Insights | Restaurant, Franchise & Hospitality

Best Practices for a Fraud-Resistant Restaurant or Franchise

March 27, 2024

At a glance

The main takeaway: Fraud is a serious threat to all types of businesses and can come from anyone within the organization.
Impact on your business: Fraud is a multi-faceted threat that can lead to a decline in a business’s overall health — from financial loss to reputational damage to decreases in employee morale.
Next steps: Aprio is your trusted advisor for all things related to your restaurant or franchise operation. Let us know if you suspect you have been a victim of fraud or would like a review of your internal procedures.

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The full story:

Businesses continue to be highly vulnerable to fraud, despite the implementation of strong security protocols. Did you know that your restaurant or franchise business could also be at risk for internal fraud? This occurs when an employee engages in intentional deception for personal gain.

Internal fraud is a serious threat to all types of businesses and can come from anyone within the organization. Smaller businesses, though, are often at higher risk of fraud due to the lack of segregation of duties and robust accounting controls. You may think you really know your people, but the close-knit nature and weak internal controls can sometimes provide the opportunity for employees to commit fraud.

What does fraud look like in a restaurant or franchise?

Fraud in restaurants or franchises can take a bite out of profits in many ways. For instance, cash register manipulation is a common culprit, with employees pocketing money, exploiting transactions, and tampering with processes. These could potentially result in financial hardship, reputational damage, and a decrease in employee morale.

Best practices to mitigate fraud in your restaurant or franchise

Smaller organizations may feel that robust fraud prevention is not within reach due to limited resources; however, there are best practices you can implement to significantly reduce the risk:

Segregate duties: Try to split financial tasks among the members of your team and avoid having one person manage all the financial transactions. This will create a comprehensive system, making it easier to identify discrepancies.
Limit access controls: Restrict access to financial information and systems based on job roles to reduce chances of tampering with records.
Establish clear guidelines: Create policies and procedures for all financial processes and make sure all employees understand the consequences of violating them.
Promote open communication: Encourage employees to speak up if they see anything suspicious immediately and assure them that they can report anything without repercussion.
Regularly conduct internal audits and reviews: Regular auditing and reviewing of bank statements, financial reports, and inventory can help identify any discrepancies as early as possible. Aprio can help you review your financial processes and operations.
Regularly review payroll and employee lists: Make sure those who are on your payroll are still employed by your organization and the wages are correct.
Consider doing background checks: This is important for anyone coming into the organization, especially those who will handle the finances.
Organize fraud-related trainings: Provide training on fraud awareness and prevention for all employees. The training should increase their knowledge about fraud and instill the importance of ethical conduct to everyone in the organization.
Leverage technology: Investing in basic accounting software can help streamline financial transactions and diminish laborious documentation tasks.
Thoroughly vet all new incoming vendors: Validate all the necessary information by calling the vendor and verbally confirming that they are valid.
Changes to vendor information: Review and validate changes, call the vendor, and verbally confirm the changes.
Monitor invoices meticulously: Check if you received an invoice outside of your normal cadence, read between the lines of the content and check for any unusual format, and confirm the authenticity of the sender.

The bottom line

One thing is definite: always be diligent when reviewing financial data. Fraud is an unavoidable threat to any organization.

At Aprio, we always have our clients’ best interests at heart, and we can help you implement some of these best practices. Our Restaurant, Franchise, & Hospitality team are your trusted advisors for all things related to your restaurant or franchise operation, so don’t hesitate to reach out if you suspect you have been a victim of fraud or need to review your internal procedures.

Are you ready to learn more? Schedule a conversation with our team.