What is Cashflow Management? Why is it important for Hotels?
Those are the exact questions you seek to answer with Cashflow Management.
Where is your money flowing in from? How much money is flowing out? Where is your money flowing off to? How much money is flowing out? How much do you need at hand for your hotel expenses?
You might ask, ‘But I already focus on Revenue Management. Isn’t Cashflow and Revenue Management the same?’
It isn’t. This is because ‘revenue’ refers to the money that is earned by the hotel from the sales. A measure of the hotel revenue lets you know how effective your marketing campaigns are. Or, whether or not you are making enough sales.
Cashflow Management has a different function. Cash flow is the liquidity indicator. If you know how much cash is flowing in/out, you’ll know whether you can fulfill your financial obligations.
This brings us to the most essential point:
Why Is Cashflow Management So Important For Hotels?
As a hotelier, you must be aware that your financial obligations are many.
Are you leasing your property or have you bought it? In case you are leasing it, you need to make regular payments. And if you have bought it, you probably need to pay off a huge loan.
And that’s not all. The hotel business is one where there’s no end to expenses. You need to pay your staff and you need to pay for the utilities. Don’t forget your suppliers. You have to pay them as well. And then comes your marketing team, auditing team, and your tech team.
Once you are done with those, you need to have enough money left for unexpected repairs and renovations. When that’s done as well, you still need enough money to absorb the shock of sudden cancellations and refunds.
Hoteliers, more than any other kind of business owner, know that this idiom rings true. You need to spend money to make money. But that is exactly why Cashflow Management becomes so crucial in hotels.
It’s not just enough to know that your hotel is performing well. You need to have a lot of fingers in a lot of pies. Is your hotel restaurant making you lose money? Which items in your gift shop are not selling well? Which promotional campaigns are not getting you enough guests? Which of your competitors are outperforming you and why?
Don’t have a ready answer to these questions? Well, then you probably have a very hazy idea of your hotel’s cash flow. And that’s not great news when you have to pay off a hundred parties at the end of the year.
The hotel business is one where you cannot hoard away profit. There are constant channels of earning, yes. But there are also constant channels of spending.
We are currently situated in 2021. One year after the global hotel industry lost billions due to the pandemic. With the constant channels of earning disrupted, you have to pay even more attention to the constant channels of spending.
How To Do Cashflow Management in Hotels?
There is a very simple answer to this question: extensive auditing.
What does a hotel audit mean? Basically, in the auditing process, all the transactions over a set period of time are verified. The objective is simple- you need to know whether you are getting a good ROI on the channels that you are spending.
Auditing was an enormously difficult process before the advent of modern technology since this required extensive book-keeping. However, auditing has become extremely easy with a Property Management System (PMS).
What is the most important requirement for a successful auditing process? Meticulously kept records that can be studied. A PMS like StayFlexi lets you do exactly that. It is cloud-based software. Therefore, it can store all of your hotel data over several years without requiring any backup.
Data tells you everything that you need to know. Are OTAs not paying you soon enough? Do you need to reduce the number of OTAs that you are connected with? Do you need to prioritize direct bookings?
But before you can answer all of these questions, you need to segment your data. This includes both customer segmentation and seasonal variations. Customer segmentation becomes incredibly easy with a PMS like StayFlexi. This is because it keeps extensive records of the preferences and purchases of the customers. This also includes key details of their hotel stay. It would be impossible to gain this data if the whole process was not digitized.
Also remember, cashflow management isn’t all about scrutinizing the channels that cash flows out of. You also need to scrutinize exactly how the cash is flowing in. For this, you need to keep a keen eye on your customers’ preferences. And consequently, you need to see which of your marketing options, sales offers, etc. are performing the best.
An audit will fetch you the answers to these exact questions. StayFlexi stands out because of its Multi-Dimensional Reporting. People tend to think statistics and numbers are just dry facts. But that’s not true. Numbers, when viewed from various perspectives, can lead to various inferences. Through StayFlexi, you can not only customize which numbers you want to see. But also how you want to see them.
There are various other unforeseen avenues through which StayFlexi can help you with cashflow management.
Managing Labor Cost for Cashflow Management
Yes, there are multiple other channels through which your cash flows out. But you have to admit that you spend a significant chunk of your earnings on paying your employees. Due to the pandemic and the subsequent lay-offs and losses, a complicated discussion regarding labor costs has arisen. 4 million hospitality workers lost their jobs in 2020 itself.
The USA, at the current moment, is witnessing multiple labor strikes. What is fuelling these strikes? Why don’t the laborers want to return to their industries?
Well, there are various demands. But two of the top demands are: more pay and fewer work hours.
In 2020, a huge portion of the hotel workers had to be laid off. This is because the hotel industry itself was running at a huge loss. The workers who returned were few and were expected to perform the jobs of many of their absent colleagues. The work pressure increased but the pay didn’t. This is because the hotel industry is still not back to its stable footing. In 2020 itself, 5 of the top hotel chains across the globe lost more than $25 billion.
You, as a hotelier, are at a difficult crossroad. There is no point in keeping the entire staff because the average guest footfall has obviously decreased. But at the same time, the number of guests is rather unpredictable at the moment. You don’t want to overwork your sparse staff when the demand suddenly blooms either.
You don’t want to spend money on staff to just sit around. But you also don’t want a workers’ strike on your hands because you are overworking and underpaying your workers.
So, how can you solve this problem?
The answer surprisingly lies in Automation.
The most fundamental way in which StayFlexi helps your staff is by managing the staff charters. That is, it ensures that the work is evenly divided between the staff. It ensured that no one is overburdened at any point in time.
Take StayFlexi’s Smart Housekeeping feature for example. This cuts out the requirement of a front desk middleman completely. Guests can simply register their request through the mobile app or mobile website of the hotel. The request is then directed to whoever is in charge of that particular room. In case that staff member is busy, the request gets rerouted to the backup staff member. You would have to spend an incredible amount of time and brainpower to manually assign and shift these duties. But thankfully, this entire process is automated through StayFlexi.
The Self-Check-In and Check-Out feature completely cuts out the need to have a receptionist man the front desk at all times. This employee can be otherwise engaged in whichever work is required at a given moment. Flexibility is the core principle of StayFlexi. Not only is it flexible itself, but it also allows your staff to be flexible.
StayFlexi also helps you with Automated Inventory Management. Not only does this mean that you don’t have to hire inventory keepers. This also means that your OTA channels will be seamlessly linked to your hotel website. No need to manually moderate the room rate templates.
Now, you might ask, ‘What does any of this have to do with Cashflow Management?’
Think about this. If you don’t have to employ staff managers, inventory keepers, and receptionists, how much money will you be saving? You’re not taking jobs away from employees. You are just ensuring maximum efficiency. This way, you don’t have to hire a whole new staff if a particular department has a labor shortage. You can simply redirect the other departments’ staff to this labor vacuum.
Cashflow management is a difficult process because it requires you to notice a hundred different details at once. This is impossible to do manually unless you hire an audit team to do it. And that itself defeats the purpose of keeping an eye on your outgoing cash flow.
This is exactly why you need a Property Management System to automate various processes for you. This is not just limited to keeping records and auditing. A PMS like StayFlexi has several other features that all help you to manage your cash flow. Cashflow Managment is not easy. But it does get a lot easier with StayFlexi.
Interested in knowing about any of the features of StayFlexi in further detail? Let me know in the comments below.