Every article I write is centered on the most current business pains I see amongst all of the restaurants that our accounting and tax practice serves, as well as industry experts who share current experiences that affect restaurant owners today. This week, we received an urgent email from a client who could not figure out why there was a cash flow shortage at one of his 1 0 stores, where he had trusted general managers who were paid to run the daily operations.
If you have an employee who is entrusted to make a daily cash deposit (who is not the owner or an investor of your restaurant), please pay attention.
In this scenario, a general manager was hired and paid based on controllable gross profit from the operations of three restaurants. This employee would manage the daily operations, the daily point-of-sale, opening and closing, and the daily bank and credit card deposits. The results of this activity were posted to a website that the owner and the accountant could view on a weekly basis.
The manager started kiting the daily bank deposits and delayed the timing of when they were made to the bank; for example, the bank deposit for January 1 would be made January 3. If you were reviewing the activity on a weekly basis, it would appear that all deposits were eventually being made and that the bank was just delaying its timing of reporting the transactions. If an owner receives paper bank statements, then this timing would not be recognized until possibly a month later, and the damage could already have been done, with the employee who created the kiting having left town (possibly the country).
Kiting was being performed for three stores, with three daily bank deposits being held from each store, totaling roughly $15,000. The trusted employee had been a general manager for eight years. When cash was getting tight for a recent payroll, the owner and accountant called the general manager and asked why daily deposits were not being made timely the next day; each time over the past few weeks, the responses always led to an excuse: It was caused by the bank’s fault, sickness, busyness or some other reason. Finally, after a payroll check bounced, the owner and accountant asked the general manager to make all deposits up to a certain date by 10 a.m. the following morning, and that was when the employee admitted to the kiting. She had
borrowed the money this way, intending to pay it back over time by putting it back from her paycheck as an excess deposit.
Fortunately, the accountant had a daily cash control reconciliation process so that he matched the bank deposits to the point-of-sale reports and could pinpoint the exact amounts that needed to be deposited the next day at 10 a.m.
First, create a daily process in which the point-of-sale reports or tapes from the cash register are reported to independent third parties for auditing. Second, work with a bank that provides online banking services so that the independent third party or owner can view the bank deposit made by the general manager (if not the owner) and compare to the information provided by the employee. A zero-tolerance policy needs to be implemented, and any nonowner employees at the restaurant need to be made aware that independent third parties are reviewing daily deposits. Third, create an Excel spreadsheet or a method of posting and reconciling the daily bank deposits to the daily sales transactions of the restaurants, and the credit card transactions resulting and being posted to the bank. This spreadsheet should have the ability to account for overrings, paid-out cash expenses, employee loans, and cash being over or short from the mishandling of the cash register.
Next, have a meeting with all employees regarding the daily reconciliation process, and create a competition between the stores for exact reporting, specifically regarding the cash over/short that results from daily operations. The restaurant workers need to be aware of the severity of reporting cash improperly, and any incidences need to be dealt with immediately under the zero-tolerance policy.
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