How can we help prevent customers ‘doing a runner’ from our restaurant? And how can we protect ourselves against losses incurred this way, or even get the money back? Can you get insurance policies that cover this? Or can we make allowances in our accounts? Previously we’ve just written off any such losses
Chris Morton, Chris Morton Associates
An interesting question, particularly as it implies a considerable problem.
Non-payment of a restaurant bill is, of course, a crime, and diners trying to abscond without paying can be arrested by the operator (though it appears that the miscreants are too quick or devious to be caught).
Your first line of defence is to ask all bookers for contact details, or at least a telephone number that can be verified, though “chance” users will often gain entry without providing this information. The next “control” is to request a credit card imprint or, failing that, if the problem is severe, a deposit or even payment on order.
Of course, persistent offenders may give you a false card, so a payment in advance may be the more effective of the two options. This is a regular practice in some pubrestaurants, and an explanatory notice detailing why it is necessary may help you overcome any adverse guest reaction.
Insurance cover is unlikely, as most theft cover requires “theft by violent means”, which does not apply in this case. It will also probably incur an excess payment, which is likely to be higher than the cost of the meal, though there may be an eager company out there somewhere that wishes to help.
Finally, once the loss has been incurred, the profit of the restaurant has been reduced by the cost of food, drink and services, so the level of tax due on profits has also declined. While you are not obliged to trade at a profit, the tax man may ask why your margins are lower than expected, so it is best to retain a record of all such losses. It is not beneficial to claim for them in any way, though.
The best course of action? Payment in advance, and a large doorman.
www.cma-ltd.co.uk
Andrew Lutter, business coach, Best Practice Forum
You can manage the risk, but there is very little you can do to prevent a determined scam other than demand cash up front.
Insurance is not the answer, as this problem is something you can control and an insurer will expect you to reduce the risks to an acceptable level. But feel free to ask your broker or insurer for help.
Much depends on the type of outlet you run, but here are some ideas:
- Install obvious CCTV over the exits, facing inwards, so “runners” will be caught on TV. You might consider mentioning this in on the menu (perhaps as an apology for the security measures).
- If people start at the bar, take a credit card impression
- Train your staff. Make sure they know what to look for. Shifty-looking, young but spending a lot. Make sure staff feel comfortable discussing their suspicions with your management team.
- Make notes when someone does a runner. Ages, numbers at the table, how the scam worked and so on. Learn from these notes and pass on the knowledge to your staff.
- A large sign by the door reminding customers that they are required to settle their bill before leaving. Company policy to prosecute, etc.
Some of the suggestions above would work well in some places but not in others. It really does depend on the type of outlet you run. You need to use a co-ordinated strategy. Nothing works well in isolation.
Financial suggestions:
- Put a provision in your accounts so you can budget for this loss (like you should for any other occasional but predictable cost).
- Make sure your prices reflect the true costs of running your business (otherwise it will be you that is doing the runner).
www.bestpracticeforum.org
If it’s in small print, most people won’t notice it, but the “runners” will. Something like: “We have installed CCTV to cover the exits from this premises to improve the security of our customers and our business. Please feel free to discuss this with the management if you wish. Thank you.” Perhaps you could also put a small comment to the effect that customers are required to settle their bill before leaving. Company policy to prosecute, etc.
Other suggestions:
- Collect customer e-mail addresses and use these to keep your customers advised of any special offers or competitions you are running (eg, free wine, free starter, etc, with a “magic” till receipt number)
- If this becomes such an issue that it really will damage your business, then get some help from a specialist consultant.
Chris Lane, partner, accountancy firm Kingston Smith
In my experience, restaurateurs develop a sixth sense when it comes to evaluating their customers. The behaviour of those with bad intentions is often unusual, and so you can watch them carefully. You can, of course, if you have very strong suspicions, decide not to serve them at all; but a less extreme action would be to ask for a credit card at the beginning.
You will need to set up a policy within your business that as soon as anyone has any kind of concern it is passed to all members of staff on duty at that time so that they can keep an eye out and hopefully prevent anyone running off. Your internal systems should also be robust and up-to-date, so that you always know which of your tables are yet to pay, and each member of staff knows which tables are their responsibility.
I have never come across anyone with an insurance policy to cover such losses. I guess it is possible to buy this kind of insurance, but whether it makes commercial sense is questionable, as the cost may be high.
As regards the accounting for any losses that arise when customers do not pay, the normal action is simply to do nothing (ie, not record the potential sale). The cost of materials for these bad sales are therefore absorbed by the business in a similar way to any other wastage of raw materials. The gross profit percentages of the business will then be affected by these losses.
www.kingstonsmith.co.uk
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