Tuesday October 21 , 2014

Cash Management Program Case Study

Sealing the Profit Leak

Cash Management Loss PreventionThe drain on profits was mounting.  Loss in the restaurant was a staggering 8% of sales or $200,000 over the previous 12 months.  The inexperienced manager thought the losses were associated with food inventory miscounts, poor portioning of food and poor recording of food waste.   Since cash shortages were within acceptable limits, she had not considered cash handling to be a source of declining profits. 

Cause:

When the investigation in this Sarasota, Florida Quick Service Restaurant (QSR) focused on cash handling procedures and cashier performance – there it was!  Cashiers were only measured by the shortages on their register.   Their handling of other components affecting cash and food cost performance was not addressed.  They were either not captured or ignored.  Audit procedures were not in place.  

Actions:

The first step in implementing a cash management program in this restaurant was to create standards for the various cash management components including cash overages and shortages.  Policies, procedures, expectations, and accountabilities were established.  A detailed audit process outlined the step by step process to analyze and identify problem areas in cashier performance.  The practice of progressive discipline addressed poor cash handling and non-compliance issues.  An audit form was designed to capture relevant information and record disciplinary actions. 

The restaurant manager was responsible for training cashiers on proper cash transactions and applicable policies and procedures.  She was also assigned to complete the weekly audit following explicit instructions, execute the disciplinary standards, record the actions on the form provided and send it to the supervisor as documentation.  Recognition and rewards were established for flawless execution of the program and for the cashiers with the most improved cash performance and best overall performance.

Results:

Profits rebounded, and payback from the cash management program was immediate.  The standardized audit process identified the issues affecting cash shortages and food loss.  The progressive disciplinary procedures held the cashiers accountable and improved their performance. Theft issues were identified resulting in terminations and prosecutions.   Managers were held accountable for cash and deposit performance on their shifts and they improved their performance as well.  
The restaurant manager reported that the instructions for implementing the cash management program were clear and easy to implement.  She stated that the strict routine of training, auditing and executing the disciplinary process provided her with a renewed interest in improving other areas of operations that included additional training and building sales.

The goal to reduce losses in cash and food cost in this restaurant was quickly realized because of the determination to make improvements in profitability.  Six months into the program, the restaurant improved from overall 8% loss to 5% and trending downward. – An improvement of $38,000!  The restaurant got a 3% jump in profitability in six months by controlling losses.  

Loss Prevention programs not only decrease losses in cash and food cost; they help reduce the risk of robbery, theft, fraud, and employee and customer accidents in the restaurant.