No matter what sector of the hospitality industry you operate in, there are certain tasks that are more important than managing invoices. Proper invoicing ensures that your hotel (or other establishment) has sufficient cash reserves to meet the many recurring costs associated with running your business. Expenses such as staffing, purchasing food and beverages, maintaining facilities, and obtaining other necessary goods and services can add up quickly.
Without sound invoice management practices, your business could soon have significant difficulty managing its cash flow. This can be especially troublesome for small hospitality businesses that typically don’t have the same sizeable cash reserve as larger corporations.
With BirchStreet Pay, you can implement proven bill management practices to better ensure the financial stability of your hotel. No matter how many guests you serve in a given week, month, or year, improving the way you process bills will pay significant dividends to your establishment.
1) Automate as much as possible
Many hospitality businesses have a variety of recurring expenses that can be handled on a monthly or even weekly basis. With so many invoices arriving day after day, there is a significant risk of human error when invoice management is left entirely to manual processing.
The more complicated an invoice, the greater the risk of serious errors. While the medical billing industry certainly has its fair share of differences from hospitality, analyzes of billing in this industry believe that anywhere from 40 to 80 percent invoices contain errors.
Although billing in the hospitality industry is fortunately not as complex, this statistic shows how easy it is for billing errors to find their way into invoices, especially when it comes to manual processing. . Errors such as duplicate invoices and missing payments can be particularly troublesome for a hospitality organization’s cash flow management.
The more “touch” required in a single invoice – even one that is delivered and processed digitally – the greater the risk of error. Data entry errors can result in overpayments or underpayments, as well as inaccurate tax calculations or even the possibility of a lost invoice. Problems like this can create major problems later when suppliers add late payment fees or other penalties.
2) Provide support for various types of documents
Before receiving an invoice for goods or services received, hotel businesses often need to place a purchase order. Purchase orders (POs) allow hospitality companies to set clear expectations with their suppliers. They delimit the products or services purchased, their quantity, the unit price and even information such as the date and place of delivery (if applicable).
A purchase order is invaluable for your internal team, especially if you have a large volume of orders. Purchase orders essentially create a paper trail that clarifies price agreements so you can avoid cost overruns and duplicate requests. These documents also provide inventory visibility to help you manage inventory more efficiently, whether it’s food or laundry supplies.
A quality inventory management system will also allow you to generate and track purchase order invoices, as well as non-purchase order invoices and credit memos for small business expenses that do not require processing. Regulated Supply and Approval.
Once a supplier has accepted the purchase order, they are then bound to fulfill that order in accordance with the agreed terms. When your company receives the invoice from the supplier, it should be carefully compared to the original purchase order to make sure everything matches.
An inventory management system that helps your business track this data will make budgeting expenses and maintaining good cash flow much easier.
3) Use digital tools to leverage billing data
Good invoice management can (and should) provide key insights into how your hospitality business is using its money – and how it can do it more efficiently.
A recent BirchStreet Systems seminar titled Hospitality transition to digital billing in 2022 highlighted how digital bill management can help hotels and others in the hospitality industry. By going from a system of approximately 80% paper and 20% electronics to 20% paper and 80% electronics, the average hotel with 250 rooms can reduce its annual bill management expenses by 81 $250 to $6,500.
Much of this stems from the streamlined nature of a digital invoice management system. Going digital with tools like BirchStreet Pay can significantly reduce invoice processing time, which can help your business improve supplier payment terms and gain better access to early payment discounts from your suppliers. This allows more transactions to be completed, even with fewer resources, significantly reducing labor and processing costs.
Perhaps most importantly, with accurate, real-time data through a digital invoicing system, stakeholders can provide reliable information to department heads regarding expenses.
This allows for informed decision-making and deeper insights into a hotel’s relationships with individual vendors. This could easily reveal areas where the hotel is overspending or where the budget is not properly allocated. Real-time information enables executives to act quickly to resolve these financial issues to improve cash flow.
4) Match Invoice Timing to Cash Flow Needs
The last thing your business needs is a hefty invoice from a supplier that arrives at a time of the month when cash flow is already tight, especially if that invoice requires immediate payment. Hospitality managers should strive to establish a billing schedule with suppliers that will benefit their business’ cash flow needs.
For open orders, this might mean setting up regular intervals for invoicing, such as every two weeks or at the end of the month. For larger projects (such as a hotel lobby renovation), consider whether it is better for your cash flow needs to make full payment upon completion or to make partial payments as you go. and as certain stages of the project are completed.
When to schedule these bill payments should be determined based on your own cash flow needs. Some hotels may find it easier to pay bills at a consistent rate throughout the month. Others might find it best to make all payments towards the end of the month when their own bills have been met.
This may require some level of negotiation with suppliers. All payment terms should be agreed upon at the start of a business relationship, including details such as how often invoices will be delivered and what payment terms will look like. Some providers are willing to offer incentives for early payments or flexible due dates, but these details should be worked out well in advance.
5) Activate electronic payments
Virtual electronic payments are much more efficient than writing paper checks. These transactions can be completed quickly and securely, ensuring vendors receive timely payments.
In particular, many electronic payment solutions now allow real-time payments that can be transmitted 24 hours a day, 7 days a week. A survey published in the ABA Banking Journal found that 81% of business leaders expect the increased proliferation of “instantly available” digital payments to radically transform the way they do business.
In the survey, 52% cited real-time payments as a valuable solution for improving cash flow management, while 46% said it would help improve general accounts payable activities. Two-thirds of respondents said they expected that with the availability of real-time payments, they would stop making and accepting cash and paper check payments.
This last statistic is of extreme importance for those who are hesitant to update their invoice management systems. Regardless of your organization’s current view on moving to an all-electronic payment solution, chances are your suppliers are ready to make the switch.
Maintaining strong relationships with preferred suppliers that help keep your hotel brand running smoothly will likely require making this transition, regardless of your internal team’s preferences.
Let BirchStreet Pay revolutionize the management of your invoices
Hospitality businesses send and receive countless invoices and purchase orders every week. A good invoice management system allows your team to create, track, and file invoices more efficiently, while ensuring strong cash flow for the business.
With Birch Street Pay, you don’t have to worry about writing paper checks or subjecting your hotel business to credit card fraud. This innovative system offers a unique solution to manage your payments through the use of virtual cards that earn cashback with each purchase.
BirchStreet Pay provides an easy-to-use interface that allows you to make payments at the push of a button, with all transactions protected by modern security measures and backed by concierge-level support.
Flexible workflows and detailed reporting allow for easy integration with your accounting/ERP systems, while giving you full visibility into your payments. A vendor integration team can even help you get vendors to accept virtual card payments.
With Birch Street Pay, you can reduce paper checks, compliance costs, and other expenses, while earning cashback. From cost savings to purchasing transparency, your organization can better understand its expense and invoice management needs, which will result in even better financial practices in the future.
About BirchStreet Systems
BirchStreet Systems powers hospitality businesses with a complete procure-to-pay business solution. As the world’s leading provider of expense management solutions to the hospitality industry, 15,500 companies in over 130 countries subscribe to BirchStreet to connect to a network of over 450,000 suppliers.
Founded in 2002, BirchStreet is privately held and headquartered in Las Vegas, NV with offices in California, China, Singapore, India and the United Kingdom. For more information, please visit www.birchstreetsystems.com.