At the end of last year, I was talking with two restaurateurs who had experienced the pleaasure of IRS audits. These folks are very sharp operators with highly organized companies. They exemplify the kind of success derived from refined numbers that are drilled down into improved operations.

The audit results were shocking. Though they thought their payroll company had handled all reporting issues correctly, they were on the hook for more than $80,000 in taxes, fees and penalties.

Payroll services are standard operating procedure for good reason:

There is just so much to keep track of!

I have friends who work for payroll services and a friend who owns one, so I’m not one of those who think these companies are the enemy. The best business people know to check that these arcane aspects are being handled and don’t just assume they are.

In one case, the payroll company had figured server overtime incorrectly. It’s reasonable to assume that the payroll service would catch this, but using polled data, their system didn’t compute that they were dealing with tipped employees and tip credit issues.

Granted, server overtime is not very common. But, in this case, they had a specific operational reason for it. (It’s a long story for another time.) The payroll company was taking the tip credit amount of hourly wage at $2.13 and paying time and a half. The correct calculation for server overtime would be minimum wage x 1.5, not $2.13 X 1.5. Have I lost you here? Probably so. It’s no wonder there is a risk that this is being done wrong. The more I mention this in conversation, the more people tell me there is a lot of opportunity out there to clean up this common error.

In the other case, the fine was related to insufficient tip declarations and the failure to file a Form 8027 which details them. The restaurant assumed their accountant would file it. Their accountant assumed the payroll service, who had all the data, would file it. No one filed it. No one was watching that tip declarations were in compliance at the store level either.

So don’t let this happen to you. What do top restaurant owners, and all business owners do? Occasionally look at their bank statements online, payroll runs, credit card statements, and yes, even their Form 8027 Employer’s Annual Information Return of Tip Income and Allocated Tips.

The bottom line?

• Spot Check. Ask questions;
• Emphasize that you are on top of things;
• That helps the people to whom you delegate stay on top of things, too.

We would be interested to hear what other services you may outsource. What are your best tips for monitoring the work of outside services?

Last week, I had the opportunity to dine at Café Des Artistes in Puerto Vallarta, Mexico, the flagship of Chef Thierry Blouet’s empire. I didn’t realize it would also be an opportunity to witness exemplary teamwork.

Chef Blouet’s award-winning restaurant offers a spirited competition for high standards between food and atmosphere, with service not far behind. He is indisputably one of the elite chefs of his country, but equally impressive is “the garden” he has created. The dining space is perched on a steeply tiered outdoor terrace in the interior of a city block. It is a courtyard enclosed by the walls of the neighboring buildings, and boasts tropical landscaping, great lighting and sculpture.

After the meal, we ordered the Chocolate Fondant. According to the English translation on the menu, the dessert specialty is served with chocolate crumble, vanilla ice cream, wafers, and amaranth.

After our first two bites, a waiter who had not been serving us approached our table tentatively and smiled. We responded with friendly body language, so he stepped forward and pointed to the two wafers, one red hued and the other vanilla-beige. In a friendly, but tentative voice, he pointed to the wafers and said, “Excuse me. Can you tell me how to pronounce this in English?”

We explained the pronunciation and he replied, “In Spanish, it is ‘Hostia,’” the word for the white communion wafer used in the Catholic Church. Knowing how chefs have a sense of humor, I imagine it was no accident that this particular wafer was used in the Chocolate Fondant. I’ve since learned that this word can also possibly be a rude slang term, so the waiters were certainly hoping to find a more polite word.

The inquiring fellow retreated to a group of waiters who were still on duty but had little to do at that late hour. Most restaurateurs would have cut the wait staff and sent them home by then. The group was standing in the multi-leveled dining space not far from our table. Like the menus they present, these service professionals are all bilingual. And, like the professionals they are, they were working on their language skills. Gradually, we heard a chorus of waiters, practicing their new English word in a scene worthy of a Monty Python skit.

“Waff-er!”
“Way-fear!”
“Why-fer!”
and a few triumphant “Way-fers!”

What a great example of teamwork! One brave soul had approached our table and carried the answer back to the whole team, then lead an impromptu pronunciation course.

And, what a sign of health at Café Des Artistes! Either by design or by accident, there was true teamwork in that dining room. Each person cared that their coworkers performed up to the standard. They understood one of the most important lessons I have observed in business and in life:

We are all in this together.

Training and hiring practices are important in any business. Fostering true teamwork and support delivers better results than an “every man for himself” message.

It is critical to review whether an atmosphere of teamwork is prevailing in your business. I know of a company who recently separated from one of their highest performers because he destroyed teamwork. It was a very tough, but courageous decision. And it was the right decision.