Top AP Tactics to Control Cash and Execute on Payment Strategies
As we enter into a new year clouded by an uncertain economic outlook, hospitality businesses need to begin thinking about accounts payable (AP) in a new way. By employing smart AP tactics, hoteliers can get better control over their cash and ultimately improve their bottom lines.
Hotels and hospitality properties face unique challenges. Not only has volume fluctuated wildly due to the pandemic and its ongoing recovery, but additional fluctuations may persist as the world appears poised to enter into a recession. Making matters worse, hospitality properties are also struggling with labor shortages and rising inflation, making it that much more difficult to stay profitable.
The good news is that by reevaluating the way they manage accounts payable, hotels and hospitality properties can maximize their cash flow and make smart moves to protect their margins. Let’s take a look at tactics hotels can use to get more control over their financial situations and implement payment strategies that help them accomplish their goals.
Strategies the Hospitality Industry Can Use to Improve Their Cash Situation
One of the easiest ways for hotels to improve their cash situation is by ensuring they take advantage of every early payment discount they can while concurrently withholding payments until they’re due when no discount is available.
Unfortunately, without the right tools in place, this is easier said than done. When AP departments are still largely driven by slow and expensive manual processes, it takes a lot of time to analyze each invoice and make sure that discounts are taken. Inevitably, some discounts slip through the cracks. At the same time, without clear, at-a-glance visibility into all outstanding invoices, AP teams might also miss payment due dates—and perhaps incur late-payment penalties.
In an age of automation, manual AP processes no longer cut it. When employees are still required to manage invoices by hand, the process drags on longer than it needs to. For example, an AP team member might get an invoice that’s missing key information and have to determine whether it’s ready to pay. In some cases, they might have to talk to someone internally to get approvals. In others, they may have to reach back out to the supplier and have them resubmit the invoice with the information they didn’t include the first time.
Either scenario stretches out the process, driving inefficiency and consuming time and financial resources. Luckily, there are several tactics hospitality companies can use to shorten payment cycle time and stretch their dollars.
AP Tactics to Shorten the Payment Cycle Timeline
To accelerate payment cycle timelines, hospitality companies should think about investing in technology designed to make life easier for the accounting team and more profitable for the business. As more and more hotels are turning to automation to speed up processes and generate ROI, many hospitality companies are implementing AP automation solutions to improve their cash position and successfully execute their payment strategies.
Leading AP automation platforms enable hospitality companies to achieve 100 percent straight-through processing with automatic two- and three-way matching and zero humans in the loop. What that means is that invoices are verified, approved, and sent to your enterprise resource planning system without any human involvement to slow it down and look up missing information.
As a result, payment cycle timelines are optimized out of the box, with the technology automatically ensuring hoteliers take advantage of every early payment discount they can while extending other payments until they’re due. It’s an easy way to improve the cash flow situation.
Additionally, AP automation enables hotel companies to form direct digital connections with the suppliers they rely on. Rather than having vendors call to track down payments, they can self-serve this information at their leisure. Not only does this make life more convenient and enable them to get more control over their finances, but it also frees up AP staff from responding to repetitive requests. Team members can then use this reclaimed time to focus on other important areas of operations, such as forecasting and new payment strategies.
For Hoteliers and Hospitality Businesses, the Time to Act Is Now
If there’s a lesson we’ve all learned over the last few years, it’s that it’s impossible to know what tomorrow may bring. Even so, with persistent inflation and an all-but-certain recession looming on the horizon, many organizations will face financial challenges in the near future.
In an era of shrinking disposable income, the hospitality industry may very well encounter another period of sharp downturn soon and will also have to contend with the rising cost of operations due to increasing supply and labor costs. In this tight economy, hoteliers have a great opportunity to make smart investments that will help them weather the coming storm and end up on solid ground on the other side of it.
By overhauling AP processes and investing in purpose-built solutions for AP teams, hotels can minimize invoice processing costs substantially while delegating human resources more effectively. By being proactive, they also position themselves to scale without adding employees when volumes return to or exceed normal levels.
In this difficult moment, much is at stake. Hospitality companies that continue using manual resources to process invoices are missing out on a chance to become more resilient while improving margins and making work more enjoyable for the accounting team.
As the saying goes, adapt or die. It’s time for hospitality companies to rethink their payment strategies and processes and invest in tools that give them as much control over their cash situation as possible. Simply put, failure to change an old-fashioned approach to AP will no doubt make an exceptionally difficult year even harder.
ABOUT THE AUTHOR
Shan Haq is vice president of corporate strategy and development at Transcepta, the leading cloud-based procure-to-pay platform. Haq is responsible for shaping Transcepta’s strategy for new markets, products, and alliances. Through leadership roles in corporate strategy, marketing, and product management, Haq has successfully grown businesses within Microsoft, Deloitte Consulting, and Boeing Space and Technology. Transcepta, based in Aliso Viejo, California, is an intelligent procure-to-pay platform that enables accounts payable and procurement teams to achieve 100 percent straight-through invoice processing across their supply chains without scanning or OCR imaging.