7 Reasons Your General Manager Will Thank You for Digitizing Tip Payments

General managers have one of the toughest jobs in hospitality. They’re in the trenches with their team, day in and day out — but with the added responsibilities of hiring, training, purchasing, inventory management, maintaining guest satisfaction, ensuring adherence policies and standard operating procedures…the list goes on.

It takes the right skillset — and a lot of grit — to succeed as a GM. When you find a talented one, as an operator, it’s worth doing everything you can to keep them happy and make their life easier. 

Enter: digital tipping. For restaurants that move away from cash tip-outs and automate tip distribution, cash management becomes one less (tedious) task on your GM’s plate. That means they have hours back in their day for work that matters. (Or maybe — just maybe — they’ll get to head home at a slightly more reasonable hour.)

Here are 7 reasons why your GM will thank you for making the switch to digital tip distribution. 

1. Fewer bank runs 

Your general manager probably bears the burden of ensuring there’s enough cash in the safe to pay out tips after each shift. For a lot of GMs, that means running to the bank to withdraw thousands of dollars in cash on a weekly (or more frequent) basis. Your GMs will be more than happy to scratch that task off their to-do list so they can stay in the store and on the floor. 

2. Enhanced safety 

Running to and from the bank isn’t just a time suck: it’s also a major liability. Having that much cash on your person makes your GM a perfect target for theft. And the same goes for their team once they’ve received their tip-outs and are heading home in the wee hours of the morning. (And realistically, the more cash you have on hand, the more opportunity there is for internal theft and skimming.) Sending tips straight to their bank account is truly the best of both worlds: employees still get instant access to their earnings, right where they want it — and everyone is a whole lot safer. 

3. Less time counting (and recounting) cash

As long as you accept cash at your restaurant, your managers will have to deal with the daily task of counting down cash registers before and after every shift. But the vast majority of restaurant sales are credit card transactions. Given the inefficiencies (and risks) of cash management, there’s simply no reason to introduce cash into the equation in order to pay out those credit card tips. 

Digital tip-outs eliminates the need for your GMs to manually count out stacks of cash and rolls of quarters until they’re going cross-eyed — which saves time and greatly reduces the risk of human error.

4. Freedom to shine on the floor 

All of that time saved from bank runs and cash counting means your managers can spend more time on tasks that really matter. Sure, there will always be admin work to be done. But generally speaking, GMs aren’t in hospitality because they want to spend their days and nights heads down in the back office; it’s because they love to be on the floor managing their team, engaging with guests, and filling in gaps as needed. Finding ways to automate what you can — like tip distribution — gives them the freedom to do just that.

5. Minimal distractions (and drama)

Every time a server comes by the restaurant to pick up tips from the previous night, managers have to stop what they’re doing to open the safe, watch the server count the tips, and sign that they received them. Then they’ll try to return to the task at hand…only for another server to show up 15 minutes later. 

Some restaurants also struggle with tip disputes — i.e., employees claiming that they didn’t get what they were owed. Unfortunately, with cash tip-outs, there’s low visibility into payment history and a lot of room for error. Combined, those two things can create major trust issues for your team.

Cashless tip-out solutions mean tip payments happen instantly — not the next day or week — and they provide you with a digital paper trail, which cuts down on the distractions and drama that your GM has to deal with on a daily basis.

6. Easy reconciliation and reporting 

Your general manager wears a lot of hats — and for many restaurants, that includes some level of reporting or bookkeeping. Your cash tip-out system might include a lot of hand-written records, complicated spreadsheets…and heavy reliance on your bleary-eyed managers’ late-night math skills.

The right digital tipping solution will provide a much simpler and more accurate source of truth for tip payments, as well as robust reporting by shift, date, location, or individual employee. 

7. A smart recruiting play  

Your GM has been fighting on the front lines of the labor shortage, and they need new, creative ideas to bring in new servers. Digital tipping options could be the differentiator they need to bring in talented servers. As more restaurants embrace digital tipping, they’re finding that a lot of candidates — especially the Gen Zers — consider instant, direct-to-bank payouts a major work perk that’s rapidly becoming table stakes. 

Give your GM the tools they need to succeed

 A GM has to be good at juggling a lot of tasks in a fast-paced environment. That’s a non-negotiable. But when there’s an opportunity to make your operations run more efficiently and make your GM’s life easier? That’s a no-brainer. Eliminating the hassles of cash management makes a world of difference for the captain of your ship — so if you’re still doing tip-outs old-school, now’s the time to seek out the right digital tipping solution for your team.

Want to check out Kickfin’s digital tipping software? We’ll show you all of our general manager-friendly features in a 10-minute demo — schedule yours today!

Mythbusters: Questions and Misconceptions About Digital Tipping

The advancement of digital tipping technology has a whole host of benefits for your operations, your team, and your bottom line. 

But as every employer knows, any change to the payment process — even if it’s for the better! — can create uncertainty and concern among employees. That’s especially true in an industry like hospitality, where it’s not unusual for employees to live paycheck to paycheck. 

While digital tipping is quickly becoming table stakes for restaurants, it’s still a relatively new technology. So if you’re considering a digital tipping solution for your restaurant, your employees will likely have questions — and maybe even some misconceptions — about what instant, cashless tip-outs really mean for them.

Below are few of the myths we find ourselves regularly busting, as well as important information that can help your people rest assured that digital tipping is a simple, secure — and did we mention instant? — way to receive the tips they’ve worked so hard to earn.  

Does digital tipping affect servers’ tax liability? 

For some servers, one of the big perks of working in the restaurant industry is that cash tips can’t necessarily be tracked — so they may not report all of their tipped income. As digital tip-outs rise in popularity, many servers are concerned that this will mean more tip reporting and higher tax liability. 

But the thing is: it doesn’t. Even though your employees’ tips might be paid out in cash, that doesn’t mean income is unreported. If your restaurant is using a POS system where you input your credit card tips after each table closes out, that POS data is already being used to report your servers’ income and the IRS is taxing them on it — which is why your employees might receive $0 paychecks. In fact, the IRS is gearing up to rely solely on POS data for tax information. 

Just like before, if a customer leaves a cash tip, it’s on the employee to claim it, but credit card tips have been (and always will be) reported to the IRS. 

Do employees need to download an app? 

If your employees are anything like us, they have no storage to spare on their smartphone. So when you announce the rollout of a digital tipping solution at your restaurant, you might get some eyerolls: Does this mean there’s another app they have to download, and another account they have to manage on a regular basis? 

Short answer: nope. It depends on the solution, of course, but a software like Kickfin doesn’t require an app download. 

In fact, employees can sign up for Kickfin in 30 seconds — without having to download anything. You simply send out an invite to each employee, they click the link, and they sign up through their browser in seconds. 

That means your staff get instant tip payouts, and they don’t have to delete a million photos to free up space for yet another app. Win-win!

Do digital tipping solutions require employees to use a paycard?

Here again, not all digital tipping solutions digitize tips the same way. 

Yes, some solutions require employees to use a paycard. The problem with paycards is that employees might get hit with unexpected fees when they want to use their card or transfer money to their bank account. (And those bank transfers can take up to 3-5 days!)

Kickfin’s solution bypasses paycards and sends tip earnings directly to their bank accounts — which is where most employees prefer. Funds are instantly accessible the moment employees are tipped out (including nights, weekends and bank holidays), so your people don’t have to deal with the paycard wait times if rent is due or they have bills to pay. 

Does Kickfin store servers’ banking information? 

Hackers and identity thieves are constantly taking advantage of weak security thresholds (or worse: accidental data leaks). So it’s not surprising that your employees might hesitate to share personal or financial information with a new vendor. 

With a solution like Kickfin that sends tip earnings straight to your employees’ bank accounts, it’s fair to assume their banking information is saved within Kickfin and could be compromised.

But that’s actually not how it works. 

In addition to being 100% PCI compliant, Kickfin tokenizes your employees’ financial information. Without getting into the weeds, the bottom line is that their financial information is safe from bad actors, period.

What about personal information? 

Constant spam calls and emails are driving everyone nuts, so your employees may be concerned about entering their phone number and email address into yet another database that could be sold to telemarketers, spammers, and even scammers. 

We get it: Kickfin will never sell your employees’ personal information. We value your trust too much. And if an employee opts out of Kickfin or moves on to a new job, they can easily delete their account.

Can unbanked employees use Kickfin? 

Kickfin connects to 100% of all 10,000+ banks for instant, cashless tip-outs. But what about hospitality employees who are unbanked?

Realistically, some workers aren’t old enough to have a bank account; some might be undocumented; and some people simply choose not to use a bank.

If your unbanked employees are worried about how they’ll get paid with a direct-to-bank tipping solution, make sure you’re selecting a software that gives them options. For example: With Kickfin, employees can simply opt out of instant payouts and receive their tips via payroll. It doesn’t add any administrative complexity for your team, and it ensures they’re still getting access to the tips they’ve earned.

Still have a burning question about digital tipping? We’re here to help. Schedule some time with us today and we’ll get you the answers you’re looking for! 

[WEBINAR] A Tip Pooling “Deep Dive” with Restaurant Strategy Podcast Host Chip Klose

Tip pooling can have big benefits for your entire team…but landmines abound.

Don’t just take our word for it: a quick Google News search for “tip pools” will return countless stories detailing costly lawsuits against operators who were — sometimes unknowingly — running illegal tip pools.

Of course, if you’re going to pool or share tips in your restaurant, compliance is only one (albeit very important) consideration.

It’s also critical to choose the best structure for your restaurant based on a variety of factors — including your restaurant type, team size and local market. And then there’s the rollout: Properly communicating the policy to your team and soliciting feedback can go a very long way in ensuring the success of your tip pool.

>>> DOWNLOAD OUR FREE TIP POOLING CALCULATOR TEMPLATES <<< 

If you’re considering instituting a tip pool or tip share — or if you want to evaluate your current tip distribution program — check out our recent webinar moderated by Restaurant Strategy Podcast host Chip Klose and featuring Justin Roberts (co-CEO, Kickfin); Larisa Thomas (VP Operations, Kickfin); Beth Schroeder (Partner, Raines Feldman LLP).

Watch the recording below to hear the panelists cover the ins and outs of tip pooling, including:

  • Pros and cons of running a tip pool
  • The most common types of tip pool structures
  • Tip pooling myths and misconceptions
  • Avoiding costly tip pooling compliance mistakes
  • Best practices for launching or updating a tip pool policy

5 Questions To Ask When Choosing a Digital Tipping Solution

So, you’re ready to break up with cash. Good news: the hardest part is over. 

But before you pop the champagne and celebrate your freedom from the pain of cash tip-outs, you have a few decisions to make. Payroll tips or digital tips? Instant tips or pay cards? There are a number of approaches to cashless tipping — but which one is right for your restaurant? 

We’ve been there (actually, we live here…), and we’ve done the research for you. As you’re wading through your options, here are a few things to consider when choosing a digital tipping solution. 

1. What is the employee experience like? 

No servers = no sales. In year three of the labor shortage, we all know how hard it can be to find good employees, so you can’t afford to lose your best servers to the restaurant across the street. If your new tipping system doesn’t benefit employees, go ahead and dust off your “Now Hiring” sign.

Most of your employees want (and deserve) to be paid on a daily basis — so before you make the switch, consider how it can affect their financial situations. 

And if you’re looking at a paycard solution, bear in mind — these types of digital tipping programs can cause a host of problems for your staff. For example, paycard fees can quickly add up, effectively docking your servers’ pay.

Ideally, you should choose a solution that gives your people instant access to their earnings (the same immediate gratification they had with cash) with minimal disruption.  

2. What will implementation look like? 

New tech can be daunting — but digital tipping software should be simple to implement, especially if you’re running as a standalone system. Make sure you ask the vendor you’re evaluating about things like:

  • How long will this take to implement?
  • What kind of training or onboarding support can we expect?
  • Are there any fees associated with the set up?

Bottom line: digital tipping should make your life easier, and that includes implementation. Make sure your solution has a clear, well-run process that gets you up and running fast.

→ Tech has never been so easy: See Kickfin’s digital tipping solution in action.

3. How does user management work? 

You have veteran employees who’ve been with you for years, others who are just around for a season, and even some who work at multiple locations. When digging into digital tipping options, look for a solution that automates user management, making it simple to add new users and new locations as your business evolves.

4. What happens when I need customer support? 

When you’re introducing any new system or process, questions are inevitable.

If your digital tipping solution doesn’t also include a robust, always-on customer success team, you may find yourself lost in the midst of employee questions, operational chaos, and maybe even some regret. Rather than feeling frustrated, ensure success by seeking out tipping platforms that are there to support your transition and keep you afloat.  

5. Will I be in compliance with tip pooling laws? 

Tip pooling regulations are always changing (and vary from state to state), so your digital tipping solution should also be a tool to help you stay in compliance with the law. As you evaluate tipping solutions, ask if they put up guardrails to prevent any tip pooling mistakes that could result in serious fines and lawsuits. 

Evaluating digital tipping solutions for your team? We’ve got you covered. Schedule time with our sales team today and we’ll answer any questions you throw at us.

What Digital Tipping Really Means: Tip Acceptance vs. Tip Distribution

Confused by digital tipping? We hear you. Get up to speed with this quick rundown so you can keep up with the ever-expanding world of restaurant tech. 

Digital tipping is an umbrella term that gets used interchangeably — but it covers a few different use cases. If you’re in the market for a digital tipping solution, it’s important to understand the different types of digital tipping. 

Here’s how we break it down: tip acceptance and tip distribution. One is important for accommodating customers’ needs (and frequent lack of cash on hand); the other allows your business to pay employees more efficiently.

Depending on the type of company you’re running and the way your team is structured, you might have a need for digital tip acceptance, digital tip distribution, or both. 

Digital Tip Acceptance 

We’re probably stating the obvious here, but cashless tip acceptance isn’t new: every time a customer pays for a meal or service and leaves a tip on their credit card — well, you’ve just accepted a cashless tip.

But now more than ever, companies are using POS systems and digital tipping software (like Kickfin) to accept cashless tips where cash had been the norm — or where a tip may not have been offered at all. For example:

  • QSR and fast casual restaurants: Rather than dropping their change into a tip jar at the coffee shop or to-go counter, customers are being prompted to leave a digital tip directly on the POS. (You know, the old iPad swivel…)
  • Online ordering: Online ordering systems now allow users to leave a tip from their phone instead of paying a delivery driver in cash. Brands like Panera even give you the option to tip when you’re placing a rapid self-pickup order and wouldn’t otherwise have an opportunity to interact or tip the people preparing your food.
  • Hotel guest services: Many hotels are adopting text-to-tip options and QR code tipping so that guests can easily tip their housekeepers, valets, and concierges if they forgot to swing by the ATM first. 

With the expanded uses of digital tip acceptance, we’re seeing many more opportunities to thank service industry employees for their work, even when we don’t have bills in our wallets or a direct interaction. 

More tipping options allow employees to boost their incomes (and who doesn’t love that?), so they stop losing out on tips just because customers don’t carry cash. Plus: it allows even more employees to become tip eligible  Business owners and managers can also use the opportunity to earn tips to attract and retain more hourly workers. 

See cashless tipping in action! Get a Kickfin demo today

Digital Tip Distribution

Since most of your employees’ tips are cashless anyway, paying out cash tips has become a major operational challenge — which is why so many restaurant teams are choosing to move away from cash tip-outs. 

But that doesn’t mean employees can’t get paid on the daily. Enter: digital tip distribution.

Instead of having your managers run to the bank, count out tips, and distribute envelopes of cash day after day, shift after shift, there is now a range of options for digital tip distribution — payroll, paycards, or instant digital tip-outs. 

This side of cashless tipping is a little newer, and it’s impacting how restaurants, hotels, and other service industry businesses view their daily operations and hiring practices (for the better):

  • Digital tip distribution saves managers from running to the bank during a shift — when they could be touching tables, helping on the line in the kitchen, or getting caught up on inventory.
  • Operators save money because digital tipping eliminates costs associated with cash deliveries and employees waiting for their tips on the clock. 
  • Digitizing tip payments can reduce the risk of error and theft.
  • Gen Z and Millenials are increasingly demanding instant, digital payment options. If you’re competing with other restaurants for the hourly workers, offering instant digital tips can make your establishment stand out from other employers.

Ready to check out cashless tipping for yourself? At Kickfin, we offer cashless tip acceptance and instant digital tip outs that are sent straight to your employees’ bank accounts, the second their shift ends. Request a demo of Kickfin. 

8 Ways to Manage Change at Your Restaurant

Change is constant in the restaurant world — and it can be a great thing. (Carryout cocktails, anyone?) 

But for upwards of 11 million people, restaurants are workplaces. And change in the workplace? That can be pretty scary for all parties involved.

In the last few years, there’s been a whole lot of change for restaurant workers: between a pandemic, an unstable economy, a tough labor market, supply chain nightmares, and a rapid digital transformation…it’s been a lot, to say the least.

Which means there’s never been a better time to implement a well-considered change management strategy. Whether it’s a new menu, new software, or even new ownership, there are a few things you can do to help your staff prepare for and adapt to the changes that always seem to be coming down the pike. 

If you’ve never had a change management strategy, or if yours needs an update: here’s a list of 8 best practices for successfully introducing and implementing changes in your restaurant.

1. Communicate the change — and the why behind it

The number-one way to ensure a smooth transition: effective communication.

Don’t just spring a completely new system on your staff. Communicate changes as early as you can and offer as much transparency as possible. 

Remember: while change can be a hard pill to swallow, it’s a whole lot more palatable if your employees understand why it’s happening. Here’s a simple way to structure your initial communication around a change:

  • Overview: Give them a brief summary of the change. Keep it short and simple — and let them know that further details are coming soon.
  • Logic: Explain your rationale behind the change. Was there an obvious problem that this change will solve? And why now?
  • Benefits: Show your employees how the change will positively impact the restaurant (and, hopefully, the employees themselves). For example, if a new system will improve the customer experience, then your servers and bartenders can expect higher tips (woo!). And of course, remind them that a successful restaurant means greater job security.
  • Details: How will the change play out? Explain how the change will affect day-to-day operations and processes.
  • Timeline: Lay out all of the key dates for the transition. Mark down any big training or implementation days, the day when the change will officially take effect, and a future date for employees to provide their feedback about the new system. 

2. Use the proper channels (hint: more than one)

Make sure that no employee misses the memo on a major change.Here are a few things to remember when getting the word out:

  • Employ multiple channels. Whatever your “primary” communication is, you likely have multiple ways of reaching employees and distributing information. Especially for big changes, make them hard to miss. Maybe in addition to a team meeting, you also send out a text, hit up the #announcements channel on Slack, and hang a flier in the kitchen. (Pro tip: This is also a great time to evaluate and optimize your communication channels.)
  • Consider the gravity of the change. Does your staff need to start wearing blue socks instead of black ones? Might not be worth an all-staff meeting. Was a seasoned manager let go? Probably want to communicate sensitive news in person. Make sure the channels you’re using are appropriate given the nature of the change. 
  • Squash the rumor mill: In a close work environment, people are going to talk. But getting ahead of “breaking news” in your restaurant and communicating it to employees all at once — instead of letting it trickle through the team — will go a long way in maintaining a healthy, transparent culture.

3. Gather feedback the right way

No, you don’t have to make every decision by committee, or put every change to vote. 

But when you do it right, soliciting feedback can be beneficial. Your employees are on the front line and will likely be most affected by a major change — be it a new menu or new closing procedures — so they might bring valuable insights to the table. Bonus: it shows you care about your employees’ POV.

With that being said, we humans are naturally averse to change. If you ask for opinions, expect to hear some strong ones. 

So, the million-dollar-question: How do you show that you value your employees’ without creating a free-for-all? 

A few tips:

  • When you initially communicate the change: Along with presenting the logic behind the decision, be honest about whether the topic is actually open for discussion.

If it’s open for discussion: Put an organized system in place to solicit and review feedback. To help minimize negative, knee-jerk reactions, give employees time to digest the news before asking them to submit feedback. And consider providing guidance to keep that feedback focused and healthy. This could be something as simple as a series of prompts, e.g.: 

  • What do you like about the change?
  • What questions or concerns do you have about the change?
  • What suggestions do you have that you think might improve the change?
  • If it’s final: You should still make sure every member of your team feels heard and supported. Give them a clear path to voice concerns and be willing to talk through objections. 

(If and when you gather feedback, bear in mind: It’s always going to be harder for your employees to effectively weigh all risks and benefits. They’re not running a company, and they don’t have insight into every aspect of the business. At the end of the day, employee feedback should be thought of as an input, not the entire equation.)

4. Get buy-in on the front end

If there’s a natural, trusted liaison between employees and upper management – like your head servers or FOH managers – consider pulling them in early to make them aware of the change before sharing it with the broader team. 

A few reasons why this could work in your favor:

  • It’s a great relationship-building tactic to demonstrate the trust you have in that person as a team leader.
  • They might be able to help you anticipate concerns or objections from the rest of the team, so you can be prepared to address those early.
  • If they show that they’re comfortable with — or even excited about — the change, that can help set the tone for everyone else.
  • They can act as an additional channel of communication and sounding board for employees and relay back additional insights that you might have missed.

5. Offer options when you can

Again, soliciting feedback can be tricky. Because the status quo tends to be very comfortable, given the choice between change and no-change, many employees will likely choose the latter.

So consider framing the situation as: “The status quo is no longer workable, so we need to make a change. Here’s the option that our management team believes is best for everyone — and here are a few other options on the table.”

Our Kickfin customers do this all the time. While employees love getting their tips instantly, directly to their bank account — moving away from cash can feel daunting for some folks at first. So before making the switch to digital tipping, management might set the stage this way: 

  • “Cash tip distribution is having a negative impact on our business. We need to move away from cash tip-outs, and we believe Kickfin’s digital tipping solution has the most benefits for you, as employees, and for our operations. We’ll provide all the details as to how Kickfin works and what this change means for you. Another option is to receive your tips on payroll. Let’s talk it through!”

6. Provide training and support 

You wouldn’t want to learn a completely new process overnight — so don’t expect the same of your staff. With any major change, make sure to provide several opportunities for staff to prepare before they hit the ground running. Here are a few ways you can do this: 

  • Host a tasting event for new menu items (a good opportunity to teach them how to suggest drink pairings)
  • Hold (paid!) training sessions on a new POS system or technology
  • Invite new managers to meet with staff before they take over the helm
  • Be available for one-on-one training and questions 

Most importantly, don’t expect employees to just “get it” right away. Be accommodating to their questions and provide as much support as they need. 

7. Create positive energy 

Once again, for the people in the back: change is hard. Acknowledging that your employees might be experiencing some disruption — and recognizing their hard work — can make all the difference when it comes to adjusting and adapting. 

Here are just a few ways you can express your appreciation for their flexibility, patience and positive attitude:

  • Shout-out employees at pre-shift meetings
  • If employees don’t already get a free meal each shift, offer a week of comped employee food
  • Give away merch (branded hats, bags, t-shirts, etc)
  • Offer a gift card or small bonus as a token of thanks
  • Throw a staff party to celebrate a successful transition 

8. Check in with your team 

After you’ve implemented a new process or change, your work isn’t quite done.

Check in with your staff regularly to see how things are going. Ask them specific questions around the impact of the change — don’t get offended if they answer honestly. You need to know if a new process is actually improving your restaurant’s workflows and day-to-day operations. 

Most importantly, give your team ample time to settle into the change and work out any kinks before attempting to course correct.

Bottom line: managing change is really all about managing people. Effective communication, proper training, and fostering a culture of trust and transparency will ensure a smooth transition for all parties involved.

Looking to change how your restaurant manages tip outs? Check out Kickfin’s cashless tip-out platform, and request a demo today.

The Hidden Costs of Tipping Out in Cash

Roughly 4-in-10 Americans say they aren’t using cash in a typical week, according to a recent report from Pew. But even as we creep toward a cashless economy, a large chunk of the hospitality industry is holding fast to cash — at least, when it comes to tip distribution.

Most of the restaurants, bars and hotels groups that continue tipping out in cash do so because it’s “the way they’ve always done it.”

And if you’re in that camp? We get it. Sticking with the status quo can feel like the path of least resistance. (Which counts for a lot these days.)

Plus: Paying out in cash daily also helps with recruitment and retention: hospitality employees expect and deserve to get paid in real-time. Meeting that need is critical in the face of an ongoing labor crisis, when restaurants and bars are competing for talent with other establishments and gig economy employers (hi, Uber and DoorDash).

But the reality is that cash distributions aren’t the only way to tip out in real time. And they actually come with a whole host of hidden (unnecessary!) costs that could be putting a major dent in your bottom line. 

Don’t take our word for it: here are seven ways that your business may be “paying” for cash tips.

1. Managers get pulled off the floor

Managers already have a lot on their plate — helping out on the floor, checking in with guests (and smoothing over any issues), or even working the line in the kitchen. They step in where they’re needed, but distributing cash tips is an unnecessary task that takes them away from work that really matters. In fact, the whole process can consume 10+ hours of their week, every week.

Cash tip-outs take so much time because more customers are paying with credit cards or digital payments. As a result, restaurants simply don’t have cash on hand to pay out server tips at the end of each shift. 

That means:

  • Many managers find themselves making frequent bank runs — sometimes every day.
  • Once cash is in hand, they’re tasked with calculating tip pools and counting cash. It’s a tedious job for anyone, but for a run-down manager who’s trying to keep their eyes open while they’re closing out at 2 a.m.? It’s the worst.
  • Not only is it tedious: cash tip distribution keeps them chained to the back office when they could be out on the floor, doing what they do best.
  • If employees come to pick up their tips from the night before, the managers are once again pulled off the floor to ensure everyone gets what they’re owed.

2. Unnecessary labor costs

If you’re still paying out cash tips, your labor costs are likely higher than they need to be.

Sure, your managers might be salaried — but at many restaurants, hourly employees will be waiting on the clock for their manager to pay out their tips since both the employer and employee need to be physically present when currency is exchanged. 

To quantify this, pick a state…how about Colorado where the server minimum wage is $10.63?  If a Colorado restaurateur has 10 employees waiting together on the clock for 15 minutes, that’s 150 minutes of unnecessary compounded labor or $26.58/day – about almost $800/month.

(Of course: managers could send employees home to save “on clock time.” But that means they’ll have the inconvenience of either waiting until their next shift to get their payout, or trekking back to work on a day off — which comes with added gas money or public transit costs —to complete the envelope pass.)

3. Employee theft

You work hard to hire the right employees: people you can trust. You ask the right questions, check all their references, run the background checks.

You can do everything right, but employee theft still happens. An estimated $3-6 billion of revenue is lost annually as a result. 

Does it mean your employees are bad people? Not necessarily. But tough personal times — or pure temptation — can lead good people to make bad professional choices and justify illegal behavior. Reducing or eliminating cash held on premises for tipping out mitigates the risk (and temptation) of both minor skimming and major theft.

4. Human error

Even if your employees don’t intend to skim from tips, counting errors happen. After a particularly exhausting Saturday night shift, your managers are often sitting there counting cash for so long that they start to feel cross-eyed — and they’re bound to slip up from time to time. Even if you just misplace $5 every other day, you could be losing nearly $1,000 every year.

And if a mistake is made, there’s no record of it. Once the cash is gone from your restaurant, you have no way to recuperate it.

5. The ABCs of fees 

Accounting fees – Cash tip reconciliation and accounting for last-minute bank cash orders is time-consuming. Your bookkeeping firm will bill for the additional hours needed to accomplish these tasks. If you’re also at the helm of a multi-location establishment, you’ll need to plan for the reporting delays and additional costs involved in requesting payroll reports from each location.  

Bank fees – As many banks outsource their vaulting to cash management companies, they roll a piece of their cost for this service down to their customers in the form of a fee for local cash pick up. Combine this particular fee with a massive liability issue: anything could happen while your GM is off premise to courier the cash, including theft or robbery. And of course, bank runs take up on-the-clock time that your GM could be spending managing the business.

Cash in transit fees – Choosing to use an armored car service to deliver cash is common practice for high-volume locations. However, it comes with both a fee for delivery and for the cash itself. Those can range from $250 – $400 per week.

6. Rounding up (and down)

Some employers use a time-rounding policy that can result in shortchanging employees on wages they were scheduled to earn. 

Other employers round up or down to the nearest dollar to make the cash counting process easier — which either inflates the tip outs or withholds money that is supposed to be payable to the employee. The rationale used in both cases is that eventually it all evens out. 

But beware the security risk you’re inviting here. Employees can claim that you are underpaying them for their time and/or their tips since it’s not an accurate disbursement each night. And for the teams that consistently round up: those quarter

7. Employee safety and financial wellness

Restaurateurs also often feel responsible for their employees in ways that don’t apply in other work environments. You spend a lot of time together, and it starts to feel like a family. 

As the head of that family, you can make choices to further promote employee safety. For example, employees feel safer and more secure leaving at night without cash in their pockets. They also report that tipping out in something other than cash means they tend to spend less of their tips on frivolous things.

Digital tipping cuts the costs of cash

Yes, cash tip outs are slow, risky and costly — but for years, it was the only way to give employees instant access to their earnings.

That’s changing fast, thanks to the advent of digital tipping. No longer is cash tip distribution a necessary evil.

Innovative, easy-to-use technologies present safer, more efficient alternatives to tipping out in cash. They can make a standard process easier for you and your team, decrease liability, and eliminate other hidden costs to your business. The best part: it’s easy to use and a breeze to implement. 

(Want to see digital tipping in action? Request a personalized Kickfin demo today!)

SITCA: How to Navigate the IRS’s New Tip Reporting Program

Three things in life are certain: death, taxes, and confusing updates from the IRS. 

This year, the IRS has rolled out a new tip reporting program that should help restaurant owners use technology to stay in compliance with tax laws — once we’re all on the same page as to how it works. Here’s a quick rundown of the new program and what it means for employers. 

How do employers typically handle taxes on tips? 

Most of the burden of tip reporting falls on the employee. They’re responsible for keeping a daily record of tips, reporting tips to their employers, and reporting their tips on their tax returns. And while tips aren’t wages, employers do still have a hand in reporting tips and withholding taxes. 

Did you know that even though tips aren’t wages, you still have to pay your share of income taxes on them? That’s why it’s so important to accurately report employees’ tips and keep meticulous records. 

In the past employers have had a few options for how to track and report tips: 

  1. Tip Rate Determination Agreement (TRDA)
  2. Tip Reporting Alternative Commitment (TRAC)
  3. Employer-designed TRAC (EmTRAC)

All of these programs require employers to educate their employees on the importance of properly reporting both cash and credit card tips — with some minor differences regarding how tips are reported to the IRS. 

One key thing to note: the TRDA does not use actual tip revenue to determine tax liability. Instead, employees are expected to report tips at or above an estimated tip rate that is determined by the IRS. If reported tips fall below the established rate, the employer is expected to provide detailed documentation of employees’ names, social security numbers, hours worked, sales, tips reported, and job titles. 

The TRAC and EmTRAC programs do not establish a tip rate, but they do require employers to take on the responsibility of ensuring their employees report their tips. No matter which tip-reporting program you choose, they all generally entail lots of paperwork and vague language — but that might change in the near future. 

What is SITCA? 

Under the new IRS proposal, a new tip reporting program called the Service Industry Tip Compliance Agreement (SITCA) would allow employers to take advantage of their point-of-sale systems and other restaurant tech in order to report their employees’ tips. The IRS created SITCA in order to replace the outdated TRDA, TRAC, and EmTRAC tip reporting programs. 

Most diners are paying with credit cards or digital payment methods these days — so the transaction data is right at your fingertips. And rather than take an educated guess at your average tip rate, the IRS will use actual tip data pulled from your POS to determine tax liability for both employees and employers. They can also easily pull employees’ hours worked and sales information to ensure tips are being properly reported.

This move by the IRS should relieve some of the tax reporting burdens and save time for employers by getting rid of the endless forms and paperwork that were previously necessary for tip reporting. 

What about cash tips? 

As always, employees are required to report their cash tips — which of course can’t be backed up by POS data. The onus is still on the employee to accurately report all tips. If the IRS notices major discrepancies between sales and tips (especially missing cash tips), the employee could be audited. 

What do restaurant owners need to know for the 2023 tax season? 

For now, you don’t need to overhaul your tax practices. You will remain in your current tip reporting program until one of the following occurs:

  • Your restaurant is accepted into the SITCA program 
  • The IRS finds you noncompliant with your current TRDA, TRAC, or EmTRAC program
  • The end of the first full calendar year after the final revenue procedure is published in the Internal Revenue Bulletin

That being said, you should start looking to ensure that your restaurant has everything it needs to succeed under SITCA. Ask yourself: Do you have a POS system that you trust? Do you use a digital tipping solution? With the right technology, your restaurant’s tip reporting and tax liability should run smoother than ever before. 

Interested in the SITCA program? Follow these instructions by May 7, 2023 to enroll.

Tax Tips for Service Industry Workers

Tax season is here — and like many U.S. employees come springtime, you’re probably feeling the pressure. Soon, you’ll be sitting in front of your computer wondering just how much you’ll owe to the government … and maybe even worrying that you’ll get audited. 

No one likes doing their taxes, but for servers, bartenders, and other service industry workers, your tipped income can make things even more complicated. Here’s how to survive tax season as a tipped employee. 

Stay on top of your tip reporting 

Tip reporting is a year-round job. Well before tax season comes around, make sure you know how to properly report your tips.

If you make more than $20 a month in tips, the government needs to know. According to the IRS, it’s your responsibility to report your tip income to your employer, who then reports those tips to the IRS. By the 10th of each month, you should hand over a detailed report with the total tips you received for the prior month. 

We know what you’re thinking: Do you really have to report cash tips?

Sure, it would be great if all of those cash tips were just money in your pocket — but failing to report all of your tips could cost you even more. If you’re audited, you could be on the hook for 20% more of your income. 

Technology is also making it easier for the IRS to sniff out under-reported tips. Under a new proposal called SITCA, the IRS would have access to POS data that includes sales, credit card tips, and hours worked. And while cash tips will still be reported through an honor system, the IRS will have a much easier time proving unreported income.

We’d rather be safe than sorry — so make sure your tip reports are as accurate as possible each month. 

Get to know your W-2 (and other tax forms)

Once your employer sends out your W-2 for the year, you’re ready to get to work on your taxes. 

Thoroughly check your W-2 to make sure the information is accurate — especially if your restaurant pools tips. You should only pay taxes on income that you actually realized, not all the tips that were distributed among your coworkers. 

Most likely, you’ll be filing with a form 1040 — but which one? Depending on your filing status, yearly income, and your deductions, you can use a 1040 long-form, 1040A, or the 1040EZ. Get familiar with what each tax form allows, and use the one that will allow you the largest possible return (or the lowest possible liability).

Take advantage of write-offs 

Think of all the small things you have to buy for your job. For example:

  • Do you have to buy work-specific clothing or uniforms, like branded polos or khakis? 
  • What about work-appropriate footwear that — while not exactly a fashion statement — keep you safe on slick restaurant floors? 
  • Or did you pay out-of-pocket for a training course on alcohol or food safety? 

While these might not be big-ticket items, they all add up and help to reduce your taxable income. 

But don’t forget to keep a paper trail: Make sure to ask your employer for a receipt when you’re buying uniforms, and keep thorough records of other items you’ve purchased specifically for work. 

(Also, take a closer look at your restaurant’s credit card processing fee policy. If you live in a state where your employer can deduct credit card processing fees from your tips, you may be able to write those off too!)

Be prepared for your tax liability

How many zero-dollar paychecks did you open last year? Like most service industry workers, your hourly wage likely went toward your income tax liability from your tips. And unfortunately, the hourly minimum wage for servers probably doesn’t cover the whole tax bill. 

Instead of wiping out your savings account to pay your taxes, start planning for your tax liability a year in advance. After each week (or even each shift) set aside about 15% of your tips, so when you see what you owe the IRS, it doesn’t leave you scrambling. And if you happen to have anything left over — treat yourself! 

Make reporting a breeze with Kickfin

When restaurant teams sign up for Kickfin, tip tracking is a cinch. Refer your restaurant employer or request a demo today!

How to Comply with Tipping Laws in Texas

Like many other Texas restaurant owners, you were probably shocked when a Dallas barbecue joint was ordered to pay their employees nearly $900,000 in stolen tips and overtime. It may have even sparked a bit of anxiety about your own tipping policies and practices.

Illegal and unethical tipping practices not only decimate your restaurant financially, but can also tank your reputation. Avoid losing your business and the community’s trust by freshening up on Texas tipping laws. 

Who Can Participate in Tip Pools? 

In Texas, mandatory tip pools are perfectly legal, so long as you follow the guidelines laid out by the Fair Labor Standards Act (FLSA). 

For one, only employees who “customarily and regularly receive tips”— namely servers, bartenders, hosts, and expos — can participate in a tip pool, and back-of-house employees cannot. 

Owners, managers and supervisors are also barred from participating in tip pools. Tips belong expressly to the tipped employee, so an owner cannot take a cut of the tip pool, and neither can their agents in the form of managers. If you’re caught distributing tips to owners or managers, it will be considered wage theft, and you will be ordered to pay back the tips and subject to hefty fines by the DOL. 

Learn to Properly Calculate the Tip Credit

The tip credit allows employers to pay tipped employees a lower hourly wage, with the idea that the server will earn at least minimum wage or more in tips. In Texas, employers can take up to $5.12 per hour in tip credit. But if used incorrectly, you could end up owing your employees back pay. 

In order to take the tip credit, your employee’s hourly wages must be greater than or equal to the minimum wage for their hours worked — at least $7.25 per hour in Texas. Employees also must earn more than $30 per month in tips for the tip credit to apply. 

And head’s up — the tip credit can still apply when your employees are earning overtime. Ensure that you’re properly compensating employees when their work hours exceed 40 per week. 

Using the tip credit requires a good bit of math (especially when overtime is involved), and there’s room for human error in your calculations. Check out our primer on calculating the tip credit and then go double-check your math. 

How to Protect Your Business & Employees

You don’t want to jip your employees — nor do you want to risk your entire business. Now that you’re more familiar with Texas tipping laws, here are a few ways you can comply with them. 

Hire an Attorney 

It’s best practice to consult with a lawyer with any legal questions. An attorney can give you detailed, personalized advice about what’s best for your business and how to stay on the right side of the law.

Choose Vendors that Protect You

At Kickfin, we partner with restaurants to revolutionize everything about their gratuity management systems — including setting up guardrails to comply with tipping laws. Request a demo of Kickfin today.