Staying Within Budget in 2024: The eProcurement Advantage
Hoteliers know that guest experiences drive revenue. In recent years, leading hoteliers have responded to the pressure to leverage data to deliver more personalised, streamlined stays for their guests. But while hoteliers have been busy moving towards digital customer-facing solutions, they haven’t put as much energy into back-of-house (BOH) transformation. Accenture reports that 95 percent of travel companies are only focused on digital transformation in some parts of their business, but not all of them.
Understanding guest data is a great way to drive top-line growth but to really boost the bottom line, hoteliers need to enhance their operational data strategy. A lack of visibility into operational data, including procurement data, creates a blind spot around costs. Siloed information makes it nearly impossible to surface the information needed to create expense forecasts and, therefore, budgets. If hoteliers want to build budgets that withstand the uncertainty the travel industry still faces, they need to understand the true cost of running their business when occupancy is high and when it’s low.
As hoteliers put together their 2024 budgets and think ahead to budget optimisation into the new year, they need to consider how their BOH data strategy contributes to increased profitability. With high-quality operational data, hoteliers can get a better idea of their costs. This makes it much more likely that they’ll create a reasonable budget and provides the visibility departments need to stick to it.
Forecasts are the Backbone of Effective Budgeting
Budgeting requires you to take a look into the future. As any hotelier who’s navigated the unprecedented travel landscape over the last four years knows, predicting what might happen over the coming 12 months is no easy task and is rife with risk. As hotel finance consultant David Lund puts it: The one thing we know for sure about the budget is that it’s wrong.
The best hoteliers can do is plan for the most likely possible scenarios using forecasting. To do so effectively, they need to rely on historical business data that provides an in-depth picture of their hotel’s operations, not just their balance sheet and P&L.
Business data is the closest we’ve come to inventing a real, functional crystal ball. Unlike your average side-show fortune teller, data won’t lie to you about what’s going on in your business, flatter you, or give you false hope. Collecting robust data from all aspects of the business helps hoteliers see their operations clearly. When it comes to budgeting for the future, historical data shows them where their money is actually going and provides insight into where they can optimize going forward.
A strong forecast includes both projected revenue and projected expenses. Of course, expenses are directly tied to how many guests you serve, which is reflected in revenue. Understanding historical expense data allows hoteliers to get a better idea of how much they’re spending at different levels of capacity. This allows them to prepare for fluctuations in capacity by knowing where to decrease or increase expenses, and when. This means they can take greater control of expenses as other variables shift, protecting their bottom line.
Paper-Based Processes and Siloed Data Hold Forecasting Back
The main barrier to powerful forecasting for hoteliers is a lack of transparency around data—particularly procurement data. Without great forecasting, hoteliers can’t create functional budgets, which can result in overspending or simply spending in the wrong places. Procurement represents a large portion of a hotel’s expenses and is a major area for budget optimization. Better access to procurement data helps hoteliers see how revenue is spent and uncover ways to maximize cash flow as occupancy changes through the year.
While many hoteliers are beginning to adopt more connected digital processes for booking, accounting, and payroll throughout the business, each department is typically responsible for its own procurement processes, which are still largely paper-based. One-third of organizations do not have automated procurement processes. Without a unified procurement process or a centralized place where purchase orders (POs) and invoices are sent, received, and paid, it’s hard for hoteliers to see the health of procurement across the business.
Procurement involves senior and department managers, chefs, and accounts payable at a minimum. Each may have their own collection of POs, receipts, and invoices floating around their individual email accounts that they’re sending to and from suppliers and between departments. This makes it extremely difficult for managers and decision-makers to gather information when they’re making budgets, and it creates barriers to adhering to and optimizing budgets as time goes on.
Moving towards digitisation and automation puts a holistic view of business-wide procurement data at leaders’ fingertips. According to some estimates, half of organizations that have implemented an eProcurement or procure-to-pay (P2P) solution do so because they need greater transparency across the procurement process. Furthermore, according to the Institute for Supply Management. businesses can drive up to 55 percent more savings when procurement insights are looped into budgeting from the very beginning. Collecting and accessing rich procurement data is, frankly, only feasible with digital solutions that connect every part of the business.
Overcoming a Lack of Data Visibility with Procurement Software
P2P software solutions such as FutureLog bring every step of procurement into one digital space, so that departments, accounting, and leadership are all singing off the same song sheet. Everyone uses one procurement process with standardized POs and approval loops. This not only saves time but ensures that the data coming into the system is as clean and error-free as possible. Even more importantly, data collection is completely automated. When all procurement activities happen in the same software, you can get a truly holistic view of data points across the whole pipeline.
Hoteliers who implement P2P software in the next few months won’t have the historical insights they need to make their 2024 budget, but it can help them stay within the budget they’ve already created. Using P2P solutions, every department has full visibility into their budget so that they can strategise accordingly. This means that senior managers don’t have to play budget police, and employees can make informed procurement decisions in the moment without hunting around for numbers. P2P software combines budgeting and spending tracking features with procurement workflows, which means that everyone has the financial data they need to optimize costs as procurement happens.
When it comes to dollars and cents, P2P tools provide accounting with an enhanced view into POs, receipts, and invoices so that validation and payment can happen seamlessly—ensuring that budget adherence is on track. It also reduces friction between departments and accounting as everyone can see where the money is going and tie spending to cash flow and revenue more easily. Additionally, real-time spending insights allow managers to get ahead of potential cash flow issues and plan for short-term budgetary challenges.
Prioritizing P2P Software as Part of Your BOH Data Strategy
As hotels increase their investment in guest-centric innovation, increasing operational efficiency with data will push early adopters ahead of the rest. Reducing procurement costs means there will be more capital available to invest in next-level guest experiences that enthusiastic travellers demand.
Procurement data provides a view into all the nooks and crannies where hoteliers can expand their margins. Those who don’t adopt P2P solutions as part of the BOH data strategy are leaving money on the table.
FutureLog brings data from across the entire procurement process into one place so that it’s easy to uncover and analyse data from all procurement activity. The platform enables hoteliers to view their suppliers’ catalogs and take advantage of discounts on larger orders. It also provides automation for approval and invoice assessment, making expense handling more effective. FutureLog also makes it possible for departments to work together to stay on budget with enhanced visibility throughout the procurement pipeline for every user. Experience a fully digital P2P process with FutureLog and get the data insights you need to maximise profitability and future-proof your hotel operations.
OUR APP: Procure-to-pay while on the go!
From placing orders and managing recipes to approving invoices and viewing reports, with FutureLog’s native mobile app you’ll have all the power and automation of our P2P web solutions conveniently at your fingertips. Whether you’re online or offline, you can stay in control.