Technology mitigates volatility. When COVID hit, hotel revenues dropped quickly and deeply. Then, during the rebound, hotel operations were pressured to ramp up swiftly. The best-managed hotel companies leveraged technology to effectively assess and respond to rapidly changing conditions.
Traditional accounting software hasn’t evolved much in decades. While bank feeds provide some automation, there is still significant manual data entry. Additionally, reconciliation, budgeting, bank rules, and spend controls are all manual. Because traditional accounting software is inefficient, it's expensive from a total ownership cost perspective.
Artificial Intelligence (AI) and machine learning expand the capabilities of accounting software. First, data entry shifts from humans to AI and automation which saves time and cuts down on errors. Second, receipts, invoices and documents are digitized, encrypted and stored, which makes tax and audit time less stressful. Third, both simple and complex journal entries are automated which means you can focus on running your business instead of learning debits and credits.
Once automation makes your accounting more efficient, then you can leverage it to maximize your revenue and minimize expenses. What does that look like? Automation can pull your revenue data from your PMS systems and reconcile it against your merchant processor revenue and bank deposits. Without automation, hotel revenue can be a black box and discrepancies between what was earned versus what was deposited can go undetected. With automation, you get access to all data sources - PMS systems, merchant processors, bank feeds - and can track what is reported versus what is deposited. Also, automation gives you the ability to slice and dice your revenue data to see what is earned by different revenue centers in your hotel. Revenue maximization is all about access and visibility into your revenue data.
Businesses need to get better at reconciling merchant processor deposits, chargebacks, and no-shows and booking cancellations. The volume of transactions makes it extremely expensive to do this manually. Having an automated system providing continuous reconciliation is the only way to track revenue transactions at scale. This will be a key trend of the future and will make hotels better at managing their revenue and expenses.
Other key industry trends? The best managed hotels provide department heads with visibility into the P&L for their respective department. During tough, uncertain times, empowering all leaders with detailed information about their daily revenue and expenses enables them to better manage the hotel's restaurant or gift shop, for example. Furthermore, virtual credit cards (VCC) have been a terrific innovation. They provide real-time budgeting where you can dynamically change spend limits on the credit cards to mitigate overspending.
Effective expense management is all about visibility, oversight, and control. Machine learning automates transaction categorization and reconciliation. You teach the machine how to recognize and categorize spending. You can also put spend limits by dollar amount or by vendor. The benefits? Limiting or renegotiating vendor costs. The best managed companies track key metrics daily and can course correct quickly if needed. This is only possible when the back office is automated.
Multi-location visibility is also critical for the hospitality industry. Unprofitable locations need restructuring and management needs visibility on costs across entities. Having an accounting system that provides real time visibility into fixed and recurring costs versus dynamically changing revenue is key - and automation is the only way to make it happen.
Real time accounting means generating real-time financial reports, which is fundamental for hotel operators in making rapid decisions. Hotel owners need to be prepared for conversations with lenders for when they need capital. They also need to be prepared for conversations with partners for when they need liquidity, or their very survival as a business could be at stake.
All in all, an automated financial back office protects in audits, enables data security, ensures compliance and increases transparency and accountability.
ABOUT THE AUTHOR
Sugam Pandey is the CTO and Co-Founder of Docyt, a cloud-based AI-powered financial workflow and accounting automation platform for hoteliers. Docyt makes accounting software run better. Sugam has deep expertise in software engineering, data science, security and accounting for the hospitality industry.