4 Steps to Foil Theft

It's only natural for you to place a great deal of trust in your employees. “We're like one big family,” is a refrain often heard in entrepreneurial ranks. That's as it should be — but it's important to keep your guard up.

The unfortunate fact is that employee theft is a growing national problem, and our difficult economy isn't making things any easier. According to the FBI, employee theft is the fastest growing category of crime in America. And few industries may be as vulnerable as the restaurant business.

Even if you're confident that employee theft is not a problem in your restaurant, it's important for you to recognize the telltale signs and know how to build and maintain an environment that will help your staff to avoid temptation. Here are some steps you can take.

1. Review Hiring Procedures

   According to Joseph Wells, founder and president of the Association of Certified Fraud Examiners, minimizing the chances of employee theft begins with the hiring process. Before hiring anyone, he says, you should conduct a background check.

   While background checks are always a good practice, you must determine whether the time and expense are worthwhile. “At a minimum, you should check the background of any prospective employee who will have constant access to cash, checks, credit card numbers or any other items that are easily stolen. In a restaurant, that covers nearly everyone,” Wells says. He suggests these measures:

   • Past employment verification — Even though most employers will only verify position and dates of employment when you call to check a reference, you can usually tell by their tone of voice what they think of the employee. Ask whether they would rehire the applicant.

   • Criminal conviction checks. Public records services (such as Nexis or ChoicePoint) have criminal conviction records for almost every large county in the U.S. If not, you may go to the courthouse and search the criminal conviction records in the criminal courts division of the employee's current or past county of residence.

   • Drug screening. Many business owners are now conducting drug screenings for potential hires as well as current employees. Obviously, people who are frequent drug users can be more prone to theft or fraud.

   • Reference checks. Amazingly, very few employers bother to call references. Most operate under the theory that an applicant wouldn't provide a bad reference. But people often list important-sounding individuals as references with the hope that you won't call. They also assume, incorrectly, that a former supervisor or co-worker will provide a good reference.

   • Always obtain the consent of the applicant. Numerous federal and state laws govern the gathering and use of information for pre-employment purposes. Many of these laws require you to obtain written consent from the applicant before gaining some of the information listed above. It's a good idea to obtain a signed authorization and release from a potential employee. Ask your attorney about the laws that apply to your business.

2. Institute Fraud-Preventing Policies and Procedures

   “Developing antifraud programs can be one of the most important things that you can do for your business,” says Wells. “Prevention, in the long run, is always cheaper than recovering your losses.” He suggests these precautions:

   • Perception of detection. Employees who perceive that they will be caught engaging in occupational fraud and abuse are far less likely to commit it. Increasing the perception of detection may well be the most effective fraud prevention method. This means letting everyone know that you are actively seeking out information concerning internal theft.

   • Proactive programs. Becoming proactive in your antifraud efforts can be one of the most effective steps to prevent fraud. Some steps cost very little, while others require an investment. Antifraud programs usually more than pay for themselves.

   • Employee education. Every restaurant should have some mechanism designed to educate all employees, including supervisory personnel, about the serious consequences of internal fraud. This can be done as a part of employee orientation, or it can be accomplished through memoranda, training programs and other intra-company communication methods. The goal is to make others within the company your eyes and ears.

   • Enforcement of mandatory vacations. Many internal frauds require constant manual intervention, and are often discovered when the perpetrator is away on vacation. The enforcement of mandatory vacations will aid in the prevention of some frauds.

   • Job rotation. Some frauds are detected during sickness or unexpected absences of the perpetrator because they require continuous, manual intervention by the offender. That's why it can help to rotate potentially sensitive jobs when possible.

   • Split responsibility. Anyone who handles incoming cash and checks should not do the paperwork accounting for that money.

   • Trash control. Randomly check dumpsters and trash bins for goods placed there for later pickup. Use clear trash bags for easy inspection and keep lids of outside dumpsters locked after hours.

   • Conduct frequent inventories. Do product inventories often and at random times. Examine records of purchases and sales daily. Assigning inventory control responsibilities to specific individuals helps to establish accountability which, in turn, helps to discourage theft.

   • Consider video surveillance. Technological advancement has greatly reduced the cost of video surveillance putting it in the reach of even small restaurants. Strategically placed cameras can be a strong deterrent to employee theft. Be sure to emphasize the program in a positive light, pointing out that the cameras have been installed for the protection of everyone, including employees.

3. Watch for Signs of Possible Employee Theft

   Be on the lookout for early warning signals of possible employee dishonesty. Watch for such signs as:

   • Any hint of substance abuse. An employee with a substance abuse problem will need extra money to finance the habit. This is a common scenario.

   • An employee with a disgruntled, belligerent attitude, often complaining about the management or job.

   • 

     Bad temper or unpleasant behavior that tends to discourage or avoid questions.

     Inconsistencies in explaining discrepancies or errors in paperwork or cash register accountings.

   • Excessive loitering around the business by off-duty employees, ex-employees or friends.

   • Secretive conversations among employees, phone conversations that stop abruptly when you approach.

   • Unusually friendly relationships or loyalty between employees and customers or vendors. Watch for customers who loiter around for excessive times or who meet with employees around closing hour.

   • An employee living a lifestyle seemingly in excess of what the salary could be expected to support.

   • An employee who habitually returns to the work area after others have left to retrieve something supposedly left behind.

   • Watch for gifts or favors to employees from vendors or customers.

4. What to Do If You Suspect Theft

   Despite the fact that sensible precautions can greatly reduce the likelihood of theft by employees, there are no foolproof ways to prevent it. A dishonest employee determined to steal is difficult to stop. If you suspect or have evidence of employee theft, call your local police department. Handling the matter on your own could lead to false or impossible-to-prove accusations, which could expose you to serious legal liability.

   In a restaurant with loyal and trusted employees, some of whom may even be relatives, it's only natural for you to dismiss any thoughts of employee dishonesty. Still, both you and your employees will benefit from a policy that creates an environment that openly discourages dishonest behavior.