Room to Grow: Streamlining Your Hospitality Accounts Payable Process
The Hospitality Accounting Department
As the financial gears of a company, a productive accounting team can positively impact every other department in a hospitality business.
Large hotels, clubs and resorts are complex businesses that rely on interconnected but independent* departments. Even for smaller hotels that are run as part of a chain, corporate office departments function in much the same way, gathering and disseminating information to the businesses under their purview. Each department remains responsible for providing certain products and services—either directly to the customer or to other departments within the business—and is expected to do so following established policies and procedures. These rules tame what would otherwise be a chaotic tangle of responsibilities. Where hotel kitchen staff may not interact often with the hotel’s marketing staff, each team’s respective work—quality food services and the brand’s image—will impact the other. Similarly, accounting teams at these establishments operate on a level deep within the business’ overall structure. While your accounts payable clerk will likely never interact with a guest, the work they do impacts the business as a whole.
The accounting team interacts with every other department in some way every single day, either by preparing financial reports and accounting statements, requesting or providing data to other departments, tackling problems as they arise, or reconciling accounts. Above all, data accuracy and timeliness are the key pillars of hospitality accounting, as the business relies on their financial reporting to make strategic decisions in the running of the business.
Top Challenges in Hospitality Accounting
Today’s hospitality operators have to juggle time and resources to manage their business’ finances, vendor relationships, and staff.
In some ways, business is booming in the hospitality sector. Business travel spending broke records* in 2015 at £1.2 trillion globally, which represents a rise of five percent over the previous year, and both leisure and business booking rates are projected to grow in 2017. Travel demand will remain high into 2017 as well. However, competition from private accommodation apps online, like AirBnb and FlipKey, is putting pressure on the industry by flooding the market and undercutting prices.
In response to this pressure, many hospitality businesses are seeking out new ways to diversify the services* they offer guests and improve the current service solutions to be more user-friendly and tailored to a customer’s profile. Examples include tablet kiosks that can speed up check-in or check-out procedures, to high tech guest amenities like Internet of Things (IoT) connections, interactive walls, and virtual reality consoles*. With advances in mobile and cloud technologies, guests can now book a room, check in and check out entirely from their personal devices, without ever having to speak to a member of staff. However, back office technologies have not yet reached that same cutting edge. Customers may be able to directly access a hotel’s property management system in real-time, but the accounting team often does not have similar device-agnostic access to the hotel’s accounting system.
In general, IT spending in the hospitality industry is lower when compared to other sectors, like financial services and telcoms. But in recent years, spend has been increasing. According to a Grant Thornton report, the global hospitality IT market was worth an estimated £29.7 billion in 2015, and hotel technology spend is forecast to grow globally at 7% year over year until 2018.
In general, IT spending in the hospitality industry is lower when compared* to other sectors, like financial services and telcoms, but in recent years, spend has been increasing. According to a Smar Hospitality Market - Forecasts*, the global hospitality IT market is projected to grow at a compound annual growth rate of 13.14% during the 2020 - 2025 period, reaching a total market size of GBP £12.727 billion in 2025.
Hotel, club and resort revenue is, for the most part, booked in the month for that month*; but financial strategy requires a longer view and accurate forecasting, which can only be accomplished if the data is reliable. When every other department is relying on that same data, the importance is amplified. Details matter, and so often, when hotel accounting teams rely on accounting systems that require manual data entry, mistakes can become a common occurrence.
When seasonality is taken into account, then scalability becomes an issue as well. Ideally, your accounting team should be able to scale with the seasons, accommodating a higher or lower influx of work without having to bring on additional temporary staff.
Systems management is another major concern for hospitality businesses. On-premise solutions require ongoing investments in terms of hardware and software upgrades. For hotels and resorts that use property management systems (PMS) to manage the complexities of their operations, system integrations are also a consideration. While the PMS system will likely be able to capture booking and guest data, many of these businesses will also be operating accounting software or enterprise resource planning (ERP) solutions to manage back office operations. Each of these systems need to be able to communicate with each other, so that data is shared and accessible.
Because of these requirements, cloud technologies offer these businesses an agile, scalable, cost-effective solution with additional benefits like remote access, third-party integrations, and simple updates.
Both leisure and business booking rates are projected to grow in 2019. - Deloitte, 2019
Automating Your Accounts Payable Process
The first step to automating your workflow in accounts payable is to take a good look at your current document management practices.
In a report from PayStream Advisors that looked at invoice workflows, 50% of businesses still receive most of their invoices in paper format, with a smattering of invoices coming through in emails, electronic data interchange (EDI), and as faxes.
The AP automation solution you choose should not only help you process your electronic invoices, but also have a means of digitising the paper invoices that come through mail and fax. In this case, digitisation is two-fold: first, the system needs to store a secure digital copy of the invoice (usually in PDF format) and then complete the data entry necessary for coding the invoice. An ideal AP automation system will take care of both these functions and also include automatic purchase-order-to-invoice matching to speed up the process further.
While invoice digitisation can already be a big time-saver for accounting teams: by eliminating a large chunk of the data entry, that’s only the beginning of the accounts payable process.
For hospitality companies, the real benefit of automation is in approval routing. When you’re managing multiple locations, it’s likely that each stakeholder in your AP workflow will be scattered across different sites. The accounting personnel who will be coding the invoices and managing the workflow may not even be working out of the same building as your invoice approvers.
With a cloud-based AP automation system, invoices remain centralised while approvals can happen anywhere. Invoices will be routed automatically to approvers based on your specific team requirements, and customised credentials make it so that the right people have access to the right invoices. The approvals can then be made from any device, and from any location.
In 2019 around 55 billion invoices are exchanged on a paperless basis.
“The e-invoicing journey 2019-2025” - Bruno Koch, 2019
With a multi-site feature, which you’ll find in Quadient AP, you can go one step further. If your business includes multiple locations, each of your properties will have its own invoices to process. To keep everything organised, you may want to monitor and process invoices for each of your locations as separate legal entities. Multi-site functionality allows you to do this from a centralised platform, so that you can run company-wide reports and perform searches for invoices across all entities at once. Invoices will always be associated with the correct company, even if each entity uses different accounting software.
Now, let’s talk about accounting software. Since AP automation comes as a third- party app, you’ll have to make sure that the AP automation solution you choose can be fully integrated with your current accounting software. Syncing should also be on your radar. Accounts payable, in tandem with accounts receivable, impacts your cash flow. With all the data that you’ll have accessible through AP automation, it’s important that your solution is able to seamlessly integrate and sync, so that your financial data remains accurate and timely.
Finally, to complete the AP cycle, you will want to automate your payments. Look for AP automation software that includes a payment module, which should include payment approval routing and multiple payment method options. Quadient AP helps you pay your vendors by providing all these essentials, including several payment methods: EFT/ACH, wire transfers, automated checks and virtual credit cards. With your complete accounts payable cycle in the cloud, all your invoice and payment data will be searchable, accessible, and secure.
The Real World Benefits of AP Automation
How AP automation will help your team and save you money
We can talk about the technological benefits of automating accounting processes, namely security, efficiency, and accountability. But any system, however advanced, will fall short of expectations if it doesn’t also offer qualitative improvements. For those in the hospitality industry, the effects of AP automation can be felt across the whole organisation, making it easier to retain accounting staff and reduce turnover, maximise the ROI of accounting staff hours, provide better financial reporting, minimise stress during busy times, and improve vendor relationships. Let’s analyse each of these real world benefits in more detail.
Reduce accounting staff turnover and maximise hours
AP automation vastly improves process efficiencies for accounting staff, which is a great motivator! Less data entry and chasing approvals means your accounting professionals will be free to tackle more rewarding work with a higher return on their investment of hours. Higher job satisfaction means better staff retention, which can effectively lower costs that would otherwise be lost to turnover, hiring and retraining. As an additional benefit, allowing your staff time for higher ROI activities, like accounting analysis, can often unearth new ideas for revenue opportunities and ways to improve other processes.
Improved financial reporting
Automation also reduces the chance of human error. Mistakes add up quickly over time, and in a paper-based system, they will be far more frequent. This includes misplaced invoices, data entry errors, coding errors, duplicate payments, late payments, and overpayments to name a few. At tax time or when an audit hits, the consequences of these mistakes can hurt your business, as they increase the chances you’ll be paying additional taxes or penalties down the line.
Scale during the busy season
More than almost any other industry, the hospitality sector is subject to the ebbs and flows of seasonality. While long-standing hospitality businesses are familiar with the patterns of each season and know how to cope, sometimes those methods of coping are not the most efficient. During the high season, for example, many hotels and clubs may take on temporary accounting staff to deal with the heavier workloads. Adding temporary accounts payable clerks not only increases your staffing costs, it also increases training costs, which then become sunk costs as soon as those staff leave at the end of the season.
When automation is introduced into your accounting workflow, the heavier workload is offset by the technology—your AP automation solution can take on the heavy lifting, without significantly increasing the burden on your permanent accounting staff. Better yet, with Quadient AP as your AP automation solution, you only pay for what you use each month as Quadient AP charges per invoice processed.
Better vendor relationships
Just as it can be difficult to find and retain qualified staff in the hospitality industry, the same can easily be said of vendors. Positive vendor relationships hinge on payments paid on time and accurately. With an AP automation system in place, you get unparalleled visibility into all your bills, such as when they’re due and when they’re paid. Your vendors will never be paid late, thanks to features like payment scheduling and notifications that can remind you about all pending due dates.
Businesses that implement AP automation technology will be able to compete in
an evolving hospitality market, by streamlining one of the most costly accounting
processes in terms of both time and resources. Take a look at your current process
and see where AP automation can lift burdens from your accounting staff, and
ultimately boost your bottom line.
*Download the full whitepaper for more information
