5 Proven Invoice Management Tips Within the Hospitality Industry

Proper invoicing ensures that your hotel (or another establishment) has enough cash reserves on hand to address the many recurring costs associated with running your business

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Regardless of which area of the hospitality industry you operate in, a few tasks are more important than invoice management. Proper invoicing ensures that your hotel (or another establishment) has enough cash reserves on hand to address the many recurring costs associated with running your business. Expenses such as staffing, procuring food and beverages, facilities maintenance, and obtaining other needed products and services, can add up quickly.

Without sound invoice management practices, your company could soon find itself having significant trouble managing its cash flow. This can be especially troublesome for smaller hospitality businesses that typically don’t have the same large cash reserve as larger enterprises.

With BirchStreet Pay, you can implement proven invoice management practices to better ensure your hotel’s financial stability. No matter how many guests you serve in a given week, month or year, improving the way you process invoices will provide significant dividends for your facility.

1) Automate Whenever Possible

Many hospitality businesses have a variety of recurring expenses that could be processed on a monthly or even weekly basis. With so many invoices arriving day in and day out, there is a significant risk for human error when invoice management is left entirely up to manual processing.

The more complicated an invoice, the more likely there are to be serious errors. Though the medical billing industry certainly has its fair share of differences from hospitality, analyses of bills in that industry estimate that anywhere from 40 to 80 percent of invoices contain errors.

While invoicing in the hospitality industry is fortunately not nearly as complex, this statistic shows just how easy it is for billing errors to work their way into invoices, particularly when manual processing is involved. Errors such as duplicate bills and missing payments can be especially troublesome for managing a hospitality organization’s cash flow.

The more “touch” that is required in a single invoice — even one that is delivered and processed digitally — the greater chance there is for error. Data input mistakes can result in overpayments or underpayments, as well as inaccurate tax computations or even the possibility of a lost invoice. Such issues can create major problems later on when suppliers tack on late payment fees or other penalties.

2) Ensure Support for Various Document Types

Prior to receiving an invoice for goods or services received, hospitality businesses must often put in a purchase order. Purchase orders (POs) enable hospitality businesses to set clear expectations with their vendors. They delineate the products or services being purchased, their quantity, the price per unit, and even information such as delivery date and location (when applicable).

A purchase order is invaluable for your internal team, particularly if you have a large volume of orders. Purchase orders essentially create a paper trail that clarifies pricing agreements so you can avoid cost overruns and duplicate requests. These documents also provide inventory visibility to help you manage inventory more effectively — be it food or laundry supplies.

A quality inventory management system will also enable you to produce and track PO invoices, as well as non-PO invoices and credit memos for smaller business expenses that don’t require a regulated procurement and approval process.

After a vendor accepts the purchase order, they are then obligated to fulfill that order in accordance with the agreed-upon terms. When your business receives the invoice from the vendor, it should be carefully compared to the original purchase order to ensure that everything matches up.

An inventory management system that helps your company track this data will make it much easier for your business to budget its expenses and maintain good cash flow.

3) Use Digital Tools to Leverage Invoice Data

Sound invoice management can (and should) provide key insights into how your hospitality business is using its money — and how it can do so more effectively.

A recent BirchStreet Systems seminar titled Hospitality’s Move to Digital Invoicing in 2022 highlighted just how much digital invoice management can help hotels and others in the hospitality industry. By transitioning from a system that is roughly 80 percent paper and 20 percent electronic to 20 percent paper and 80 percent electronic, the average 250-room hotel can reduce its annual expenses for managing invoices from $81,250 to $6,500.

Much of this comes from the streamlined nature of a digital invoice management system. Going digital with tools such as BirchStreet Pay can significantly reduce invoice processing time, which can help your business improve supplier payment terms and gain greater access to early payment discounts from your vendors. This allows more transactions to be completed, even with fewer resources, greatly reducing labor and processing costs.

Perhaps even more importantly, with accurate, real-time data through a digital invoicing system, stakeholders can provide reliable information to department heads regarding spending activities.

This enables informed decision-making and deeper insights regarding a hotel’s relationships with individual vendors. It could easily reveal areas where the hotel is spending too much, or where the budget is not being allocated properly. Real-time information lets leadership act quickly to address such financial concerns to improve cash flow.

4) Match Invoice Timing to Cash Flow Needs

The last thing your business needs is a hefty invoice from a supplier to arrive at a time of the month when cash flow is already tight — particularly if that invoice requires immediate payment. Hospitality leaders should work to establish invoice timing with suppliers that will be beneficial to their company’s cash flow needs.

For ongoing orders, this could entail setting up regular intervals for billing, such as every other week or at the end of the month. For large projects (such as a renovation of a hotel lobby), determine whether it will be better for your cash flow purposes to make the full payment upon completion of the work, or to make partial payments as certain stages of the project are completed.

The timing of when to schedule these invoice payments should be determined in accordance with your own cash flow needs. Some hotels may find it easiest to pay invoices at a consistent rate throughout the month. Others might find it better to make all payments toward the end of the month when their own invoices have been filled.

This may require a certain level of negotiating with suppliers. All payment terms should be agreed upon at the start of a business relationship, including details such as how frequently invoices will be delivered and what the payment terms will look like. Some suppliers are willing to offer incentives for early payments or flexible due dates — but such details must be worked out well in advance.

5) Enable Electronic Payments

Virtual electronic payments are far more efficient than writing paper checks. Such transactions can be completed swiftly and securely, ensuring that suppliers receive payments in a timely manner.

Notably, many electronic payment solutions are now enabling real-time payments that can be transmitted 24/7. A survey published in ABA Banking Journal found that 81 percent of business leaders expect the increased proliferation of “instant availability” digital payments to dramatically transform the way they do business.

In the survey, 52 percent cited real-time payments as a valuable solution for improving cash flow management, while 46 percent said it would help improve general accounts payable activities. Two-thirds of those surveyed said that they expected that with the availability of real-time payments, they would stop making and accepting cash and paper check payments.

This final statistic is of extreme importance for those who are reluctant to update their invoice management systems. Regardless of how your organization currently feels about transitioning to an all-electronic payment solution, chances are high that your suppliers are ready to make the switch.

Maintaining strong relationships with preferred suppliers who help your hospitality brand run smoothly will likely necessitate making this transition, regardless of the preferences of your internal team.

Let BirchStreet Pay Revolutionize Your Invoice Management

Hospitality businesses send and receive countless invoices and purchase orders every week. A sound invoice management system enables your team to more effectively create, track and file invoices, all while ensuring strong cash flow for the business.

With BirchStreet Pay, you don’t have to worry about writing paper checks or having your hospitality business be subjected to credit card fraud. This innovative system provides a single solution for managing your payments with the use of virtual cards that earn cashback on each purchase.

BirchStreet Pay provides an easy-to-use interface that enables you to make payments with the push of a button, with all transactions protected by modern security measures and backed by concierge-level support.

Flexible workflows and detailed reporting enable streamlined integration with your accounting/ERP systems, while also giving you full visibility into your payments. A supplier onboarding team can even help you shift suppliers to accepting virtual card payments.

With BirchStreet Pay, you can reduce paper checks, compliance costs, and other expenses, all while earning cashback. From cost savings to purchase transparency, your organization can gain a better understanding of its expenses and invoice management needs, leading to even better financial practices in the future.


About Birchstreet

Established in 2002, BirchStreet Systems is an end to end Procure-to-Pay SaaS Market Leader doing groundbreaking and innovative work in Hospitality, F&B, Casino and Clubs. Global enterprises trust us to fuel their growth because of our insights, deep industry experience, and comprehensive spend management tools. We collaborate with the largest Hospitality enterprises to empower their procurement and finance departments to translate technology into positive bottom-line business results. Our solutions empower users suppliers, and corporate to optimize, transform and save.