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Streamlining Third-Party Delivery Reconciliation: Automatic Settlement of High-Volume Accruals

Due to high transaction volumes and frequent charge changes, franchise restaurants face a set of common financial challenges tied to third-party delivery reconciliation. But with ERP/accounting tools like Dynamics 365 Finance and AMCS by Avantiico, the reconciliation process can be automated, ensuring accurate tracking and less manual effort.

 

Learn more about these challenges and solutions, and scroll to see our step-by-step guide on recording accruals, payments, and closing out transactions with AMCS and D365 Finance.

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Danny Thomas

Introduction

Many accounting businesses and financial shared services teams managing high transaction volumes need to book accruals and reconcile them against payments from third parties. Examples include third-party food delivery services for franchise restaurants, insurance claims, and online marketplace sales. If you are already live on Microsoft Dynamics 365 Finance and Supply Chain Management, some solutions are available out of the box, while others can be implemented with free Microsoft ISV solutions.

AMCS is a Dynamics 365 Finance & SCM ISV solution that automates complex accounting tasks to simplify and streamline time-consuming processes. One of its great features is the ability to import and post journals for hundreds of legal entities at once. AMCS comes standard with integration to the Financial Tags feature in Dynamics 365 Finance and Supply Chain. This feature is included in the AMCS Lite solution, which is 100% free and available for download for Dynamics 365 customers.

Overview

  • Accounting teams have needs for high-volume accruals. It is challenging to keep track of these if they are not on a subledger like AP or AR.
  • Dynamics 365 for Finance and Supply Chain offers out-of-the-box features that support automated reconciliation and settlement of accrual transactions using Financial Tags.
  • AMCS for Dynamics 365 Finance has native integration to import journal accruals with financial tags. This can be done even with the free AMCS Lite solution, across legal entities and at high volume.
  • Reporting and additional automation can be built around unsettled and partially settled transactions to automate actions with suppliers and customers.

What Is Third-Party Delivery Reconciliation?

Third-party delivery reconciliation is the process of matching payments received from delivery services like DoorDash, Uber Eats, and Grubhub with the actual orders placed at a restaurant. This involves ensuring that the amounts collected by these services align with the restaurant’s records, addressing any discrepancies, and managing the high volume of transactions generated daily.

 

One of the main challenges in third-party delivery reconciliation is handling the high volume of charges from multiple order aggregators, which can change frequently. Many franchise businesses face significant difficulties managing delivery service fees and reconciling transactions from various platforms, requiring dedicated staff to manage the reconciliation process daily. This issue is common across various brands, making it a widespread challenge in the franchise restaurant industry.

Third-Party Delivery Reconciliation for Restaurants: Challenges in Processing & Reconciling Accruals

In our example story today, we’ll focus on the restaurant industry and common franchise accounting needs. This industry went through a seismic change during the COVID-19 pandemic in how they catered to their customers, specifically how they delivered food to their customers.

 

To deliver food, many restaurants, including large franchise chains, use third-party delivery services like DoorDash, Uber Eats, and Grubhub. These delivery services collect payments from customers and then pay the restaurant company a percentage commission. This creates a reconciliation challenge for hundreds of transactions generated per day per location, i.e., matching the payments received from the delivery platforms against the actual orders placed. On top of this, there are multiple delivery platforms to reconcile against.

Since the third-party delivery provider isn’t the actual customer, it can be a challenge to track these financial transactions at a subledger level like the Accounts Receivable module. The transactions from these delivery platforms often don’t integrate directly into the business’s subledger in their Dynamics 365 system. This means traditional reconciliation methods are unsuitable or time-consuming and error-prone. Since data resides in the third-party system, the sheer volume of these transactions adds to the complexity.

Standard Dynamics 365 Finance Solutions – Ledger Settlements and Financial Tags

Dynamics has out-of-the-box features that support automated reconciliation and settlement of accrual transactions called Financial Tags. Financial tags in D365 Finance offer a flexible way to add user-defined fields to transactions, providing enhanced tracking and analysis capabilities. You can track information such as Customers, Vendors, or Payment reference.

Using the Ledger settlement feature in D365, leveraging financial tags as match criteria for delivery order number and delivery partner name, this solution aims to reconcile these third-party settlements. In the example we’ll walk through with our example story, the following is important:

  • – We configure financial tags for the delivery partner order number and delivery partner.
  • – A standard process automation batch job is configured to settle transactions based on those parameters.
  • – A Ledger Settlements inquiry shows settled, partially settled, and unsettled transactions.

Ledger Settlements in Dynamics 365 F&O

In Dynamics 365 Finance and Operations (F&O), Ledger Settlement is a powerful feature designed to manage the reconciliation of financial transactions and settle open transactions within the general ledger. This process automation ensures that debits and credits in the general ledger match corresponding amounts, facilitating accurate financial reporting and closing. The Ledger Settlements inquiry tool allows users to view both settled and unsettled transactions, maintain details for unsettled transactions during year-end close, and set up exclusive accounts for ledger settlements.

 

For partially settled or unsettled transactions, Dynamics 365 F&O can generate exception reports and configure rules to automatically settle minor differences within an acceptable range. This feature supports transaction settlement, partial settlement, auto-settlement based on predefined criteria, linking transactions, and using clearing accounts. Additionally, users can review unsettled transactions, reverse incorrect settlements, integrate settlements with the general ledger, and utilize batch processing for efficiency. These functionalities collectively ensure that financial data is accurate, up-to-date, and compliant with accounting standards, making the settlement process more streamlined and efficient.

Core Functionalities of Financial Tags

  • User-Defined Fields: Allows the creation of up to 20 custom fields per legal entity. Provides flexibility to track data beyond standard financial dimensions.
  • Transaction Tagging: Enables the assignment of custom tag values to financial transactions. Tag values are stored on general ledger accounting entries.
  • Enhanced Transaction Analysis: Facilitates detailed transaction analysis by providing additional data points. Aids in internal analysis and reporting.
  • Legal Entity Specificity: Financial tags are configured at the legal entity level, allowing for tailored tracking. They can also be shared.
  • Flexible Tag Management: Tags can be deactivated (but not deleted) to preserve historical data. Tag labels can be modified, even after transactions are posted.
  • Journal Integration: Tag values can be defined at the journal batch header level, defaulting to journal lines. Tag values are handled in specific ways for multiline vouchers and non-source documents.
  • Post-Transaction Editing: Tag values can be edited after transactions are posted for internal analysis purposes.

AMCS (Advanced Multi-Company Solution)

AMCS for Dynamics 365 Finance is a D365 F&SCM ISV solution from Avantiico which has native integration to import journal accruals with financial tags, including across legal entities and at high volume. With AMCS, you can build solutions using financial tags to easily track and manage millions of transactions generated through third-party delivery services. Combining the power and versatility of AMCS with financial tags enables your accounting team to build a robust solution for your tracking and analysis needs. More about AMCS can be found [here], but note that everything except for the integration automation shown in this blog can be done with AMCS Lite, our totally free version of AMCS.

Improvements with AMCS

With AMCS, you have the ability to automate transaction import for multiple journal entities at once. AMCS can fully automate your file-based imports based on your requirements. Ultimately, our goal is to help you achieve success in your business with fewer clicks. Learn more about AMCS Lite and AMCS Premium here.

How to Record Accruals, Payments, & Close Out Transactions with AMCS & D365 Finance

Using the tools described above, here is an example of how to record accruals and payments, then use ledger settlements to close out transactions: 

1. Receiving Data from Vendors

When working with vendors who provide high volumes of data we assume that they will provide a periodic file via email, SFTP, or other solution.  AMCS Premium can pick up these files and process them automatically, as it supports configuration-based file mapping to accept files from many different formats. 

 

If you’re using AMCS Lite, this data will need to be molded into an import-happy format.  The data will be imported and automatically posted in D365 as a journal.  Note the FinTag values which represent Delivery Order number, Delivery Customer, and Delivery Provider. 

First you would receive orders and estimate your commission: 

receive-orders-and-estimate-commission

Then a reconciliation file to go with a lump sum payment with order payment details which might be the same – or they might not. 

The important thing for this example is for the estimates and payment files to carry both the order number and delivery provider. 

2. Configure Ledger Automatic Settlement Process Automation in D365 Finance

In the Dynamics 365 Finance General Ledger module, which is under Process Automations, create a new process automation for Ledger Settlement: 

In this form give it a name and a run time: 

process-automation-name-and-run-time

And define the parameters for your automatic settlement.  In this case I am attempting to settle only on Delivery Partner and Order Number. 

define-parameters-for-automatic-settlement

Once that is defined a new process automation will exist in this form, which will kick off a batch job similar to a recurring batch job at the designated point in time. 

batch-job

3. Review Unsettled Transactions in D365 Finance

In the Ledger Settlements form, after the automation has run, users can see the results of the settlements to review settled, unsettled, or partially settled transactions.   

review-unsettled-transactions

In addition to the functionality found on this form, reporting can be built off the data to help follow up with vendors to correct reconciling issues, or to clean up unsettled transactions. 

Conclusion

Many businesses spanning different business models have high volume transactions that must be reconciled in the ledger without the need or possibility to go through the subledger.  When you have that requirement consider using standard Dynamics 365 F&SCM tools as a first step to operate your reconciliation with the out of the box Ledger Settlement functionality.  If you are seeking want a fully automated solution, consider leveraging Avantiico’s AMCS for Dynamics 365 Fiance add-on to automate the import and processing of your data. 

Simplify Your Third-Party Delivery Reconciliation: Request a Demo Today!

Ready to see firsthand how Ledger Settlements, Financial Tags, and AMCS by Avantiico can streamline your third-party delivery reconciliation and reduce manual tasks? With a quick consultation and demo, we’ll show you exactly how these features can be tailored to your needs and workflows.  

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