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For many restaurants, the increasing popularity of online delivery services, such as DoorDash, Uber Eats, and GrubHub, has drastically expanded their sales and growth potential. Until a few years ago, steady revenue demanded in-person diners (unless you were a takeout restaurant). Now, for many restaurants, partnering with these 3rd party delivery services significantly expands their customer base.
While providing a tremendous opportunity for business expansion, third-party delivery services also contribute an additional nuanced layer of accounting complexity. These delivery partnerships introduce new reconciliation challenges. They involve managing different fee structures for each service. Accurate financial reporting is essential for business and food tax purposes. And navigating the unique terms within each service platform is crucial. All these aspects create an error-prone and time-consuming process. Trying to handle it alone can be challenging.
The ramifications can be severe without proper accounting reconciliation. From underpaying taxes to potential fines, not getting an accurate picture of the business can be detrimental. It’s critical to a restaurant’s financial health to have systems that can precisely manage reconciliation for these third-party delivery partnerships.
Delivery partnerships are a catalyst for restaurant growth. Delivery apps are powerful marketing tools, helping restaurants gain wider online exposure and building stronger brand recognition. This increased visibility leads to a larger customer base and ultimately generates new revenue streams. It can also improve customer experiences by letting them enjoy their favorite local foods from the comfort of their home.
The potential upside of partnering with delivery services is clear. Now comes the challenge of keeping accurate books and reconciling financial information from these third-party sources.
If your restaurant is looking to expand via delivery partnerships, here are some accounting challenges you’ll need to address:
Sales information in your restaurant’s financial records may differ from the delivery partner’s. This difference could be due to several reasons:
There also could be a data formatting discrepancy. Delivery services often have limited transaction details, typically just the total order cost. Restaurants, on the other hand, can provide detailed breakdowns with each item’s price.
Third-party delivery services incorporate various costs that impact how restaurants must account for revenue and expenses during reconciliation. These include driver tips, commissions, delivery fees, and service charges.
Each delivery platform also differs in its fee structure. Delivery fees can be a fixed price tag or a flexible percentage, depending on the service you choose. This adds another layer of complexity to the mix.
Restaurants love utilizing food discounts to get a quick boost in sales. These promotions impact total revenue reporting and are tricky to administer. Monitoring them across different sales channels, like in-store, online, or through a third-party delivery platform, presents a challenge.
Applying discounts can be tricky, as each delivery service has individual terms and conditions.
A huge contributor to inaccurate financial reporting is the timing of revenue recognition. The delivery service and restaurant could vary depending on whether they use a cash or accrual accounting system. For example, the delivery service might recognize revenue at the time of delivery. Meanwhile, the restaurant doesn’t account for it until the cash is digitally exchanged.
While you can easily demand your money back in the restaurant for poor service or bad-quality food, things get complicated with delivery apps. When customers dispute charges and request refunds from the delivery service, you must account for its impact on your restaurant’s financial reporting. Consider how the adjusted revenue gets recognized and when it becomes cash.
It’s also not universal for each delivery platform. Each service will have individual policies regarding administering chargebacks and refunds.
Ensuring bank statements and accounting records matched was already hard enough for restaurants. There’s a lot to monitor between cash, credit card, and mobile pay options in terms of payment channels. Now, add third-party delivery services, and there’s even more complexity in maintaining accurate financial records.
For restaurants, the primary value of effective third-party reconciliation is financial accuracy. When your books are clean and up-to-date, you get a better view of your business to make improvements quickly. You can spot revenue opportunities, such as increasing the price of a high-demand food item. Additionally, identify cost-cutting opportunities, like reducing waste by only buying the minimum amount of perishable inventory.
Accurate reporting also helps with stakeholder transparency. You’re far more likely to get a bank loan or bring on new investors if they can trust that your accounting records are complete and up-to-date. There’s also the tedious compliance piece of running a restaurant. The better your accounting, the less likely you are to get fined for inaccurate business filings. This also reduces the chance of receiving a surprise bill for underpaying food and beverage sales taxes.
Utilizing a delivery service to sell and distribute food has tremendous upside for your restaurant. It also comes with nuanced reconciliation complexities for accounting. These complexities include service fees, promotions, refunds, and other challenges of adding a third-party provider. Running a restaurant is demanding, and managing accurate financial reports and tax implications can be a heavy workload. Partnering with a specialized technology expert can ease this burden. Doing so lets you focus on what you do best: creating fantastic dining experiences for your guests.
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