Postmates brands themselves as being “Everyone’s Favorite Delivery Service” and it’s easy to understand why consumers have fallen in love with the convenience and ease that comes with using this application. Postmates operates 24 hours a day in over 130 cities to deliver customers everything they need such as food, clothing, medicine, etc. But, should Postmates be every restaurant’s favorite delivery service? Restaurants can create partnerships with Postmates through the Preferred Merchant Program. Partnered restaurants have access to superior marketing/visibility on the application as well as faster and cheaper deliveries for customers. More importantly, it offers restaurants the opportunity to expand their customer base.
Should you Partner or Pass?
As always, nothing is for free, this partnership comes with a price! It’s up to you to decide whether the benefits outweigh the costs. So let’s take a look at what a partnership actually means for restaurants in terms of cash flows. Firstly, there are three substantial expenses that restaurants incur.
- Commission: Postmates charges a commission between 15 and 30%.
- Sales Tax: This varies by state.
- Direct Deposit Fees: Postmates uses Stripe as an online payment method and the restaurants absorb the 0.80% direct deposit fee that they charge. This fee will be capped at $5.00, so any deposit over $625.00 will be charged only this flat fee.
- Note: Postmates Partners are able to escape one very common expense: Credit Card Processing Fees. All orders are processed through an electronic ordering app on a tablet which is given to them for free. This enables them to save 3-6% on credit card processing fees.
In addition, Restaurant Partners are paid by Postmates, not the customers. Postmates collects the sales revenue from customers and then sends partnered restaurants direct deposits once a week, on Monday, after deducting the expenses. But how should restaurants properly account for and enter these revenues into their Point of Sale (POS) system? To illustrate this, we will use an example where “Restaurant ABC” receives three orders throughout the week through Postmates.
The three orders and expenses associated with them are as follows. Note that since the commission percentage Postmates charges fluctuates, we will assume 20% for this example.
Restaurant ABC will then receive a direct deposit on Monday equal to the previous week’s sales revenue + the sales tax – the commission – the direct deposit fees. Note that the restaurant will receive the sales tax associated with the orders which they will be responsible for remitting to the government at a later date.
Now that “Restaurant ABC” has received the invoice, is simple to post this revenue into the general journal ledger. Sales revenue made through delivery services should be entered as method of payment in the POS system and QuickBooks. This is much easier with an automatic daily sales entry program, such as POS Link, as it saves time and ensures accuracy.
How does this partnership affect Cash Flows?
Some restaurants have seen tremendous growth when partnering with delivery services as they experience an increase in orders and customers. One of the obstacles associated with delivery services is the processing time that the restaurant must endure before receiving payment. One positive aspect of partnering with Postmates is that they pay partners once a week, lessening the gap between the cash outflow associated with the orders and cash inflow of revenue. A partnership with Postmates also comes with some benefits free of charge, such as a tablet which helps streamline operations and saves money by eliminating credit card processing fees. In addition, the fact that the sales tax is included in the direct deposit allows the restaurant to “borrow” this money before remitting it to the government and gives them more cash on hand.
