charges the customer $10 but enters a $5 beer into the Point-of-Sale system. The server then gives the customer the $10 beer and pockets the $5 difference.  

Required:

Suggest a control deficiency that could lead to the above employee theft. Explain the possible implication on the financial statement and provide a recommendation to address the deficiency.

Answer 1

Theft or pilferage is a regular challenge to most restaurants and can be a very costly loss to the owners of a restaurant. In this case, there is a control deficieny and this needs to be corrected.

The control deficiency is the same people are taking orders and serving customers and have access restaurant inventory and to the billing system and the cash drawer system.

Recommendations to address the deficiency include:

One method is to invest in surveillance cameras and ensure that customer services areas are monitored including the point-of-sale system/computer to ensure correct entry in the billing system. This is an one time investment and not a recurring cost.

A second method which is a quite simple one is to separate duties and responsibilities of the staff and ensure that the person taking the order called a steward is different from the person serving the customers called a server or waiter. This separation of duties would put in a check and balance in place wherein the order taker will ensure that the correct order is placed and recorded in the billing system so the server will have to serve as per the entry in the system and the customer will have to be charged as per the system entry. The person handling the cash drawer and customer payments should be different from the servers.

A third method is to conduct random audits on servers when they are serving and checking on their orders and entries made into the billing system. Another way of random checks is to have a 'mystery shopper' or 'secret shopper' concept who will act as a customer and will be unknown to the staff of the restuarant but will be observing and reporting to the owner based on their experience at the restaurant. Another way is to have customer feedback forms for each table served a server must ask for customer feedback and provide the form along with the bill/check.

A fourth method is to keep each servers tabs in the billing system separate through a separate employee log in and password. This will ensure that an employee is checked on the entry they have made and compare it to the physical inventory/stock of liquor at the end of shift. This will be an automatic deterrent on the servers.

A fifth method is to ensure proper background and reference checks of restaurant staff and ensure only people with integrity and proper credentials are recruited. These staff must be explained and trained on company policy and ensure that they are aware of the consequences of pilferage or theft.

These are some of the methods recommended to control theft or pilferage in a restaurant. However, while there may be some cost implications for the owner of the restaurant and costs can vary depending on quality and quantity of equipment used, scale of implementation, location of the restaurant, etc. However, these would be much more economical as the loss owing to theft or pilferage would far outweigh the costs of implementing these measures in the long run. These are not to be termed as expenditure but instead as investments to ensure stability and minimal wastage.