B2B Payments

How Restaurant AP Grows Value With The Front-Office POS

The restaurant industry has a lot of unique financial friction points. With notoriously tight margins, continued reliance on cash and paper and products that are easily perishable or damaged, restaurants face a slew of hurdles in managing cash flow and gaining visibility into their current cash positions.

That’s what makes the marrying of front-office finances with back-office finances so valuable for this space, according to Teri Wilson, general manager at restaurant accounts payable technology firm Sourcery.

The company announced this week that it reached a deal to be acquired by restaurant mobile point-of-sale and payment processing solution provider Lavu. The terms of the deal weren't released. At first glance, the synergies between a point of sale (POS) and accounts payable solution may not appear clear. But Wilson told PYMNTS in a recent interview that the opportunity in connecting the flow of financial data from the POS through the back office is significant in helping industry players gain cash flow visibility.

“When you don’t have the data flowing from your POS into your payables into your ordering and inventory management, then you don’t have a single payments glass to look through to understand your business and its performance,” she said.

An influx of FinTech solutions has tackled a range of front-office financial friction to embrace restaurant patrons’ shift away from cash. Digitization in the back-office, however, hasn’t occurred as quickly. According to Wilson, there are a host of reasons why.

The order-to-pay processes remain quite manual and disparate, for one. She pointed to one example of a restaurant with different morning and afternoon kitchen staff; the afternoon shift was responsible for ordering the goods and products that were running low, and for calling vendors over the phone to place those orders. It’s a manual strategy with several pitfalls, including a lack of visibility into who ordered what, when and why.

In addition to inefficient ordering tactics, once items are received more challenges arise.

Due to the nature of the restaurant industry, goods can be more likely to go bad or be damaged in transit, said Wilson. Indeed, a box of strawberries or a crate of eggs isn’t the most durable of packages.

Because of this, another unique aspect of the restaurant industry has emerged: the use of credit memos, which enables restaurants and delivery personnel to make notes on an invoice regarding any credit and invoice adjustment resulting from perished or damaged deliveries.

Not only does the use of the credit memo rely on paper for handwritten notes on invoices, but it also adds complexity to understanding, at a line-item level, which products did not arrive as they should, how that impacts an invoice, and how that impacts how much a restaurant pays on that invoice. Once a payment is made, it can be near impossible to reconcile a payment against a purchase order and invoice when so many figures differ from each other, and when those figures are recorded manually on paper.

And to compound this lack of clarity, restaurants with multiple locations but one central back-office are likely seeing invoices collected at various geographic points, further limiting the ability to streamline the invoice-to-pay process.

Unfortunately, according to Wilson, paper invoices probably aren’t going away any time soon in this space. But what industry service providers can do is support digitization efforts wherever possible, whether it be scanning invoices to get digital copies, or promoting electronic payments to vendors to obtain data on those financial transactions.

Wilson noted that while Sourcery considers ACH to be the optimal way to pay, thanks to its ability to provide valuable transaction data for reconciliation and analysis purposes, restaurants still need to use checks, often as a cash-management tactic.

“Restaurants are a difficult business to run, and many of them are budget-sensitive and dependent on daily cash flow,” she said. “We also have some vendors who, their primary business is not payments. They’re a local organic farm and they stick with what they know, which is the check.”

Digitization of restaurant finances, particularly in the back office, won’t happen overnight. Indeed, due to reasons both on the supplier and restaurant side, electronic payments and documents will likely continue to lag behind the digitization that customer-facing platforms have experienced in recent years.

But digitizing whenever and wherever possible within the order-to-pay and accounts payable arenas can open up a business’s view of company finances not possible with paper receipts and checks alone. And as more FinTech solutions step into the back office (and connect back-office finances with the front office), the more restaurants will have the flexibility Wilson said they need to migrate away from paper and toward cash flow visibility.

“It makes it easier to be reactive because restaurants have to be very agile and flexible to meet daily needs,” she said.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.