Restaurants: Implementing Internal Accounting Controls

A Scripted Freelance Writer Writing Sample

Restaurants: Implementing Internal Accounting Controls

Have you ever thought about Internal Accounting Controls? Your accountant may only be paying attention to the numbers. This can be very costly. Smart thieves can drain your accounts and profits even though a CPA audits the books. They will do things you never thought of.

What are Internal Accounting Controls?

Internal Accounting Controls (IAC) are methods that help you control risks. They provide quality assurances and explore any weaknesses in your operation.

A chief way thieves make off with your profits is through the cash register. Small restaurants encounter these problems more often than larger establishments because they have fewer controls in place. Outright theft of inventory or equipment, and improper employee use of time.

Since thieves exploit your control weaknesses, it is important that you give attention to Internal Accounting Controls.

Voids, Comps and Gift Cards

Voids cancel a previous transaction that is completed and visible in the system. A thief may also open the transaction while the customer pays and then drop the sale when he pays. When customers change their minds after receiving their order, all or part of the order should be voided, but an employee may not record the corresponding comp or discount and pocket the extra change.

Gift card thefts are hard to track. A manager should number and registered the amounts. A manager's signature should be on each card so that employees don't give them to friends or family. Cashiers can drop and order and load in a gift card for the same amount. You can catch these if you look for cards with uneven amounts. Most purchasers buy cards for an even amount.


We often regard "unders or shorts" as the only problems we need to worry about. But "over" may point to an employee who lost count of who much cash he took. This is called "Counting."

An employee decides to use Combo #3 to fund his theft. Every time a customer orders that combo, he rings it up and subtotals it so the customer views it. After the customer pays, he clears the sale rather than completing it. He puts a penny in the dime drawer, or vice versa. Or, he moves one little piece of paper from one side of the register to the other.

Near the end of his shift, he counts the mismatched coins and multiplies it by the combo's cost. That's how much he takes out of the till. The register cash matches the tape, even if there is a POS (Point-of-Sale) system. However, an integrated system with a direct link to the accounting system might prevent this type of theft.

Credit Card Fraud

A newer concern is credit card fraud. For example, a janitor working after closing hours operates the credit card machine. He prints a consolidation report to review sales. Then he refunds purchases to his own credit card and runs an end of shift report to reset the machine for the next cashier. This type of theft may not be noticed for a month or two.

Skimmers have small devices the size of your palm that attaches to a reader. Hackers steal customer information by breaching restaurant databases.

Even chip technology isn't foolproof because the card information is still magnetized. Credit card fraud can create a bad reputation for the restaurant.

Inventory Theft

Employees may steel food because feel that they are "owed" these benefits for all the work they do. They may make special deals with vendors, who in turn may give kickbacks, usually involving the collusion of managers who account for the inventory as spoilage.

A cashier may oblige friends by discounting an item, dropping to order or voiding it. It may appear as a regular order, the employee taking money and pretending to make change. A bartender may also hand out drinks or refill without charging. Employees may also take supplies and equipment.

Theft of time and wages

Employees may clock in early or clock in late to increase their time. Sometimes their reasons may be legitimate, but a supervisor should approve any schedule changes. Shift supervisors should be alert for employees who punch in or punch out for another employee.

All of this adds up to thousands of dollars over a short time.

Installing Internal Controls

Here are some Internal Controls to minimize losses:

1) Use exception reports to look for voids, comps and at "overs" as well as "unders" on daily reports. Check for cashiers "counting" to cover voids.

2) Install proper segregation of duties between handling cash and accounting for it. Avoid having employees share registers. Shift managers should not handle tills alone or unsupervised.

3) Check tills often. Audit with the cashier present and have cashiers sign the register reading report. Check tills often and beware of cashiers who want items voided or who "find" cash to cover a short. Don't overfill the till.

4) Keep a ledger account for gift cards. Watch for purchases or reloads that are not in even figures.

5) Compare buying orders against deliveries at the time of delivery. Make regular stock checks at unpredictable times or right before deliveries.

6) Monitor with security cameras.

7) Require manager approval for any schedule change for employees before they can clock in. Supervisors should watch shift changes to ensure employees don't clock out for others.

8) Use of a software program with automatic alerts to warn supervisors of certain conditions, such as too many or too few for the work load.

Above all, train employees to understand the Internal Control rules and the reasons for them.


A business should have internal control procedures in place regarding separation or segregation of duties between accounting and handling of cash and other assets. Required approval and access to parts of the accounting system through passwords or lockouts are also recommended controls. Hand counting and physical audits, standardized documents, performing daily or weekly trial balances and other periodic reconciliations are all important Internal accounting controls to stem theft.

Jerry Robbins is a versatile writer who is a former CPA and has a MBA in Business Administration, Accounting and Health Care Administration, has run a tax and accounting office and aided with audits. Jerry also knows the ins-and-outs of business management. She has also written several screenplays and worked with group forums.

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