The hospitality industry is a big part of the economy, accounting for hundreds of billions of dollars each year. Hotels, restaurants, and coffee shops are just a few examples of businesses in this industry, which all operate in fast-paced and challenging environments.
Given the intensity of the hospitality industry, many businesses that fall under this umbrella get used to operating in a state of chaos, causing owners and staff to face many challenges that might get in the way of running a smooth business. One of these challenges can be accurate, up-to-date books.
Bookkeeping can be low on the priority list for hospitality businesses because it may not seem vital in their day-to-day operations. For example, at a restaurant, if a bar back loses an invoice from a food supplier, the restaurant doesn’t grind to a halt. However, if no one is available to receive a food delivery, the entire day (or week) might be lost for the business. It’s easy to see what would take priority.
While a lost receipt or invoice doesn’t have immediate ramifications, it will invariably lead to poor financial reporting, which can put an entire business in jeopardy in the long term. Let’s take a look at some of the additional bookkeeping challenges hospitality businesses face, and how bookkeepers can help business owners overcome them.
The challenge: long hours, lots of paper, and disorganization
When we think about businesses in the hospitality industry, often the first thing that comes to mind is the long hours of operation. Most hotels and motels are staffed 24 hours a day, and restaurants often open for lunch and don’t close until the early hours of the morning!
As a result, receipts, bills, invoices, and other source documents can be generated at any hour of the day or night. This means that there won’t always be a staff member on hand who is responsible for tracking or processing the documents.
Without specific rules and processes in place for collecting and managing financial documents, the risk for poorly organized and lost documents is high, and keeping accurate and up-to-date books can be a huge challenge for restaurants, hotels, and other hospitality businesses.
Additionally, many businesses in this industry are required to use paper receipts and bills from both suppliers and customers, so they cannot digitize their documents at the creation point as easily as other industries. Being forced to operate using hard copies adds to the risk of losing documents, and makes it harder to keep the books organized. As a result, supplier bills can be handled incorrectly, and a business might be surprised to learn it owes hundreds of dollars at the end of the month.
While the hospitality industry can still be paper-based in several ways, technology is also acting as a disruptor. For example, new POS solutions such as tablet ordering and payment systems have allowed many businesses to improve and expedite customer experience. However, it’s important to ensure that new technology can be seamlessly integrated with the business’s existing tech stack, and doesn't add any further complications or inefficiencies.
Fortunately, these challenges present an exciting opportunity for advisors who have the experience and expertise necessary to help hospitality businesses set up more efficient back-office systems.
How bookkeepers can provide additional value to hospitality clients
Accurate and up-to-date bookkeeping is invaluable for any business. Knowing the state of accounts and exactly where money is being spent and made is crucial. As mentioned above, hospitality industry businesses face several ongoing challenges that can impact the state of their books. Outsourcing to a bookkeeper is often an easy decision, and it’s even shown to increase the success rate for SMBs in general.
Bookkeepers’ roles with SMB clients are evolving beyond bookkeeping – in fact, bookkeepers who leverage cloud technology are well-positioned to not only help them stay up-to-date with their finances, but also to help them increase overall business efficiency. Helping hospitality businesses implement a standardized workflow will enable them to experience a number of benefits. For instance, a single system for tracking and processing source documents provides clear instructions to hospitality staff, and will increase the speed at which you can close their books, and reduce the risk of lost documents.
If no system previously existed for a client, clear and easy-to-follow instructions for what to do with receipts, bills, and other documents will increase efficiency for all staff members who generate source documents. As the advisor, a standard, technology-enabled workflow will enable you to access information about who is efficient at sending documents, and who might need a bit of help.
Furthermore, through quicker and more accurate monthly bookkeeping, you’ll be better equipped to provide timely business insights for clients. In the hospitality industry where margins can be slim and finances very tight, detailed insight into cash flow, financial planning, and the business’ overall financial health will not only add value, but will also save time, and could help a business become more successful and profitable. Taking this burden off an owner will free them up to focus on growing a successful business, and has the potential to create long-term, prosperous clients.
A resource toolkit for bookkeepers working with hospitality clients
For bookkeepers looking to expand their client base, hospitality businesses present an exciting opportunity.
Helping them to implement a standard workflow that includes technology and automates clients’ document collection, bill pay, and reconciliation can truly add value to this type of client.
For more information on how to leverage technology to better service hospitality businesses, Xero recently produced the Hospitality App Playbook, the latest in Xero’s app playbook series. Download it to learn how to select the right technology they need to provide more value to clients in the hospitality industry.
Learn how to better serve hospitality clients – download the Xero Hospitality App Playbook!
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