A system that is used throughout the restaurant industry is POS which stands for Point of Sale. This computer-operated system allows business owners to track sales, cash flow, food inventory and can help make your bookkeeping simple enormously. A POS system is a necessity because of the  great magnitude of cash and credit cards that pass through a restaurant each day. A POS system not just tracks every penny of your sales but many POS programs also function as credit card processors. The orders go through the computer, directly to the printer present in the kitchen. Since the POS system acts as a time clock, it can also help in preparing the payroll.

The objective for this case study is to check the POS data for integrity, look for variances and its justification and ways to reconcile it, consequences on financial reports and explain why auditing these data are of utmost necessity before starting the bookkeeping function. POS is the system in which the day to day restaurant transactions data is  stored and gives the bookkeeper/accountant access to all data in a meaningful manner so that they can record the transactions appropriately in the accounting software and use it for further analysis. We have referred to the data of one of our clients, a franchisee of Papa John’s Pizza to elaborate our case.

Firstly, let’s first look at the various categories of data which can be extracted from the POS and is of significance from an accounting perspective.

1. Sales (Taxable/Non-taxable)
2. Sales tax
3. Accounts receivables (Cash, CC, Food delivery Cos.)
4. Mileage
5. Employee shortages
6. Gift card sold and redeemed
7. Purchases
8. Inventory transfers
9. Closing inventory
10. Labour

In this case study, we will describe issues related to Sales. In Part 2 of this case study, we will take up Purchases, Inventory Transfer & labour.

1. Sales:

Here is an excerpt of sales data taken from a monthly store report. Ideally, the Net sales should be the sum of the taxable and non-taxable sales. However, in this instant case, the Net sales is $46,811.61 and the sum of Taxable/non-Taxable sales is $46,761.61. Well, the difference is just $50. But for a restaurant franchisee having 30 odd stores, this small difference will cause wrong sales data being recorded in the books of accounts and wrong sales tax calculation. These minute errors could lead to huge time-consuming reconciliations at the end of the year. It is important that Taxable sales and non-taxable sales be recorded separately so that sales tax reconciliation can be prepared with ease. Therefore, it is necessary that we confirm the numbers before recording it in the accounting software and figure out a way to reconcile it (if necessary) at the very beginning.

Below is a sample Monthly store report pulled from the POS.

In this instant case, we pulled the taxable sales report from the POS which provides us breakup of daily sales for a particular month. Here it is:

We then compared it with the store report.

The result is that the numbers of the sales report are consistent with that of the store report. However, the sum of the taxable and Non – Taxable sales is not equal to the net sales in both the reports. The only likely reason we can ascertain is a technical error in the POS. However, we need to find a way out to reconcile this in our accounts.

Therefore, what we suggest is to create a Sales Discrepancy Ledger (Type -sales) and Credit the account with an amount equal to the difference of the net sales and sum of taxable and non-taxable sales. This is to make sure that the total is equal to Net sales because that is what will be reported to the Franchisor. Refer to the screenshot below: