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Friday, April 21, 2006

Do We Count The Employee Purchases?

During my college years, I worked in a variety of hotel and restaurant positions. There were plenty of jobs available in the Saratoga Springs, NY area in summer. I worked as cook, cashier, bellhop, busboy, night auditor and desk clerk. When the summers ended, I would continue my night auditor job on weekends during the school year.

As I gained more of the innkeeper's trust, he gave me other reports to review. Eventually, I was given the weekly food cost report and the supporting documents. The single issue I had with the entire food cost calculation was the lack of accuracy.

At this same hotel, cash was always tied to the penny. Every desk clerk and night auditor had a personal money drawer in the safe. Shift changes were never a cause for shortages. Each clerk ran a tape and counted their cash drawer before the deposit in the safe.

In stark contrast, the food inventory figures were often way off. Certain middle pages would be loaded with obvious errors like flour at $20/pound and dry spices improperly extended at ten times the correct value. These errors forced me to devise a simple way to expose obvious mistakes. I created a set of summary figures with totals for each page and category.

One night as I arrived for work a truck was making a delivery. As I parked my car, the delivery truck was moving from the dock. The driver stopped his truck near the assistant innkeeper's station wagon. Soon the back door was open and four cases of meat were loaded into the rear storage area.

The food cost week ended the same day and the inventory was taken the next morning before breakfast. I came on later in the night and the documents were in a big envelope as usual. Before I began work, the innkeeper asked me to come in his office. He told me the costs were quite high and he was very interested in locating the problem. We arranged to have a meeting in the morning just after my shift ended.

My summary numbers quickly pointed to a high meat cost. As I reviewed the invoices, I noticed the previous day's bill from the meat supplier. Since there were only ten items on the bill, I decided to go out in the coolers to count the meat. There were no big events during the day and the dinner was slow.

Virtually all of the meat on the previous day's invoice was gone.

In the morning meeting, I asked the innkeeper: "Do we count the employee purchases?"
He asked me to explain and I told him of the late delivery and the special drop in the station wagon. He asked me to stay quiet regarding what I had seen.

The next week, a trap was set and the thief was exposed. He resigned and the food cost dropped 2 points. The summary statistics exposed the meat problem since there was no longer a hiding place in the spices and flour.

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