How to Control Cash Handling

show me the money

Perhaps you have heard it said that 25% of restaurant employees are honest all the time, 50% are honest most of the time and remaining 25% are dishonest to the bone and will steal every time they are presented with the opportunity. The industry averages show that somewhere between 2-4% of sales are lost to theft or cash mishandling.

You need systems to keep track of the money from the time it leaves your customers hands until the time it is deposited in the bank.


Whether these ratios are accurate, common experience tells us that employee theft is a problem for all small businesses, in particular restaurants. In a business with desirable products such as food and alcohol and the most popular commodity of all – is always going to be your cash. You must have controls in place and you will need to be vigilant and consistent to protect your assets and your business.

Here are a few of the most basic, fundamental controls of cash handling procedures that many restaurants are either unaware of or ignore completely. Intentional or not weaknesses in this area can be very expensive and have brought about the downfall of more than just a few businesses. Wait staff, cashiers and bar staff, will almost always handle cash during the course of their rostered shifts. For a start floor staff should never be able to take a cash register reading. If an employee is able to calculate what they “owe the till” it makes it so much easier for them to skim off that excess cash (from unrecorded sales) and walk out with money you made but never knew you had. I have heard of staff leaving markers on their register indicating the amount of many they need to remove from the register before they sign off.

Be aware of unusual indicators or signs like smaller coins on a keypad. An example a row of 5 x 5 cent coins inconspicuously lined up on a key pad or in close proximity to a Point of sale device. This is often referred to as “building a bank” many a thief has come unstuck as they were unable to remove these funds from the register and consequently the counted cash amount exceeded the expected cash amount.

If you have the time on a busy shift quickly pull a draw out of the system and spot check it against an X report (read only). This is an effective way of ensuring that your employees are aware of your vigilance and above all your unpredictability with “spot checks.” While cash shortages are not great news, your worst nightmare is actually cash over.

They indicate either there are unrecorded sales or that customers are being potentially short changed. In our experience, cashiers, servers and bar staff should consistently be within $1 over or under. Anything over the $1 should be sounding alarm bells indicating that an employee may need further training, or simply cannot handle the pressures of the job or even worse possibly trying to steal. Have a detailed well written cash and credit handling policy. Discuss this at your staff orientations and staff meetings.

Cash Handling Procedures

Have each staff member sign a document supporting they have been provided a personal copy of your “Cash Handling Procedures". When you have cash over or cash under events they should be detailed and written records need to be maintained.

It is vital you regularly approach and discuss with staff their individual cash handling history. Regular dialogue with staff especially in a proactive fashion discussing and documenting their cash handling history is by far the most productive process for minimizing cash control and cash handling problems. Never attempt to rein in a problem days weeks or even months after it has occurred.

Have a “set in stone” procedure that employees must follow to process refunds given to customers and showing credits for mistakes made. I would suggest a pad style format or on a clipboard with the time, date, amount and employees signature. Follow up on refunds; never take for granted this process will manage itself without your full involvement. Refunds are covered in further detail later in this document. How you will handle your suspicions and how you then deal with your employees is for you to determine. You need to be extremely sure of the facts and need a “paper trail” of documented events to support you if in the event you take action against an employee.

It is not an uncommon occurrence to have an employee totally guilty of all that you suspect them of only to escape the long arm of the law simply because you do not have the facts to support your allegations. Feeling disgruntled and ashamed this employee may leave then pursue you in a Civil law case for defamation or through their Union for duress. Consider how much are you prepared to pay to rid yourself of this potential “leach.” Always ensure you display respect all your staff and the manner you handle these events will be closely monitored by all your employees. Handle your suspicions professionally do not start rumors that your staff will no doubt spread.

This process usually does little other than warn the thief resulting in them curtailing their actions for weeks or months until the threat subsides. Be extremely cautious and never believe everything you are told. A good thief will create a situation or master the events creating the illusion that another person is in fact the thief. My personal experience is pay attention to the person making the most amount of noise on the subject. Often, not always thieves will try and move the attention on to others and in turn well away from themselves. Consider the most vocal advocate, often (not always) they can have the most to hide.

Safe Control procedures and Policies:

Always limit access to the safe, there is nothing worse that every staff member having totally unrestricted access to the safe to change those larger notes. The safe should be kept locked at all times. Many safes have envelope size areas allowing money to be dropped in (drop safe).

Your safe and its contents should be frequently verified. One person on each shift should have control over the safe to the exclusion of all others. This Managers or key person should always verify the safe contents when first taking control and once again when handing over at the end of a shift. If change is required or a cash draw skimmed it will be the sole responsibility of this nominated person to control the movement of this cash to and from the safe.

Audit Trails, many new safes with push button P.I.N access codes keep an internal record of individual’s access to the safe and logs the event by person (individual P.I.N) and the time of day. Once again with a nominated safe control person only they should have access over the specified period. Unauthorized access by another Manager or key person in this period is traceable.

The safe day lock feature, many older safes have a day lock feature. Simple rotate the tumbler a quarter turn in a given direction and it “day locks” not totally locked but gives the feel of being locked as the door opening handle will not turn. This is not a good practice, a good thief will be aware of this feature.

Many safes offer a key lock facility used in conjunction with the normal combination features. Effectively the safe is not locked using the “tumblers” but is locked using the key method. This permits quicker access when required and still restricts access to the key holder only. This is a good system, but, be cautious especially when the day Manager takes a key home at the end of their shift. You may need an additional Day Key hidden on site for such an eventuality that a shift manager or key person can be given access to.

Refunds, over-rings, voids and error corrections:

Paid-outs should be entered on a form with the time, date, signature and receipt stapled to it. Paid-outs should be deducted from a petty cash fund if possible and not from the daily deposits or cash drawers. If you give staff access and the means to refund money ensure you have iron clad procedures to minimized the opportunity for staff to refund into their own pockets.

Most Point of sales System generate comprehensive dockets or receipts for refunds and require Manager Log on or key access to perform. Ensure you have strict procedure for refunds, when and for what reason refunds are given. Above all retain the docket or receipt.

Skims, Sport Checks and draw change outs:

Make a cash drop for each shift. One person should be responsible for each shift deposit. Have them enter a log with the amount of the deposit, total sales for the day, date, time and signature and have them put this on the envelope that is to be dropped into the safe.

Make bank deposits daily, keeping each days deposit separate and attach the bank deposit slips to your daily cash reports. Never leave deposits in store overnight and certainly never broadcast to staff you are carrying a day’s takings on your person.

A Key Register and safe combination access log should be maintained. If you issue multiple safe keys to Managers then these keys should be numbered and a log should be kept with information on the person having the key. You will find that some insurance companies require this in their fine print.

Whereas it might be possible to make an insurance claim for a loss such as theft (check your policy) rest assured the insurance company will have many hidden clauses they may potentially call on to not pay a claim.

Always use registers with a cumulative register reading - This is like a speed odometer on a car, keeping a running total of the sales, coupons, etc. Incorporate theses readings in your daily sales reporting.

Abcom’s eProphet.NET cash handling module will process your Point of Sale information in an accumulated manner. This makes it impossible for a POS or cash register to be operated, for a brief period then closed off and reopened one or many times in one day. A good example of this is the employee that opens your business every morning, but, runs the register system for say one to two hours closes it off and then re-opens it.

All the proceeds for these brief one to two hour periods are kept by this employee. Many point of sale systems have inbuilt often hidden running totals. These running totals often referred to “opening forever’s” or “closing forever’s” quietly tick along behind the scenes accumulating each days sales.

In a competent Cash handling System such as eProphet.NET the day’s opening “forever” figures are compared to the point of sales. If this employee runs a separate period of trade closes and then reopens the system the running totals Closing and opening forever’s will not match. With this inconsistently cash cannot be processed without Abcom’s intervention. This is designed to highlight the irregularity and in turn instigate action and investigation.

Use a register or Point of Sale system that has the transactions visible to the cashier and the customers. Dual display Point Of Sale screens are now very popular and provide a detailed and visual presentation to Customers whilst their account is being totalled. This additional screen provides great visual marketing opportunities when not processing a guest check.

Customers can be treated to a visual presentation of products or information of your Customer Loyalty programs and even your social media details such as Twitter and facebook. Secret shoppers are also trained to take note of these transactions to make sure the employees are not under-ringing sales.

Leaving draws continually open and overflowing with notes and coins sends a bad message to staff and your customers. This messy cash handling procedure is just begging for a thief to come along and help themselves.

Perhaps another point to consider is the quiet yet unassuming individual that purchases that Cappuccino every morning actually works for the ATO. As an auditor and you can be assured this individual may have observed your cash handling procedures and immediately suspect you may be hiding income. After all perception is often reality.

Sales should always be recorded at the time of the transaction and a cash receipt should be given to the customer. Always lead by the best example, staff witnessing you adding transactions in your head and making change (although impressive) just presents staff with another opportunity to rort the system (if you have one.)

Receipts cost money and today’s thermal paper receipts quickly become unreadable. When you issue a receipt it usually has your Business Name and contact details displayed. This is a great marketing opportunity to draw attention to your web page, twitter or facebook sites and repeat business.

Never underestimate the power of social media to encourage your customers to increase their frequency. Beyond this phenomena it provides your customers with a written record the transaction and hopefully the amount tendered. Ever had a customer return later for asking for a written receipt?

Did you have an old fashioned receipt book or could your recall the completed transaction and re-print a receipt. Skimming draws of excess note and coins has always been a must and great cash control practice. Remove the temptation by continually reducing this large volume of cash just screaming out ‘Help yours self.” A good POS system will prompt you to skim at several points in a days trading.

Messy draws bursting with notes and excess coins are often the sign of poor cash handling on the part of your employees. Encourage your staff to ask for their cash tills to be skimmed of excess notes. Several of the Fast Food giants provide corporate uniform to their employees with anti theft features built in. Simply, no pockets, there is nowhere to stash the cash; however, a prudent thief will probably us their socks or elsewhere on their person.

Eftpos and Credit Card facilities

Now more than ever before Eftpos is more affordable and even more unavoidable than ever. New technology allows business owners to utilize Bluetooth card reading devices faster than ever authorizations using their mobile phones instead of expensive EFTPOS devices. With faster internet connections authorization can be processed in a split second, not like the years ago when a device actually dialled out on your phone line and disconnected the current phone call.

Use of electronic payment can presents the modern day thief with opportunities. When a customer does not want a receipt the cunning staff member inflates the check amount by $10.00 and hoping the customer never checks the amount when punching in their personal pin number. If they do notice they simply apologize for their obvious error and make the correction.

Skimming devices are becoming more prevalent and the internet is full of opportunities to purchase slimming devices along with instructions on how to use them. A good practice is instructing your staff to avoid handling customer credit cards, always ensure your customers keep their card in their hands and run the card through the machine themselves. When customers notice your staffs are well trained to avoid contact with their precious credit cards your integrity as a reputable business will be enhanced. Always be vigilant and observe the interaction of your staff when it comes to processing card payments.

By far the greatest benefit with the emerging cashless society is the amount of cash processed in the average business has been declining consistently every year. Money especially notes has always been credited as a great distributor of germs and viruses, perhaps this is just an old “wives tale”. The main virtue of this cashless society is there is less cash in circulation for staff to steal from.

It is much easier to keep tills, neat and skimmed when there is less in them. Another benefit of the cashless society is the money walks itself to your bank every time your Eftpos provider settles your account (usually daily.) your time is more precious working on or in your business then standing in a bank queue for twenty minutes five times a week.

Customers and disputed tendered amounts:

Cashiers should place the customer's money on register ledge in full view of the customer until the change is made. If the customer says he gave a larger dollar amount, the cashier has it right there to confirm it. There are individuals out there that will seize an opportunity.

If your staff are not correctly trained and simply stuff that $10 or $20 note onto the pile and then make change then they will be tricked into giving more change than required. If that $10 not is left either on top of the keypad or cross ways on top of the Cash draw they there will be will be doubt concerning the amount tendered.

Disputed change verification can be an ugly reality in the restaurant game. We have all experienced this at some time; a customer is cashed out and leaves only to return five minutes later in the belief correct change has not been returned to them. This is a golden opportunity to quickly deal with this and demonstrate you have procedures in place to quickly verify this.

At worst it is an opportunity to demonstrate to your customers and employees that you have absolutely no idea of how to deal with this. A bad business owner will dismiss a customer’s query outright and on the spot and as a consequence you lose a valued customer in the process. Then an employee can potentially see this as an opportunity to steal, knowing that the customer will get sent “packing” and that no verification process exists.

So how do you deal with this sort of issue? Firstly always have an unused spare cash draw complete with float ready to go for that quick change out. Granted this will always occur when you are flat out, but, if you don’t deal with it the ramifications can be enormous. Quickly take an X-report (read report) from your Point of Sales system, unlike a Z report the X report simply takes a reading of your sales at that point and does not reset the days sales to zero.

Remove the draw and drop the new unused draw into the system, now you can continue to use the Point of Sale. The rest is simple; count the draw (preferably with the customer present as your witness.) Subtract the float amount and the money that remains should equal that of the X report.

Any variance over might support the customers query and a variance under completely negates it. Generally most customers will accept this procedure has satisfied their needs either way. Occasionally despite your attempts of being very efficient and totally transparent a Customer will imply collusion. How you deal with this is then entirely up to you.

Be cautious if you are in the practice of not ringing up all sales then the outcome will be that you are cash over for that very reason. It will be impossible to verify if the customer is short changed and the very fact you are cash over supports the customer’s claim they were short changed notwithstanding what actually may have occurred.

Cash registers should not be left unattended and never ever concealed from sight. Many a register cash draw has been popped open by a competent thief in the middle of a busy lunch service and its contents removed. Money should never be exchanged from register to register if a multiple register configuration is used.

If this occurs unscrupulous employees will short change unsuspecting colleagues. You then end up with a cash variance and you may potentially suspect the wrong person. Ensure you are following up on unauthorized draw opening; many systems will record on the Z tape the number of occasions a draw is opened by a key or some other release method. Always check with the operator and ask why, you should then see the frequency decrease

Perform a Z reading each day. This clears the register of the previous day’s sales. This reading should be attached to the daily cash report. Don’t fall into bad habits such as simply counting your till, subtracting your float and accepting that the remaining money equals sales. It is a lazy and dangerous way to run your bushiness and a competent thief much like an opposing military General will identify your weakness and then strike.

Follow up on your bank deposits to make sure your money has been credited to you account. Go through your bank statements line by line and check to see that none of your deposits are missing and each one is entered accurately. Banks often make mistakes, money can be occasionally sent to the wrong accounts. Banks are also not immune to dishonest employees.

I recall a Detective once explaining that in the event of an armed robbery in most banks will search their employees work stations after the event. This is to ensure an employee has not seized an opportunity skimmed a few dollars and hidden in the bin or some other obscure location and then presuming the “bandits” will get the credit for the additional missing funds. Privacy laws are more comprehensive nowadays, so this may longer occur.

If you are using a night safe facility then you will need to be exceptionally careful. Not only are there tremendous personal safety issues there are also the mechanical issues. Many night safes can be very old and as such quite unreliable and prone to jamming. Draws have been known get stuck open or even stuck close? I recall an experience many years ago where the local Real Estate Agent had deposited over $6,000 in cash into the Banks Night Safe Facility.

The money was never seen again and it was later determined that the night safe was faulty and when the draw was closing the chute did not fully open permitting the wallet to drop into the safe area below. It would appear that another night safe customer had simply opened the draw and found a night wallet just sitting there. The thief was never caught although it was narrowed down to five or six night safe users.

CCTV Cameras as a deterrent:

How many times do you think you are captured on CCTV camera on your way to and from work. Apparently in the United Kingdom it can be as high as 300 times a day. Never underestimate the power of:”Big Brother” watching! CCTV is a great tool to assist in the management of your business. Although it is not just as simple as nailing a camera to a wall and your problems are solved.

There is a list of ethical guidelines that need to be addressed. There are even Australian Standards for the installation and operation of CCTV cameras in certain applications. Above all do not conceal cameras and always ensure they are labeled with signage as “always recording.” Never place them in change rooms or toilets unless you want to make the 6.00 pm news. A CCTV camera or portable web cam was recently found in the change rooms of one of the larger Food Chains. This camera placed there by another employee resulting in a court appearance and subsequent loss of employment.

Privacy is always a big concern; I recommend research your obligations as they can vary from state to state. It is vital to get this right, I would always suggest engaging a CCTV professional to assess your individual needs and suggest a CCTV solution. This expert can also advise you of the laws and ethical standards you will need to adhere to.

There many different types of CCTV systems ranging from “pretend” to full motion detection with face recognition. Most cameras will record to a computer hard drive and have day/date/time generators on screen. One of the many features of CCTV cameras is they have the ability to record other events in your restaurant. CCTV cameras have been used as evidence in courts to refute “slip and fall” claims where customers have faked and incidents.

I recall an example in a large hamburger chain where a customer complained of foreign objects in his children’s meals. The customer had been recorded on CCTV earlier removing hair “scrunches” from his daughters pony tails and placing them inside their meals.

Mystery Customer or Secret Shoppers

If you have a secret shopper program in place this is a great routine for assessing your staff and their cash handling procedures especially in your absence. I often make observations of wait staff procedures and their service culture whilst waiting to pay my account. If you have a program in place or are using a mystery customer service provider then stipulate that attention be paid by the assessor during the “Cashing Out” phase of their process and observations fully recorded.

I have been constantly amazed at the observations I have witnessed time and time again. On several instances I have deemed it serious enough to contact the restaurant owner or manager to detail my observations. Often my comments and observations have been met with ambivalence.

Food Costs signs of theft:

A good cash handling and cash control culture does not happen by mistake or overnight. It exists as a result of vigilance, training, retraining and constant follow-up. Lead by example, have common sense systems in place that work and that your employees understand. If you suspect you are being stolen from then be pro-active and do something about it. Constantly complaining about the thieves and doing precious little to prevent it only results in your employee believing that you may well deserve it.

Skim draws regularly, change draws out frequently. Designate cashiers and record and track individual cash handling performances and share this information with staff. Keep records of such variances and most of record the names of all people on the shift. A pattern will emerge and l will be able to make determinations and take action based on these emerging patterns.

Some thieves are so good you may never catch them. You may not even know it is happening? Good restaurant controls are required not only in cash handling but also in inventory management, with these tools available you can use them to assist to identify potential theft. You may never suspect a person but stock movement is a great indicator that something is happening. Several years ago a client using our Inventory software detected an increase in the variance from projected and actual food costs. This variance was only small around half of one percent from the normal expected tolerance.

Might not sound like much to most people but this business owner had good controls in place and a variance over .30% of one percent was deemed unacceptable and was investigated thoroughly. For several months this variance had shifted to .8 of one percent, still sounds small but on $300,000.00 turnover month this was around $1500.00 of raw stock unaccounted for. With food costs at around the 30% mark it does not take long to calculate this issue was much bigger than $1,500.00. This was just the raw products missing image what the retail value was?

I recall reading this Restaurant owner 17 page statement to Police complete with Abcom Statistical Reports that were later used in court to support the charge of “stealing as a servant.”

Probably the most consistent and classical theft scheme is the employee that can add cost of retail products up quickly in their heads, take customers cash provide the correct change and often the money never sees the inside of the till. The classics never die, and a junior wait staff will embrace this concept and work it with such vigor in the belief that it has never been done before.

A final consideration, there is no justifiable reason for employees to steal from you. In fact there may be many reasons that will serve as a defense to stealing. If you have ever taken advantage of an employee perhaps not paid a penalty rate when it was justifiably due, or in the eyes or perception of that employee you have “ripped them off?” This may not always be the case, but, you would be surprised how many theft charges do not proceed because the employee had a legally acceptable reason for “taking” something. Having problems interpreting awards then you might like to speak with an Abcom Payroll consultant?

In closing always ensure your payroll procedures are beyond reproach. If you have an employee being spoken with by the Police as a result of information you have supplied be prepared for any consequences. If it can be established that an employee had a legal right to remuneration and that you had failed to pay this employee correctly then the Police may not have a case. Be prepared to be heavily scrutinized in the courts should you ever reach that level.

Abcom Cash Control Module in eProphet.NET

Abcom has a long history of providing Restaurant Cash Control solutions. For over twenty five years Abcom systems have been providing cash handling solutions to all McDonalds’ restaurant here in Australia.

Abcom’s new generation eProhet.NET provides a fully integrated cash handling system with the following features:
Interface with almost all brands of Point of Sale systems,* eProphet.NET Cash control module allows for direct connection to your POS system to facilitate downloading of cash details from one or multiple POS devices. This electronic collection of sales and cash handling enables our clients to compile detailed and real time data pertaining to Sales and Cash Handling and control. Records are kept and easily accessible for the day one of systems install. Cash control can be tracked in detailed eProphet.NET.

Additional features included in eProphet.NET Cash Control Cash Handling Module:

*A POS interface (download capability) may be required for some features to be fully implemented.

Enquiries:

Call 07 5530 7806 or contact us via our online form


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