2013 Food and Hospitality Roundtable

2. 2013 Food and Hospitality Roundtable Using Technology to Prevent Manager and Employee Fraud Presented By: Robert D’Ambrosia Ctuit CEO & Founder

3. The Hospitality Environment • Hospitality operations are notorious for theft given the nature of distributed cash handling and high-turnover employees. • Employee theft is worse than consumer theft. Both include financial loss, but employee theft abuses a trusted relationship, damages morale, and is more likely to spread among employees.

4. ROI on 10 Minutes per Day • The US Chamber of Commerce reports that up to 75% of employees have at one point or another taken product or cash from their employment • Between 5 and 7% of gross revenue is lost due to employee theft • This means a restaurant doing $2 million per year may be losing $100,000 to $140,000 per year. • www.cbsnews.com

5. Prevention is Better than Prosecution • As tempting as it may be to catch theft in the act, prosecutions can be expensive, distracting from your business goals, and if mishandled, can backfire on you. • When you do catch someone, work with HR and your legal counsel to make sure you protect yourself from repercussions.

6. Have a Documented Fraud Policy Work with your HR department to make sure that in the event of a disciplinary termination, you are protected from being accused of discriminatory practices. • Create a written policy of active steps • Create a schedule of daily spot - audits to make sure all cash-handling employees are periodically checked. (Compare mid-shift checks for accuracy, then confirm they haven’t change post – EOD) • Log the results • 2-3 audits per manager will take 5-10 minutes per day • Let your employees know that you perform spot audits daily

7. Finding Theft • Bad news, there’s no “Magic Bullet” • Every restaurant will have nuances that need to be taken into account – employee meals, coupons, bar transfers • Good news: theft usually leaves a trail. • Use spot audits to discover suspicious activities, then go data sleuthing • For the most part, look at baselines and outliers • Don’t jump to conclusions. Use reports to determine where theft is likely, then you’ll still need to catch someone in the act. (Spot audits will often suffice.)

8. 4 Theft Detection Tools • Surveillance / Security Cameras • Spot Audits • Data Analysis • Using a Shopper / Spotter

9. Accounting Department • Embezzlement is often not POS related • Don’t allow POS check adjustments by accounting staff • Perform external accounting audit annually

10. Managers • Editing Checks after servers have turned in paperwork • Look for checks with comp/void/promo activity significantly after the last item ring time. • Compare manager activity % to other managers • Graph out manager activity over time, compare managers to each other. Are any spikes towards the end of shifts? • Sometimes Manager Activity will be disguised as Server Theft

11. Bartenders

12. Bartenders • Abusing the “spill check” • Compare the ratio of spills in between bartenders • “No Sales” instead of closing cash transactions • “Get a receipt or it’s free” policy • Review “No Sales” on video if you have a camera system • Compare bartender ratios of Cash vs. Credit card tenders

13. Bartenders

14. Servers • Be sure to verify it’s real server activity, and not a manager. (check transaction times.) • Server theft will often show up as higher CC tip percentage • Look for checks with unusually high CC tip %’s. • Abusive Manager Comps • Insure that table is still present / hasn’t paid and left • Coupon Redemptions • Compare redemption %’s on a per-guest or per-check basis • Buffets / Salad Bars (Another Self - Transfer) • Compare guests served to host’s count • Look for tables open longer than expected • Cash tender ratio works here too (Like the bartender example) • Spot Audit checks • Self Transfers / “Wagon Wheel” • Compare self-service transferred items as % of total items sold

15. Sample Baseline Report

16. Preventions • Make your spot-audit policy known to everyone • Establish a “Ring it before your bring it” policy • Don’t allow shared POS accounts (“AM Bar, PM Bar” etc.) • Don’t allow managers to change employee checks after employees have clocked out • Limit employee’s discount / promotion capabilities as much as possible • Eliminate employee ability for table or item transfers if possible • (recognize that voids / transfers are often result of server error / lack of organization)