Article
Why Skimming Cash Is Always a REALLY Dumb Business Move
Although not the most publicly discussed restaurant topic, the fact remains that there are some restaurant operators who have no problem pocketing some portion of their cash sales and not reporting it. You've probable heard some stories yourself about the creative schemes owners have devised to avoid paying the tax man.
One that comes to mind is the restaurant owner who kept an extra cash register, that he rigged up on a stand with wheels, that was hidden in a closet but rolled out for use the last few hours of every day.
For what's it's worth, here's my take on why I think a restaurant owner ends up shortchanging him or her self and their business more than the taxing authorities when they fail to report all their sales.
1. It's against the law
The fact that skimming is against the law may not mean much or even anything to some people. But because it's against the law, and we're talking about depriving our various governmental agencies their piece of the action, the penalties are extremely severe if you're ever caught. The government gets extremely testy about tax evasion so they've made it a felony offense with severe penalties and even jail time it you're convicted.
2. All meaningful controls in the restaurant are lost
A restaurant's financial information is essentially worthless if skimming takes place. The operating percentages and cost ratios don't mean anything. Skimming makes inventory control a worthless exercise. How can you tell if you're doing a good job or bad job of controlling your expenses and whether your business is improving or suffering from operational problems? It's very difficult, if not impossible to run your restaurant like a business and make intelligent operational decisions when sales are understated.
3. Employees know what's going on
Maybe not the entire staff, but a few will figure it out. When they do, some will feel entitled to some of the spoils. This makes it easier for them to justify taking home a few boxes of meat or a couple 20's out of the till. Some employees have been know to even blackmail the operator if they're aware that skimming is a serious violation of the law. Probably most important, though, is operators who skim lack any moral authority and credibility. Integrity is an important issue for many employees and they don't respect or want to work for someone with low moral and ethical standards.
4. Skimming makes it more difficult to borrow money
Imagine an operator going to a bank for financing to buy another restaurant or expand the existing one and while showing the banker the restaurant's financial statements says something like, "I know these numbers don't look all that good but the restaurant's really doing better than this." Integrity is "very" important to bankers too.
5. Skimming makes it more difficult to sell a restaurant
Pocketing cash off the top will dramatically lower the value of the business. Business valuations are heavily dependent on accurate, credible financial information being available. When it's not, there's nothing to justify or prove how high the sales volume is and how much money the business is actually making.
These are just a few of the reasons why it's not a smart business move to skim. Operators that do, usually end up cheating themselves, in the long run, much more than the tax man.
