How Advance Orders Affect Your Restaurant Accounting

According to a recent survey by our friends at Toast, about 80% of restaurant consumers place at least 1 online order for food per week. It’s welcome news for operators, who have had to place more reliance than ever on takeout and delivery as on-premise dining slowly makes a return.

Though digital solutions have helped some restaurants and restaurant groups thrive in an otherwise uncertain time, there’s a hidden complication that can arise for many operators who depend on their POS systems to help facilitate advance ordering.

Isn’t advance ordering a good thing?

Advance ordering is great both for customers who want to plan their meals in advance and for operators who want to have stronger forecasting for future sales, be able to make better plans for purchasing inventory, and get a tighter grip on restaurant food costs.

Many delivery facilitators give restaurant operators the option to set their own advance ordering timeframe. Some choose to make ordering available only 24 hours in advance; others may prefer longer timeframes, like one week or even one month.

Customers must pay up front to ensure that their advance order is placed. And that means that the restaurant may be receiving money for consumption that won’t happen for another several days, or even weeks.

The extra upfront cash is helpful, but it may not be so great for actual accounting processes.

How can advance ordering skew my books?

Advance orders hit your books the day they’re placed—after all, it’s the day that your restaurant is actually receiving money. It’s a bit different than the liabilities associated with gift card sales that we wrote about recently.

However, depending on the POS system you use for ordering and any integrations you may have with it for your accounting systems, the sale may actually get moved in the backend from the day of payment to the day of pickup.

If restaurant accounting isn’t your forte, this may not seem like a big deal. But in reality, it opens a gigantic can of worms when it comes to the accuracy of your books.

Consider this example. You’re a restaurant operator in Pennsylvania that uses your POS system to facilitate all online orders. You allow orders to be placed up to two weeks in advance, and you’ve started to depend on this data to help your team make smarter purchasing decisions during a lean period of operations.

For restaurants in Pennsylvania, sales tax on purchases from the prior month is due to the state on the 20th. According to your accounting records, you should owe $1000 in sales tax back to the state. But your ordering system is saying it’s only $800. Uh oh! Which is correct?

You dive into your purchase records, and after a while figure out that the POS system was withholding the tax due because of five large advance orders placed at the end of July. You got paid for the orders when they were placed, so the accounting system is correct—but the ordering platform is registering the sales on the days the orders were picked up, which fall in the next reporting period.

Sounds messy, right? It gets even worse when you realize the opposite can be true—the POS system may show that you actually owe more sales tax than what your books reflect. And just imagine the situation when December and January roll around: yearly reporting on months of advance ordering can easily go off the rails!

Can I protect my books and continue to offer advance ordering?

Just because advance ordering may skew your books doesn’t mean you should stop utilizing this important feature altogether. Before you reduce your advance ordering window down to just the day of, first make sure that this flaw is actually applicable to you and your restaurant(s).

If everything looks consistent, congratulations! Your POS system likely already attributes sales to the day on which it was placed. If things are looking off, it’s time for bookkeepers to dig in and see if it’s due to advance orders.

However, if you use Toast to facilitate advance ordering and have QuickBooks Online as your accounting system, we have a much faster way to reconcile your records. Sign up for Sync, our integration between the two platforms, and we’ll automatically refresh your data from the past 14 days and switch the records back on your behalf! Your accounting team can thank us later.

One final word of advice: find a happy medium when setting your advance ordering window and stick to it! If the order period is too short, you may lose customers; too long, and you may not be able to correctly balance your books.