Best Practices for Managing Rapid Growth

One of the most important aspects of working with third-party delivery services is sales tax remittance. States have different rules about whether the restaurant or the delivery service is responsible for collecting and remitting sales tax. In some cases, it’s the restaurant, and in other cases, it’s the delivery service. Keeping track of what’s your responsibility (and what’s not) can save you thousands of dollars each year.

From an accounting standpoint, point of sale (POS) systems often can’t distinguish between an order placed in-store and an order placed through a third-party service. So, the sales tax for all orders is automatically included in your sales reports. When you file your taxes, you’ll pay out the sales tax on your gross sales – regardless of whether they were generated in-store or through a third-party app.

This means that in states where it’s the third party’s responsibility to remit sales tax, you’ll end up double paying in your filings. While sales tax on individual orders may not seem like much, if you’re running a high-volume restaurant or own multiple locations, this can add up to tens of thousands of dollars in overpayment in a single year.

Keep in mind that these laws are changing as the industry changes, so it’s important that you keep up with any communications from your accounting partner and the delivery services themselves. Ignoring those emails can be a costly mistake.

Program your POS to help sort third-party orders

If your restaurant is in a state where the third party is required to remit sales tax, you could end up double-paying the sales tax if you don’t keep track of third-party orders in your POS. However, even if your restaurant is in a state where you are solely responsible for remitting, programming your point of sale systems to account for third-party orders will make a significant difference in your ability to reconcile your accounts and ensure you aren’t overpaying or getting short-changed. 

Unfortunately, many point of sale systems aren’t automatically set up to differentiate between an order placed in-store and one placed through a delivery service. All of your sales are simply lumped together, making reconciliation a major undertaking. 

In states where third parties are responsible for remittance, it might seem like you could just mark third-party sales as “tax exempt.” But that’s only going to make matters worse. If you enter orders into the system as tax exempt, then the order won’t be taxed and your financials will get very out of sync, very fast. So, you have to come up with a way to distinguish between in-store purchases and those placed via third-party apps that still ensures sales tax is being properly charged and collected.

One simple approach to distinguishing between the types of orders is by making “third-party delivery” a separate type of tender in your system. This will make clear which orders are placed in-store vs. those placed in external apps. It’s not a perfect solution, but it’s a big step in the right direction toward easier account reconciliation.

Of course, it gets even more complicated when working with multiple providers. Ideally, you can create distinctions in your POS between the different third parties that you work with. That will simplify reconciling your records with the reports provided by each service. However, it depends on the capabilities of your POS. If you can’t separate each service, even making a basic distinction will go a long way. You’ll ultimately save both time and money by programming your POS to distinguish between third-party orders from those made in-store.

Reconcile your accounts every month

Reconciling your accounts is absolutely vital for maintaining accurate records and protecting your bottom line. If you aren’t reconciling every month, you’re probably letting a lot of money slip through the cracks – either through overpayment or oversight. Reconciling will help to ensure you identify discrepancies and can even help to prevent employee theft. 

As outlined above, in states where third-party delivery services are responsible for sales tax remittance, you have to reconcile to avoid double paying. Distinguishing third-party sales in your POS will make it much easier for both sales tax reconciliation and the additional third-party fees. 

Keeping accurate track of your financial data means separating the third-party’s commission, the fees they charge, and the markup on the site. The monthly reports offered by the third-party services will break all this information out. Monthly account reconciliation involves determining whether the amount the service has sent to your bank account matches your records of what your restaurant is owed. If things don’t line up, you’ll need to contact the third-party service to correct the discrepancy. Unfortunately, discrepancies are fairly common, and they add up quickly if not addressed.

If there’s a significant discrepancy, it could be a sign of employee theft or a problem with your POS. In one example that our accounting experts discovered, an employee was tendering orders as third-party delivery when in actuality the customers were paying in cash. The employee pocketed the cash, but the cash count on the register was still correct at the end of the night. That kind of discrepancy wouldn’t show up without reconciling sales reports with those of the third party.

If you haven’t been keeping up with reconciling your accounts or if it’s proving to be a headache, we’d love to discuss how OnePoint might help. Reach out today to speak with one of our experienced account managers about OnePoint’s accounting services for restaurant groups.