• Buck Paolino

Don't let this mistake mess up your hotel's cash flow!



Hotel Cash and Financial Reviews


Hotel Owners, Management Teams, and Hotel Controllers:


Let’s chat about the bank for a second. Recently, a hotel regional manager came to us frustrated that it seemed he was always going back to the ownership group asking for money to cover expenses at the hotel. The expenses were legit but he couldn’t seem to get cash flow under control. It was embarrassing and frustrating for everyone involved. And once we spoke it became very evident there was a very simple solution.

You see, the GM thought that if an expense wasn’t going to be paid that week they were holding onto the invoice. Not only for invoices but for their own reimbursements as well. This was resulting in thousands, and I mean thousands of dollars that were due not being shown anywhere. And when those amounts were finally being sent in to be paid they were resulting in sticker shock to the management team for approval. Management was thinking they had $30k of expenses to be paid but instead had $55k that was due.

Hotel Expenses


Now let’s break this down a little bit more, because holding onto invoices actually has a very important domino affect that affects multiple areas of the hotels financial well being.

  1. When you hold onto invoices they get applied to the wrong period. Invoices submitted in October that are for July results in expenses not being reviewed appropriately.

Not only that, it distorts the financial well being of the hotel during those time periods. Said another way, the P&L you sent to owners and the bank are not accurate. They are vastly overstating the profitability of the hotel.


2. It leads to poor vendor relationships and trust within the organization.


Vendors are important to you being able to provide a great experience for your guests and they will stop serving you when they aren’t paid timely. They have payroll and suppliers that they must manage as well and putting a strain on the relationship can adversely affect your ability to manage the hotel.


3. Holding invoices is an absolute No – No, especially when cash flow is tight.


As my director of hotel accounting Albert says, “Knowing what you owe helps you plan. Not knowing means you get a surprise down the road!” And he doesn’t mean a birthday party. Those missing expenses weren’t recorded anywhere nor did the accountant, regional manager, or owner have any idea their hotel wasn’t performing as well as they thought. Plus, those amounts weren’t showing up on accounts payable agings for approval to pay adding more stress when they “surprised” everyone on the report for approval in the tune of $ 20k for expenses that happened 3 months ago.

So, our tip for this week is to make sure even if you don’t plan on paying this month you must submit invoices routinely to make sure they are tracked appropriately. We tell our clients that to keep yourself, your team, and your cash flow in good standing to submit invoices weekly. Pick out one day each week they are due with your accounting team and then stick to it. With this particular regional manager once they met with the GM and explained that even though an invoice wasn’t going to be paid that week it needed to be sent weekly it immediately cleaned up their cash flow problems. Not only that, it was freeing for the GM as well and their own personal reimbursements began to be paid faster.

Alright, I hope that was helpful! If you haven’t signed up for our weekly videos, please do so below!  Talk to you soon! 

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