Reconciliation is not exactly a sexy topic, but as delivery continues to grow and new channels continue to emerge, it has become a major headache for operators. The accounting process of ensuring two sets of financial data match comes up all over business, but third-party delivery companies have reportedly turned that headache into a full-blown migraine.
Why? As any operator with a high portion of delivery knows, every delivery platform does things differently.
In short, it’s a mess and it eats up hours of accounting time for a single location, and much more as a restaurant brand scales up. Then there are edge cases like chargebacks, one critical part of the reconciliation tool from ItsaCheckmate. Chargebacks happen in delivery, when a customer gets the wrong food or a bad experience, platforms typically comp the meal. That, however, doesn’t always flow to the point of sale and it’s one instance of the many mis-matched datapoints between the platforms and the restaurant.
“Chargebacks and refunds are a critical part of this, we help highlight any chargebacks and refunds,” said founder and CEO Vishal Agarwal. “Let’s say I did $6,000 in sales and got $4,000 in the bank. That might be the cost of doing business, but that’s not always true.”
He said having clarity there means an operator can go back to the third party with any errors or mis-calculations, which happen. With automated reconciliation, however, the conversation can happen much faster and with very clear reports.
“Now, they can take it to the third-party platforms and have a real dialogue instead of in three or four months when they figure it out by hand,” said Agarwal. “You have to be able to have those conversations with clear data and a fast timeline.”
He’s piloting the tool with Five Guys, and it’s currently being utilized across the whole brand. For franchised brands especially, this kind of reporting can be very attractive so the franchisee and franchisor can have the same numbers and avoid conflicts when it comes to paying royalties.
The key for Agarwal, however, is making off-premises orders more profitable in this era of inflation.
“The accounting process, it is also an expense, so we’re making digital ordering more profitable,” said Agarwal.
That’s a core concern for Nextbite co-founder and CEO Alex Canter. He said reconciliation functionality is almost a must-have for brands that are integrating the virtual brands created by his company and others. It was something his partners were asking for.
“There’s a huge headache when it comes to managing the accounting and reconciliation on the third parties because they’re all built out independently. Some pay every two weeks, some are monthly, some are every Sunday. They even count days differently,” said Canter. “You can imagine the complexity of managing multiple platforms with multiple virtual restaurants.”
He said Nextbite built its own reconciliation tool for his brands and his restaurants, but partners started asking for help making it easier. Canter explained that taxes are another complicated aspect for operators to figure out and, again, all the platforms do things differently.
“One of the most complicated components is the sales tax remittance. Some of these states have marketplace laws and some platforms adhere to that and some don’t. Some will do your remittance for you and others will pass along the tax to you,” said Canter. “If the consumer is ordering in one ZIP code versus where the restaurant is, the tax rate might be different, the more we dug into it, it’s just chaos.”
Reconciliation has always been an accounting issue. But today, the ever-growing level of business done on platforms and in new channels like virtual means that chaos is no longer a little issue. Canter said in order to do more digital business, new tools need to solve such new problems.
“We’re in a place now where a lot of restaurants have figured out how to deal with it, but it’s not where they want it to be. It’s not a new problem, but it’s probably wildly inefficient,” said Canter. “We’re trying to make it easier to say yes to taking more delivery orders, which means we have to solve some of the new problems.”
