Publication: KROST Monthly News Release

Approximately 95% of all businesses now experience some type of employee theft totaling an estimated $52 billion dollars a year. Cash-based businesses such as restaurants and bars are even more vulnerable to theft by employees. While it would be nearly impossible to eliminate employee theft and dishonesty completely, we can gain more control of the situation by recognizing some of the early warning signals and implementing controls.

Recognizing some of the early warning signals of internal dishonesty gives employers the chance to head off potential problems. It’s important to keep in mind the ABCs – Activities, Behavior, and Customers, of detecting these early warning signals.

(A) Employee Activities:

    • Bringing large shopping bags or wearing loose clothing to work on a regular basis. These items can be used to transport food and other items out the door
    • Consistently returning to work area after others have left to retrieve something left behind
    • Complaints from other employees and customers that personal effects have been stolen
    • Frequent cash shortages and overages on the employee’s shift
    • Unusually high numbers of “no sale” and undocumented voids
    • Employees who work through lunch breaks and never take time off may be running a game with the cash register. Employees who never take a vacation may be afraid that their theft will be discovered by their replacement

(B) Personal Behavior:

    • Inconsistent explanations of discrepancies or errors
    • Bad temper and unpleasant behavior that discourages questions
    • Any sign of substance abuse (it costs money to fund a habit)
    • Making a habit of “borrowing” store money or property
    • Disgruntled and belligerent attitude, complaints about management and job to others

(C) Customers & Outsiders:

  • Customers frequently complaining of shortages and changes in orders
  • Unusually large or frequent credits or refunds by any individual employee
  • Gifts or favors from suppliers or customers to employees

Besides recognizing the early warning signals, there are controls that can be set in place to further restrict and discourage employees from stealing. Informing employees of these controls and the consequences of being caught is a detriment in itself. Most employees steal because they think they can get away with it. Some suggested controls are:

  • Require a receipt for each transaction

It is very important to create a culture of honesty. Every business has a culture whether they know it or not. There are workplaces that reward honesty and create a culture of caring, and others that overlook employees that break the rules and steal. Having a written policy and enforcing it will help create a positive environment. Make sure that these policies include specific consequences for employee theft. Discuss your policies with your employees and make sure they understand the rules.

Ann Santia, Staff Accountant
KROST, An Accountancy Corporation

  • Put one employee in charge of setting up the cash drawers and another to double check the cash count
  • Require that the register drawer be closed after each transaction
  • Limit the amount of cash for each drawer, requiring that cash drops be made when that point is reached
  • Employee background checks can eliminate any employees with a prior history of fraud or theft
  • Video surveillance will cause employees to think again before stealing
  • Have your bartender keep a check in front of the customer so they can be periodically checked
  • Have bartenders keep empty bottles and do a quick inventory before and after random shifts
  • Keep a product inventory and usage sheet. Inventories should be done often and at irregular intervals as well as routinely. Inventory duties should be assigned to an individual employee and that employee held accountable
  • Trash containers should be kept inside during business hours and checked at random for signs of pilfered goods. Use clear plastic trash bags and inspect contents periodically

Author: Ann Santia