Operating a small business can be quiet rewarding while filled with
several challenges. Protecting the business from fraud is a one of the
major challenges that small businesses face. Often times the
perpetrators of such fraud come from within the very small business
they are a part of. According to research done by the Association of
Certified Fraud Examiners (ACFE) small businesses experience loss
from fraud 100 times the amount of their counterparts (Wells T.
Joseph, 2003). This level of fraud occurs partly because small
business operators tend to have in place limited internal control
mechanisms (Wells T. Joseph, 2003). Fraud is any and all actions an
individual takes to gain an unfair advantage over someone else
(Romney et al, 2021). Internal controls are the mechanisms, rules and
procedures implemented by a business to ensure financial integrity,
accountability is preserved, and fraud is deterred (Kenton Will, 2021).
Small business such as a restaurant often uses customer checks with
pre-numbered sequence codes as a form of internal control for its
cash receipts. This policy is a form of internal control which helps
management in its reviewing and reconciling of cash receipts each
day. Majority of the fraud that occurs in small businesses involves the
business losing cash, being able to review and reconcile cash receipts
against the prenumbered customer checks may be able to produce
the manager with knowledge of fraud. Having at the very least a
reasonable level of internal control over the cash receipts is very
important to the survival of the restaurant. And so, it becomes
important for the manager of such a business as a restaurant to be
aware, able to understand and verify financial information presented
to them on prenumbered customer checks and cash receipts (Wells T.
Joseph, 2003).
Efficient way of controlling cash receipts
The restaurant management can efficiently control cash receipts by
utilizing a good cash management system. Cash management looks at
a loss prevention practice in a business operation, such as a
restaurant (Toast, 2022). By implementing procedures such as:
a) keeping a consistent system when training and onboarding
employee's management should ensure that employees are informed
and have a clear understanding of the business's cash handling
procedures,
b) by assigning each employee to a cash drawer for the duration of
their shift. This will have each employee be solely responsible for the
cash in their assigned drawers,
c) establish security and accountability measures. Have dual control
by requiring two signatures to allow for sales exceptions, drawer
closeout and deposits. An employee held accountable is less likely to
commit fraud. Security cameras may also be utilized by installing
them where cash is being handled,
d) keep good and updated records of sales exceptions. Set up post of
sale (POS) system to allow for the imputing of a note giving reason for
sales exceptions and have manager reviewing these exceptions at the
end of each shift,
e) segregate duties by having a manager or shift supervisor review a
server's cash in their presence before moving it to the safe (Toast,
2022).
References
Kenton Will, (2021), Internal Control: Definition, Types and Importance -
Internal Controls Definition, Types, and Importance
(investopedia.com)
Romney B.M, Steinbart J.P, Summers L.S, Wood A.D, (2021),
Accounting Information Sytems- 15th Edition
Toast, (2022), 5 Ways to stop Theft with Smarter Restaurant Cash
Management - 5 Ways to Stop Theft With Smarter Restaurant Cash
Management | Toast POS (toasttab.com)
Wells T. Josephs, (2003), Protect Small Business - Protect Small
Business (journalofaccountancy.com)
