Revenue Management Threatening the Shape of your Ship?

For any hotel, keeping overheads under control is an ever increasing pressure. And for those with numerous departments, (hotels have 7), ordering a wide variety of items from food to linen services, controlling spend with a paper based  purchase order system(or no system at all) can lead to major issues, such as fraud, theft, and a lack of cash flow control.

Purchase Order software can be used in any size hotel and is particularly beneficial for smaller hotels as they have a greater need to control spending, as it is easier to purchase too much for a smaller establishment and sitting with too much leftover inventory. (There is less concern however about theft in small hotels where the owner/manager is directly responsible for the purchasing.)

For a large 5 star hotel, with a large workforce, more people become involved in purchasing, thus there are more chances of overspending, theft and fraud. As someone with hospitality background, let me paint a clearer picture of how. Fraudulent activities are more obvious to identify in certain departments, i.e housekeeping and food and beverage, than in others but just because it is not seen with the naked eye does not mean they don’t happen. A typical hotel consists out of the following 7 departments (that alone should tell anyone with common sense that controlling purchases, theft and fraud won’t be easy ) and here is a brief breakdown of each one’s responsibilities:

Housekeeping Department

The Housekeeping Department is responsible for the immaculate care and upkeep of all guest rooms and public spaces as well as spoiling guests with plush bathrobes, slippers, Egyptian linen with a 500 thread count, and other amenities. In a competitive hotel market, it is service and cleanliness that really make an impact on guests and determine whether they will return. Theft in this department is also most common and is not limited to just employees, but guests have been known to pinch a bathrobe or 2 which means a loss for the hotel and purchasing more than was budgeted for.

Engineering Department

The engineering department is responsible for repairing and maintaining the property, treatment and distribution of water, water features, boilers and water heating, sewage treatment, and external and common area lighting. That is a lot of bolts and nuts and, overtime for those unexpected plumbing malfunctions, look at the Titanic!!!

Front Office

The Front Office is the nerve center of a hotel and the only direct contact guests have with hotel employees. It’s duty is to enhance guest services by constantly developing services to meet guest needs.

Accounting Department

The accounting department manages customer invoices, monitor accounts receivable, accounts payable and account reconciliations. They are responsible for setting up internal controls for audits and business processes. Taxes are either managed by the accounting department in house, or contracted to outside tax accountants.

Human Resources Department

The role of HR consists of being an impartial and internal justice system which will promote transparency and openness in organizational communication. HR also serves as a progressive voice in a common system and strives to ensure competitiveness in the conditions of service for staff.

Security department

The security department is there to protect the guests, staff, and the entire property. Hotel security departments usually use preventative tasks such as patrolling, monitoring CCTV, and investigating any misdemeanors.

Food and Beverage Department

The food and beverage department is responsible for supplying food and drink to the guests, either through a restaurant or banqueting. This is also the department that regularly overspend on supplies and struggle to control recipe and menu costs to stay competitive.

This goes to show that costs and inventory, if not controlled, can ‘run away’, especially when individual departments have open authority to purchase, without strict approval routes and the application of budget controls.

Theft and fraud can occur during the purchasing process in a number of ways; like kickbacks, the use of phantom companies, abuse of change orders, duplicate invoices, purchases for personal use, and more. These problems can be prevented by implementing effective purchasing and procurement procedures in your hotel. is the easy way for hotels to achieve spend control. Because you can set up budgets within departments and match your company’s approval rules, control is simple and effective. Fully customizable purchase order and line item fields allow hotels to record and report in ways not thought possible before. Book a free demo to find out how can work for you.

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