Sales and Collection Reconciliation

The company is a quick-service restaurant and operates three stores in the state of California. The company also operates its business through online food delivery platforms, including DoorDash, Uber Eats, and Grubhub.

Additionally, the company also provides training, support, and supplies raw materials to other restaurants. It recently acquired another company and due to the early stage of acquisition, there was a limited understanding of accounting and financial reporting practices.

The management of the holding company wanted to streamline the accounting for sales transactions, tracking the revenue from different sales channels and optimizing the customer collection process. The proposed solution included developing an accurate sales report and tracking collections by store locations and the sales channels in accounting enterprise resource planning (ERP) and QuickBooks.

Investigations revealed that the reported sales numbers did not tie back to the total sales value in the point of sale (“POS”) terminal. Upon further investigation, it was discovered that historically, customer deposits were considered as sales by. Also, the sales were neither tracked by location nor by sales channel.

SOLUTION:

• We discontinued the practice of recording the customer deposits as sales. Instead, we decided to record sales, sales tax payable, and receivable from merchant partners through journal entries (JE) from POS reports.
• To gain a better understanding of the company’s sales performance by different channels, we decided to track B2C and B2B sales separately.
• Further, the B2C sales were categorized into online and in-store sales, while B2B sales were categorized into service revenue and raw materials sales.
• To understand store-wise performance, we decided to implement QuickBooks Classes for the bifurcation of income and expense by each location for reporting purposes.

• We used POS sales reports to record sales, sales tax payable, and receivable from merchant partners through JEs. This helped in reporting the accurate net sales amount in the Income Statement. Also, sales tax payable and receivable from merchant partners can be easily traced from the Balance Sheet report.
• To bifurcate the numbers by sales channel, we created separate general ledger (“GL”) accounts by sales channel.
• Retail sales were further divided into subaccounts named online sales and in-store sales.
• Wholesale sales were further divided into subaccounts, service and product sales. This helped in understanding the revenue mix for wholesale sales.
• We used the QuickBooks Classes feature; for each location separate class was created. While recording sales JEs, we used the class assigned to each location’s sales.

ADVANTAGE OF OUR SOLUTION:

• Based on all the changes we made in the accounting process, the management can now track the efficiency of each store and can take appropriate measures to improve store profitability and effectiveness.
• The management now has visibility of each channel’s contribution to overall sales, and they can make strategic decisions accordingly.
• With the corrective measures, now the sales revenue matched with the POS system, resulting in accurate financial statements for tax purposes.
• The management can now track sales tax liability and receivables from merchant partners. This step helped in working capital management.