The word “expenses” needs to be defined and refined for this article.
NB: This is an article from Hotel Financial Coach
Expense broadly refers to any cost a business has including payroll, goods and services and cost of goods, “the cost required for something; the money spent on something.” That is its definition according to Oxford Dictionaries.
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To refine that we need to step back and see that hotel expenses are specifically goods and services, and not payroll or cost of goods (e.g., food cost).
To put even a sharper focus on this distinction, it is hotel expenses defined according to the Uniformed System of Accounts for the Lodging Industry (USALI). That is what this piece is all about: defining the latest and greatest control process for managing your hotel expenses.
In no particular order, here are the top 10 control points to ensure you are not missing any dollars in your hotel. Failure to follow these controls will cost you by increasing your expenses. It is not a matter of maybe or not at your hotel. It is a fact.
1. Purchase Orders.
Using POs is like wearing shoes for a hike. You do not want to walk barefoot! Purchase orders do not need to be fancy or come from an expensive computer system. The old tried and true three-part NCR form still works very well. The key to using POs is the expense is requested, reviewed and approved before it is bought. Many hotels skip this process because they think it is too much work. As much as 20% of your top line goes out the door every year by way of a purchase that should be controlled.
2. Credit Cards.
Today this is a runaway train in most businesses and hotels are no different. Everyone is buying everything on plastic. But wait a minute, just because you want to buy online and skip the store, or the traditional vendor experience does not mean you skip the pre-approval process. Get a credit card program from your bank that includes the up-front controls for spending and never just pay the balance and skip the details of your manager’s spending cards.
3. Daily Receiving Reports.
Having an independent record of all the goods received by the hotel every day is mission critical. Independent of the person who arranged for the purchase and independent of the person who ultimately receives the goods in their department. Even if it is the housekeeping staff receiving and recording the maintenance items and vice versa, you need someone independent to verify that what you are ultimately paying for is what has arrived at the hotel.
4. Weekly Purchase Order Reviews.
Getting your team of department managers on a regular cycle of presenting their purchase order requests to you, the GM, on a regular day of the week, perhaps after the morning meeting on Friday is a best practice. The last thing you want is to allow them to present a purchase request whenever they feel like it. Getting those leaders organized so they request their supplies at the same time each week is like your mom going to the grocery store each week on the same day. Remember that?
