Toast POS Accounting With QuickBooks Online

Toast is a very popular restaurant point of sale (POS) system. If you have Toast, you want to know how to extract the relevant data and efficiently get it into your accounting system. 

From an accounting perspective, I mostly look for two things from a restaurant POS system:

1. Is it a cloud-based system?
2. Does it properly integrate with QuickBooks Online? 

Notice the word properly in #2. Almost every POS system will claim to integrate with QuickBooks Online. But that doesn't mean the integration is anything that is useful from an accounting perspective.

I've seen all sorts of really bad integrations that cause major problems and inefficiencies.

We do a lot of restaurant bookkeeping, so we have experience with many different POS systems.

Overall, I would rank Toast very good from an accounting perspective.

Below, we will discuss some different aspects and considerations of Toast as it pertains to your accounting system.

Integrate Toast POS with QuickBooks Online

Toast POS integrates with QuickBooks Online, but you have to use a third-party app called Shogo. The good news is that Shogo is a fairly affordable add-on at only $35 per month, and it works really well.

Toast has a small add-on fee on the POS end to integrate through Shogo, but again, it's fairly affordable. Shogo will save you a ton of time, and the integration is well worth it.

Once you set up the Toast integration with QuickBooks Online via Shogo, you will have to map the various items to your QuickBooks Online chart of accounts. This is where the accounting piece comes in, and you will want a good restaurant accountant to advise you. 

There are a few reasons why we love Shogo:

1. It has worked with every POS system listed on their website.
2. Shogo automatically enters the daily sales summary based on how you want it broken down.
3. Shogo holds back the integration if there is a mapping error.

This often happens when you add a new item to Toast and don't properly map it to the correct income account. Once you fix the mapping issue in Shogo, it will post the past entries; you just might need to request it through support.

Lastly, they have absolutely amazing and timely customer support.

Tips and Cash Reconciliation

A common difficulty restaurants face is handling their cash and tips reconciliation process. 

We recommend restaurant owners push towards running their tips through their payroll process when possible. 

We recognize that expectations with employees may have already been set, and they expect to walk out with their cash tips.  In these cases, we use the Shogo integration to track credit tips and cash tips within the accounting system.  

We'll need something to reconcile cash and tips on a monthly basis. This generally works with a cash reconciliation sheet prepared by the operations staff.

At the end of the month, we use this cash reconciliation to ensure that all tips are collected, paid, and reviewed by the accounting team.  

Toast Gift Certificates

Toast has its own built-in gift certificate system. We highly recommend using it, as it works incredibly well to track outstanding gift certificates, balances, etc. 

Customers can easily purchase gift cards and send them to recipients via text or email. 

Gift cards can be redeemed in person or online through the Toast Online ordering system.

Lastly, customers can look up their gift card balance and add value to it if they choose to do so. 

Toast Merchant Processing

I'm pretty certain that Toast forces you to use their merchant processing. Please don't quote me on that, but I think they recently made that switch.

I'm not sure of the merchant fees, but I believe they are fairly competitive. From an accounting perspective, it isn't the most accounting-friendly merchant processor we have dealt with, but it is far from the worst.

The daily sales integration through Shogo really helps to understand the merchant deposits. With other merchant processors, you may run into batches that don't make sense with the bank deposits.

I would recommend running the Settled Deposits Daily Breakdown report in Toast.

We typically have to wait until the 5th or 10th of the month to reconcile the merchant account.

You will note that on the last day of the month, that batch sometimes settles with batches from the following month. Reconciling the merchant deposits can sometimes be difficult, but this report should help.

Third-Party Delivery Services

The various third-party delivery services like Uber Eats, Doordash, Grubhub, etc., may make restaurant owners cringe due to their high fees. Unfortunately, they are typically a major pain to account for properly as well. 

Having the various delivery services integrated via Toast will definitely help on the operations end of the business. From the accounting perspective, they can be time-consuming and a pain to reconcile.

It's hard to explain, but one of the biggest issues we see is if an order entered in Toast changes after being entered, the delivery service does not relay that information back to Toast.

Other issues, like the various fees, returns, etc., also need to be addressed properly.

Another major consideration is sales taxes. Some platforms will collect and pay your sales tax for you, so make sure you understand those details when setting up your account so you don't double-pay your sales taxes.

Toast Payroll Services

We have had a few clients use Toast Payroll services; of course, there are pros and cons.

One major pro is that the payroll piece is integrated with the Toast POS system (obvious) so hours are automatically synced to Toast payroll from the Toast POS system.

Like any other payroll provider, Toast Payroll will file your payroll taxes and W-2s for you. As we have preached in the past, we believe every business should outsource its payroll. 

One really big benefit of Toast payroll is the Toast Tips Manager.

With the Toast Tips Manager, you can set up tip pool rules to have your tips automatically distributed among your staff according to the tips distribution rules that you set up.

This is a huge benefit for any restaurant manager or owner who has had to manage tip distributions and tip pools. Ensuring that you are properly distributing all of the tips collected will save you a ton of time and reduce your liability. 

Another benefit of Toast payroll is that you can offer your staff a Toast Pay Card, which gives them instant access to their tips and wages after each shift. 

The big con of Toast Payroll services is that they do not integrate with QuickBooks Online.

It is not an incredibly difficult journal entry, but a payroll journal entry integration with QuickBooks Online would still be nice.

Toast has told me that the payroll integration exists if you use the xtraCHEF feature (more on xtraCHEF in our next section). I don't quite understand why Toast won't roll out the payroll integration to all customers, even if they charge a fee to set it up. Automating the payroll entry is worth it.   

You should note that if you allow physical paper checks for employees, this will require a decent amount of data entry, as each paycheck needs to be added as a line item on the payroll journal entry.

Cost of Goods Sold

First of all, I could go on forever about determining the true cost of goods sold in a restaurant. It is time-consuming, costly, and requires a lot of upkeep. 

We typically recommend using a cost-of-goods-sold account when you make your purchases. Of course, when you purchase an item, it becomes inventory and doesn't become a cost of goods sold until you sell it.

However, getting that level of detail in your QuickBooks Online system will require a decent amount of work.

One option is to count physical inventory and calculate its cost. Then, you could adjust the cost of goods sold to inventory, which would give you a more accurate COGS.

xtraCHEF, which Toast owns, will help calculate a more accurate cost of goods sold. 

With xtraCHEF, you can upload your vendor invoices, which will be coded to your accounting system by line item.

The invoices will then be automatically synced to your accounting system. You will also receive a daily dashboard of sales and expenses.

Lastly, with xtraCHEF Pro, you will have recipe costing, prime cost calculations, and inventory management. 

In summary, I understand why the cost of goods sold is a major concern for a restaurant owner. To get a more accurate cost of goods sold, you just need to do a cost-benefit analysis and find a system that works for you. 

Summary of Toast from an Accounting Perspective

Honestly, I would give Toast a big thumbs up from an accounting point of view.

When a client tells me they are using Toast for their POS system, I tell them it was a good choice.

Compared to other restaurant POS systems that we do accounting for, Toast is the easiest to automate and account for properly in your accounting system.