May 2, 2024
5 minutes

The ultimate guide to managing accounts payable in hospitality

Vendors at a restaurant chain Managing Accounts Payable in Hospitality
Quick summary

Housekeeping supplies, food and beverage services, maintenance, entertainment, the list goes on. Many expenses come with running a hospitality business and juggling staff, multi-currency budgets, and vendors can lead to some major stress. Luckily, there's a shortcut that'll help you eliminate busy work and gain a competitive advantage: Introducing intelligent automated accounts payable (AP).

Table of Contents

    According to pymnts.com, 54% of CFOs see a definite need for more AP process automation, but only one-third actually use it for their internal processes. To top it off, just 9% of AP processes are fully automated.

    Sound familiar? Then, it’s time for an AP revamp. In this article, we’ll explore why AP automation for the hospitality industry is so vital and how you can nail it.

    The importance of efficient accounts payable in the hospitality industry

    Accounts Payable (AP) isn’t just another cost centre that helps keep the lights on and pantries stocked, nor should it operate in a silo. How you handle AP (including time-saving automation) impacts the success of the finance function and your company’s overall financial health.

    With the proper AP automation system in place, you can upgrade mission-critical tasks like:

    How State of Play Hospitality (Bounce & Flight Club) streamline AP

    If you get your AP approach right you can achieve at least these seven crucial things (plus way more).

    1. Faster invoice processing and accuracy
    2. Better vendor relationships
    3. Cost savings
    4. Less administrative burden
    5. Improved regulatory compliance and risk mitigation
    6. Healthy cash flow
    7. More opportunities to scale

    Best practices for managing accounts payable in hospitality

    The operations at hospitality organisations differ massively from business to business. Your needs will be unique, from suppliers to entertainment to food and beverage.

    That said, when it comes to expense management and accounts payable within the industry, there are a few best practices everyone should have in common.

    Digitise invoice and receipt management

    Is your team rummaging through physical receipts or placing one file into another file to organise them?

    Go paperless and let technology take over your processing. With Payhawk, for example, you can use a mobile app to support your expense management, including smart data capture thanks to OCR technology and an AI Camera. You can also equip staff to submit error-free, correctly-coded expenses with customisable expense categories quickly. Plus, support compliance with custom approval workflows to ensure all spend is in policy.

    You can even give your accounts team real-time visibility into departments, projects, and more with a seamless flow of analytics and data to your ERP

    Integrate company systems and data

    It is crucial for hospitality businesses to get a holistic view of vendors, expenses, revenue, profits, and cash flow across entities and venues.

    And here's where all-in-one finance comes in.

    David Watson, Group Financial Controller at State of Play, says:

    Before switching to Payhawk, we used credit cards and bill.com for the accounts payable (AP) fulfilment system. It didn't integrate with NetSuite or combine cards and AP fulfilment, so there was some switching between tools. One of the biggest advantages of Payhawk is the integration between our accounting software and the ability to put payments in the hands of the actual users and operators (venues).

    Automate AP processes from beginning to end (reconciliation)

    When your team has essential tasks to complete, admin is a chore that slows them down. Take a load off their backs by calling in the bots.

    • Automation with a solution like Payhawk will remove manual processes and the headaches that come with them, including:
    • Automatically extracting data from invoices in more than 60 languages
    • Saving time on data categorisation and letting the in-built self-learning OCR do it for you

    Build effective vendor relationships

    Forging great vendor relationships is critical for streamlined AP processes. It positions your company to win by promoting collaboration, trust, and mutual benefit.

    If you have managed to build good vendor relationships, your company can hope to:

    1. Negotiate more favourable terms, e.g., extended payment windows and discounts
    2. Speed up issue resolution through open communication
    3. Build strategic partnerships
    4. Enhance vendor loyalty and reliability

    So, stop using rigid and incomplete accounts payable software for restaurants, bars, pubs, or hotels to support your supplier relationships. Opt for all-inclusive technology to simplify and centralise operations instead.

    This action could look like leveraging our procure-to-pay features, which let you:

    • Pay global suppliers fast and cost-effectively with international bank transfers in 50+ currencies into 160+ countries
    • Supplier management features, including customisable data entry and enhanced supplier info that syncs with your ERP
    • AP automation for the hospitality industry, including purchase order creation and multi-step approval workflows for efficient and secure order processing
    Payhawk OCR receipt capture feature in action - animationPayhawk OCR receipt capture feature in action - animation

    Streamlining invoice processing and approval

    Dealing with lost invoices, mistakes, and late payments and the costs that come with them? You’re not alone, according to our research:

    Considering that costs like renovations, entertainment, and marketing often run into six and seven digits, it's easy to see how AP losses rack up fast in hospitality. Traditional invoicing practices like physical receipts and manual processing only go on to fuel the fire.

    Luckily, there’s a solution: digital transformation of core processes. Optimised AP tools can do wonders for AP efficiency. The best-in-class AP solutions average 3.7 days for invoice processing compared to 19.4 days for other systems.

    The right tools will also increase spending accuracy and transparency without burdening your team. For instance, our automated AP solution facilitates real-time reconciliation, plus three-way matching across invoices within our purchase order feature, goods received notes, and more. You can also set group-wide spending policies, multi-step approvals, and analytics.

    Common challenges in accounts payable for hospitality

    Certain issues will keep rearing their ugly heads when you use the wrong tools and processes to manage AP in the hospitality industry. These include:

    • Corrupt or inaccurate data
    • Sluggish payment cycles
    • Issues staying compliant with laws and regulations
    • Low data visibility (e.g., into spending, budgets, and financial obligations)
    • Complicated vendor onboarding and management
    • Invoicing problems, such as lost invoices and approval bottlenecks
    • Duplicate payments

    On the other hand, using the right AP automation for the hospitality industry makes manual finance work a breeze. Let’s dive into a scenario to put the difference into perspective.
    Imagine you’re the CFO of a hotel and restaurant chain. You onboarded accounts payable software for restaurants and hotels. But your plan didn’t work out because the technology wasn’t an all-in-one solution, and it fragmented processes further.

    So, you go back to managing AP the old way. We’re talking paper PO and invoice processing and comms via email. Payment methods also vary. You might use cheques for one vendor and credit cards for another. But here’s the worst part. Your team has to complete procurement orders via a legacy system. This solution requires manual data input and exporting from an Excel spreadsheet. Not only is the process tedious and time-consuming, but it’s risky.

    All it takes is one clerical error, like leaving out payment information, and you’ll overpay suppliers. Plus, there’s no way to detect the mistakes until your annual audit. By then, it's too late. Profits take a hit. Plus, there’s no guarantee you’ll recover the money.

    Thankfully, this isn't the end of your story. All these problems disappear when you switch to a digital, comprehensive AP and expense management solution like Payhawk.

    Fraud prevention in accounts payable

    AP fraud takes many forms, from online attacks to employees colluding with suppliers to secure kickbacks. Worse, the scheme can be hard to uncover, resulting in significant financial setbacks. Businesses lose 5% of their revenue to fraud yearly, averaging $8,300 per month in losses. Plus, 88% of fraudsters cover their tracks.

    So, if you’re overseeing AP in the hospitality industry, you’ll need to call reinforcements to tackle the plots and schemes 24/7. But how do you do this without putting more work on your team’s plate and spending a fortune? AI fraud detection tools.

    For instance, your finance team can be on the lookout for financial fraud in real-time using our cutting-edge technologies like our:

    • Algorithms for pattern detection and anomaly recognition
    • Predictive modelling and behavioural analysis across large datasets
    • Identity verification tools like two-factor authentication, biometrics, and secure sign-on
    • Automated expense approvals
    • Payment protection tools like card auto-blocking, tokenisation, and security certificates

    How to optimise accounts payable for financial performance and cost reduction

    If you’re looking to upgrade AP in the hospitality industry, chances are you want to see a financial return, too. The good news is AP automation can support your company’s bottom line while helping you reduce your expenses. Here are some potential rapid-fire ways to make your AP more profitable:

    • Use technology to speed up remittances to take advantage of early payment discounts
    • Optimise working capital management by analysing AP ageing reports for overdue accounts and cash flow issues
    • Streamline invoice processing, approval workflows, and payment methods to shorten the cash conversion cycle and maximise available funds
    • Leverage insights and analytics to spot trends, patterns and opportunities. Use this data to make decisions that drive cost savings, expense optimisation, and improved profitability
    • Enforce robust compliance measures and controls as part of a complete spend management approach. Prevent errors, fraud, and unauthorised spending with expense management software and corporate cards, including in-built controls
    • Use a complete solution (as mentioned in the previous point) like Payhawk that includes AP, cards, subscription management for recurring payments, and more to get a comprehensive view and make fast informed decisions about spend

    Andrew Jacobi, VP of US Finance at State of Play Hospitality, describes:

    “We really rely on the customisable class settings within Payhawk to distinguish between venues so we can analyse performance. We create the custom fields that our cardholders use in order to categorise their spend. So, whether it's categorising between venues or categorising it into the right general ledger code, it's extremely helpful in terms of how we allocate spend."

    Payhawk allows us to spot if there's overspend in specific places up and down our P&L very quickly. For example, if we see that we're spending too much or more than expected on DJs in a particular venue.

    AP automation for the hospitality industry: State of Play's story

    One of the easiest ways to improve your AP automation is to take notes from brands that successfully transformed theirs. State of Play Hospitality is a great example.

    Before switching to Payhawk to leverage an all-in-one solution for AP, cards, expense management, and more, this multi-venue hospitality company used multiple tools to manage expense management and vendor payments for entities across the USA and UK. The problem? The tools didn’t talk to each other or help provide a single source of truth about spend and cash flow.

    Given the international nature of the business, multi-entity management was a top priority, too. The team wanted a global view of spending and easier payment processes. Removing vendor and supplier management bottlenecks like tardy purchases and approvals was also on the wishlist.

    Since adopting Payhawk, State of Play's AP and financial management processes run like clockwork. The team saves time, money, and effort while enhancing its financial decision-making. Specifically, the team has:

    • Gained a centralised AP and expense management platform with corporate cards, spending controls, smart OCR technology, and seamless (NetSuite) ERP integration. When a team member uploads an invoice, the data goes straight to State of Play’s ERP. This setup makes managing invoices and expenses effortless
    • Used our multi-entity management dashboard to access real-time data on spending across locations. For example, the team now knows when card transactions occur and why. This feature facilitates better oversight, decisions, and cost control
    • Leveraged our spend categorisation features to track expenses by venue, like how much they spend on DJs for each site. This information allows the team to allocate costs accurately to general ledger codes. They can also catch overspending, assign resources, maintain accurate forecasts, and track costs against budgets better
    • Used our corporate cards to fulfil vendors’ and suppliers’ payment terms quickly, including upfront payments like deposits. No more waiting around for approvals and payment option switching

    Working with Payhawk has helped State of Play transform the way they manage and analyse spend.

    David Watson, Group Financial Controller, State of Play, says:

    Moving corporate credit card transactions away from traditional banks to a product that directly integrates with NetSuite was a game changer! Now, thanks to complete visibility over our multi-entity spend, we save time and make better decisions.

    Thrive in hospitality with automated AP

    AP in the hospitality industry isn’t just another admin exercise or cost. It can help your business make more financial gains, boost efficiency, and gain the upper hand in the market. But you’ve got to be strategic to unlock the full potential of your AP. Let go of fragmented tools and processes.

    Embrace AP automation for the hospitality industry to ensure efficient procurement and analysis. Reinforce your accounts payable and expense management technology with a robust spending policy and staff education, and let data decide your next steps. Make these moves, and your AP processes will run like a well-oiled machine.

    Do you need more control over your AP processes? Real-time spend visibility? Faster, more accurate procure-to-pay processes? Book a personalised demo today and see how Payhawk can help.

    Trish Toovey - Content Director at Payhawk - The financial system of tomorrow
    Trish Toovey
    Senior Content Manager
    LinkedIn

    Trish Toovey works across the UK and US markets to craft content at Payhawk. Covering anything from ad copy to video scripting, Trish leans on a super varied background in copy and content creation for the finance, fashion, and travel industries.

    See all articles by Trish →
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