7 Impacts and Benefits of Accounts Payable Automation with xtraCHEF by Toast
Learn how you can use xtraCHEF by Toast to foster data-driven decisions for your restaurant — decisions that can help increase margins and protect profits. These new costing and spend insights can help owners and operators achieve scalable processes with precise monitoring.
DISCLAIMER: This content is provided for informational purposes only and is not intended as legal, accounting, tax, HR, or other professional advice. You are responsible for your own compliance with laws and regulations. You should contact your attorney or other relevant advisor for advice specific to your circumstances.
Restaurant accounts payable (AP) and invoice management processing is a daunting task. It can easily turn into a bottomless time pit — especially without proper procedures and systems in place.
Invoices come in many forms: through email, papers attached to delivery boxes, even one-off store receipts.
With how essential it is to the business, it seems like invoice management and AP should be a simple process. It more than often couldn’t be further from the truth for most, with multiple people and manual steps contributing to the process.
The burden often falls on managers to manually enter invoices into their accounting software or trusty Excel spreadsheet. This manual data entry process can take hours and is subject to human error.
The cherry on top is that all the work interpreting and inputting the invoice data is for nothing. It’s most often the case that a lack of proper procedures and systems results in dormant data that’s not being properly used to inform costing and profitability decisions.
Read on to see the seven critical impacts and streamlined benefits of accounts payable automation capabilities. Learn how you can use xtraCHEF by Toast to foster data-driven decisions for your restaurant — decisions that can help increase margins and protect profits.
These new costing and spend insights can help owners and operators achieve scalable processes with precise monitoring. Follow along as we walk through the process from the first snap of an invoice to using data to determine menu pricing.
1. Receiving invoices
The first step in the AP process is getting the invoices into xtraCHEF by Toast. There are multiple ways to transfer invoices into xtraCHEF, such as:
Snap a picture through the mobile app
Upload a PDF (or a bulk of PDFs)
Forward to a designated email address
Electronic Data Interchange (EDI) with the vendor
Once the invoice is received by xtraCHEF, it is read with OCR (optical character recognition) technology to automatically read and digitize the relevant information from the invoice. This includes vendor, invoice number, product name, unit of measure, quantity, and cost.
All the invoice data shows up in your xtraCHEF account within 24 hours. Most invoices are read and transferred well under this time, but delays can occur due to the quality of the invoice. For example, invoices with bad stains, notes and scribbles, cigarette burns, etc. can have a delayed transfer as they receive human analysis — nonetheless, this literal messy data is still digitized.
If there are any issues with an invoice, they will be sent to an exception screen where additional information can be manually entered. Some common issues include missing invoice numbers, vendors missing from your accounting software, or mismatched invoice totals (possibly due to a pending credit).
2. Mapping the invoice
The next step is mapping the invoice. Invoice mapping is the process of allocating payments and invoices to one another. This step needs to be done to connect the line items on an invoice to the account from your chart of accounts.
For example, if an invoice from a vendor is always categorized as food, xtraCHEF will remember to automatically import invoices from that vendor to the food cost general ledger code going forward. If an invoice has many different line items, such as meat, supplies, and beverages, you can map these line items separately.
Want a line item to go to the food cost account but need additional detail for analyzing and reporting? You can map all invoices from a certain vendor to food costs while adding detailed categories when you map for further analysis. This category will only show in xtraCHEF reports and will not be transferred to your accounting software.
For example, if one of your main menu items is beef, you can categorize the line items on the invoices as beef. This way you can further analyze this category within xtraCHEF for purchasing decisions.
If something has been mapped incorrectly or needs any changes, no worries. You can make changes to any aspect of the invoice and the software will remember your changes so similar invoices are not coded incorrectly in the future. It also keeps a log of who mapped the original entry, along with the date and time for reference, to allow for change control and consistency training.
You can also set up approval settings where all invoices that have been mapped are sent to an approval screen where they can be approved (or edited, if necessary) then automatically delivered to your accounting system.
3. Plate costing
Once invoices have been uploaded, you can use xtraCHEF’s recipe management software to automate recipe costing. With this feature, you will find a list of ingredients collected in a product guide based on your past purchases.
Different ingredients can be added or swapped using the drag-and-drop interface, making it ideal for menu items that change often. xtraCHEF can also quickly make any measurement conversions for you. Using this software, you can determine plate costs so you can properly price menu items, manage your cost of goods sold (COGS), and achieve profitability targets.
Here are the simplified steps to calculate your plate costs, assuming a recipe of just beef and potatoes:
1. List ingredients:
- Russet potatoes
2. Define units as listed on supplier invoice (C):
- Pound for both
3. Purchase price per unit (A):
- Beef - $2.75
- Russets - $1.50
4. Yield* percentages (B):
- Beef - 100%
- Russet potatoes - 81%
5. Calculate actual unit cost for each ingredient** (E):
- Beef - $2.75
- Russets - $1.85
6. Define serving unit used in the recipe (D):
- Beef - ounce
- Russets - each
7. Calculate unit serving cost***:
- Beef - $0.17.oz
- Russets - $0.46
8. Determine portion size by unit:
- Beef - 5 oz
- Russet - 1 each
9. Calculate your portion cost:
- Beef - $0.85
- Russet - $0.46
10. Total plate cost:
11. Plate cost after waste percentage (10% in this scenario) [F]:
12. Food cost percent for entire plate (price of $3/F):
*How much you will have left of a finished or processed product. You can refer to a list of common product yields to use as a guide.
** A / B, or Purchase price per unit / Yield percentage
*** E / (C / D), or Cost per measure / Units per measure. This is 2.75 / 16 for beef, as it's sold by the pound but most be converted to ounces (16) for serving. It's 1.85 / 4 for russet potatoes, assuming the average potato is 4 oz.
xtraCHEF helps automate this process as you are uploading invoices. It also has a density calculator — for example, to compare a cup of flour against a cup of sugar — for more accurate costing.
4. Strategic pricing
After achieving accurate costing, pricing is the other side of the profitability coin. Your menu prices have to be in balance with your food costs to align with your profitability targets.
Keep in mind individual food cost percentages will vary from item to item based on ingredients, seasonality, etc. — that’s just the nature of the industry. So you have to be strategic and intentional with your pricing to keep up.
Using xtraCHEF by Toast, you can set targets and be notified if there are changes. You can then decide how to handle the inevitable changes that will arise:
1. Work to bring down costs, either through supplier negotiation, shopping around, or decreasing portion sizes
2. Raise prices to accommodate increased costs and maintain menu item profitability target
3. Blend the two together, knocking down costs a bit so you don’t have to raise prices too much
5. Analyzing pricing and costs
The “Analyze” section of xtraCHEF can be used to see pie charts with spending by category.
If detailed categories have been set up when mapping, you can get additional oversight. You might notice that 20% of your spending is on beef, for example. When you analyze further, you can see detailed reports by vendor and compare the prices spent by vendor.
Using this information, you might realize you are being overcharged and look into switching vendors for that category.
This overview allows for better decision-making and insight into where your money is going.
6. Ordering with the bottom-line top of mind
You can also create an order guide to streamline the process of purchasing your most-used ingredients by scheduling recurring orders through xtraCHEF.
Price tracking can be set up to alert you when prices go up or down, allowing you to have more insight and control over fluctuations.
You can even upload vendor bid sheets to compare prices and decide on the right vendor for future orders.
7. Financial and operational harmony at scale
Hopefully, you can see the benefits of accounts payable automation and the analysis it unlocks within xtraCHEF. These insights are all but unachievable manually, and that’s not to mention the countless energy and labor hours that would go into calculating them
What traditionally may have taken hours or even been unavailable (unless your restaurant had the means for its own development team) is now available in the snap of an invoice — literally.
Whether you want to scale operational and financial operations across a single restaurant or an entire chain, xtraCHEF by Toast can unlock the insights you need to help you get there.
How to unlock the benefits of accounts payable automation for your restaurant operation
When you’re ready to unlock real-time insights on your restaurant costs, xtraCHEF by Toast is here to help. Pairing it with an integrated accounting system and a restaurant-focused CPA firm can help increase the impacts and benefits of the accounts payable automation tool.
It’s a tough industry to begin with — but you already knew that. And it’s been made exponentially more tough over the past few years. We want restaurant operators to have every edge they can find; to make as informed of decisions as possible about the trajectory of their business.
Combining xtraCHEF with our restaurant-centric services at The Fork CPAs is a great step in that direction.
Marisa Parker is a CPA and a Client Advisor at The Fork CPAs. The Fork CPAs provides restaurant owners with frictionless, streamlined, and modern restaurant bookkeeping and tax services. They believe that with the appropriate technology and accountant, restaurants of all sizes can access the same financial data as national restaurant chains.