8 Ways That Hoteliers Can Increase Compliance and Reduce Annual Spend

Sourcing goods and services effectively is at the epicenter of day-to-day functions in hospitality firms and accommodations. The careful and systematic procedure of procurement not only ensures smooth operations but also reflects our commitment to delivering exceptional hospitality.

Unsurprisingly, most hospitality businesses grapple with a shared challenge - harmonising the procurement of essential items and services against their budget restrictions. A survey by Deloitte has drawn attention to this tug-of-war between cost-efficiency and necessity, indicating that over 66% of hospitality organisations consider cost savings as their ultimate goal, a significant rise from 40% presented in previous years.

Consider these numbers:

• Hotels using e-procurement have seen a 55% increase in compliance with negotiated contracts. (Hospitality Tech)
• Hotels that use e-procurement solutions have seen a 30% reduction in maverick spending. (Faster Capital)
• Approximately 75% of businesses report improved risk management with e-procurement. (PWC)
• E-procurement can lead to a 10% reduction in inventory costs. (Research Gate)
• About 70% of businesses report improved supplier performance after implementing e-procurement solutions. (RFP 360)
• E-procurement can reduce transaction costs by up to 60%. (Aberdeen)

Now that we know the role of e-procurement solutions let's talk about how they can benefit your hotel enterprise.

Another critical function of e-procurement is facilitating effective spend analysis. With traditional manual processes, not only is data tracking a laborious task, but it's also fraught with potential errors, especially as the volume of procurement activities multiplies. With P2P solutions, your purchase data is automatically collected and stored systematically, ready for an accurate and comprehensive analysis. This process serves as a foundation for strategic decisions on cost savings and optimisation efforts.

Smart procurement and strategic spending set the stage for efficient allocation of resources and optimising financial impact. Forward-thinking procurement officers, in collaboration with their financial and budgeting counterparts, are tasked with identifying strategies to measure and enhance procurement cost savings by exploring:

• By thoroughly examining areas of habitual high spending, hospitality organisations can determine potential resource optimisation and efficiency gains.

• Cost-saving agendas aim to trim down the expenses of necessary items and services, while the "cost avoidance" initiatives target eliminating unwarranted expenses completely.
• Overstocking leads to higher costs and potential wastage while understocking can result in missed sales opportunities and dissatisfied guests. With real-time tracking and analysis, you can keep your inventory at its optimal level at all times.

• Unnoticed variances between invoices and agreed contracts can lead to monetary losses. Even the slightest deviations need tracking as they may accumulate into substantial savings over time.

• Cost-saving constantly needs a holistic view, including considerations beyond just purchase prices. Auxiliary elements like delivery fees, installment costs, and one-time charges have to factor into the procurement cost savings equation.

• Crucially, there needs to be a company-wide consensus on savings strategies, complete with meticulously tracked metrics and swift action plans catering to arising savings opportunities.

• While immediate savings can be harnessed by monitoring spend and procurement adherence, viewing such yield as part of a wider strategic initiative rather than a standalone target can bolster lasting success. A careful equilibrium between measurable cost reductions and the overall wellness of the organisation is fundamental.

• If there's any mantra you should be following in today's digital age, it's this: data is king. With e-procurement solutions, you gain access to a wealth of data - from supplier performance metrics to purchasing trends. This data empowers you to make smarter financial decisions, allowing you to invest resources where they offer the highest return. For example, you might notice from your solution's analytics that a particular supplier consistently overcharges or under-delivers. Using this information, you can decide whether it's time to renegotiate terms or switch suppliers altogether.

• A digital procure-to-pay solution boosts visibility and improves monitoring and auditing of purchases. This ensures they comply with internal and external rules. Issues or non-compliance can be identified and fixed quickly, preventing them from becoming major problems. This automated system also supports preferred supplier agreements. Once these are established in the system, your purchases are more likely to come from approved suppliers, improving compliance and uncovering potential cost-saving opportunities.

The adoption of cutting-edge procurement solutions like the ones offered by FutureLog can be transformative. Having a fully transparent spend management system profoundly enhances the identification and tracking of cost-saving opportunities, including:

• Efficiently automated reporting system producing comprehensive purchase summaries, general budget overviews, and specific item details.
• Comprehensive glimpses into spend versus budget and contract adherence, enabling robust cost savings and avoidances awareness.
• Dramatically reducing the amount of administrative work and eliminating manual or paper-based activities.
• Customising the procurement experience with user controls for purchasing, contracts, approvals, payments, etc.
• The potential to leverage accrued cost savings to augment leadership skills and elevate guest experiences.