Reconciling payouts from third party platforms such as Swiggy and Zomato is a major choke point for accounting operations of restaurant chains and cloud kitchens.
Reconciliation means putting together data from three different sources, as follows -
1. Payout sheet
Sent by the platform to your email inbox every week/month -or- downloaded from the "partner app" provided by the platform.
It contains following details:
- Orders fulfilled by the restaurant in the corresponding week.
- Net payable that the platform is supposed to pay the restaurant chain, after deducting all the platform commissions, fees, taxes and many more.
- Settlement transaction references, through which platform settled the final amount to restaurant chain.
2. Sales report
Most Point of Sales software provide, an option to download "sales report" for a selected duration. It contains details of all the orders fulfilled by the outlet, across various channels including third party platforms.
From your perspective, this should be the ground truth of all sales conducted at your outlets.
3. Bank transaction feed
From your bank portal/app, you can download the list of transfers made to your bank account. Payment transactions from various entities conducting business with your organization, including the third party platforms will be there in this list.
Ok, Now that we have all these documents to proceed with reconciliation, let's try to define...
What are the core objectives of Reconciliation?
1. Revenue leakage detection
In restaurant business, the margins are very thin. So every penny is important. Sometimes a few slip-us can happen from platform side while calculating the final payout leading to leakages, in your share of the revenue. Only way to identify such slip ups is to match orders from your sales report (obtained from POS) against the orders mentioned in the payout sheet (sent by Aggregator).
This ensures that not even a single order is missed out in payout sheet and your share/cut for each order is calculated as per the agreed upon formula.
For example, The restaurant is not required to shoulder the discount burden for coupons sponsered by Banks, Credit card companies or Payment gateways. (coupons like ICICI20, GPAY40, PAYTM20 and more)
However it may have been added under your account head in the payout sheet. You should identify such orders and bring them to the notice of platform for redressal.
2. Trace bank transactions to payments from platform
You may have one or many bank accounts into which platforms are depositing the payments related to a payout sheet. A single settlement may be trasferred in one or many transactions, landing in your bank account in any arbitrary order. There may also be other sources of revenue, being deposited into these accounts.
It's very important to track, which transaction refers to specific payout related to specific outlet and platform, to stay on top of your cash flows. To identify this, transaction reference numbers in your bank feed should be mapped to reference numbers in the payout sheet.
3. Financial planning
Reconciliation is a means to put together a full picture of your NRR (Net Realized Revenue).
Net Realized Revenue is the money that lands in your bank account after all the platform specific expenses such as commissions, fees, discounts, ad spend and so on, are "deducted" from your sales revenue.
Several biases can creep into your financial decisions, if you don't fully comprehend the true nature of your revenue.
Let's look at a couple of questions, you as the owner of a restaurant business need the answers for frequently.
If the discount burn is doubled on a specific platform, at what rate does the NRR(Net Realized Revenue) increase?
What is the share of a revenue, I receive effectively (after commissions, taxes on commissions, discounts, special fees and more), specific to a platform?
What's the average length of cash flow cycle across different platforms ?
What is the tax liability for a given duration, for sales spanning across multiple order channels, including third party platforms ?
You'll be able to answer all these questions posed above and more, only if you perform reconciliation properly. You may also want to drill down on such questions to a specific outlet or item or category, to identify non performing outlets and products on your menu.
Ok. I'm sold! Reconciliation is great!
But where's the challenge? 🤷🏽♂️
I can simply use Microsoft Excel to perform Reconciliation. Right?
To accomplish reconciliation, dedicated staff are required to manually download, tens to hundreds of documents/files (depend's on the size of your operation), with confusing formats, from multiple websites/sources.
Import them to excel workbooks and perform a join between POS sales report and platform payout sheet based on Order ID. A similar join should be done between transaction references in the payout sheet and your bank transaction feed.
These files can sometimes be so large that, even Microsoft excel throws a "hail Mary" and crashes miserably! We tried it ourselves!
It's still manageable, but...
Only if you are managing a couple of outlets on a couple of platforms, and have in your employ a talented, tech savvy accountant.
For larger operations, this becomes a nightmare exponentially, as the number of outlets and platforms grows. It's goes even a notch upwards if you are running multiple brands from a single physical outlet.
Depending on your accounting team's size and competence, it may take anywhere from few weeks to months to put together a full picture of your Net Realised Revenue for a given month.
If your accounting team takes weeks or months to get you this information, it will already be stale by the time you need to make your decisions. To succeed in this market (post COVID), you have to keep up, not catch up
Having to manually deal with hundreds and thousands of sheets with excel workbooks, introduces human error into the final reports. This may lead to wrong decisions that will cost the business dearly.
We at UrbanPiper have been closely following the difficulties faced by our customers in this regard.
So we envisioned a feature that will detect leakages arising out of missing orders and inconsistencies in payout calculations. Dashboards that give a 360° view of a restaurant's business on third party platforms. Trace payments received from platforms for payouts related to specific payout period and outlets.
And, here's the good news!