According to UKHospitality, the Covid pandemic over the last two years is estimated to have cost the hospitality industry £115 billion. It has been increasingly difficult for businesses to survive - and many companies have been pushed to their absolute limits, challenging them in ways they had never thought possible. Staff shortages, rising costs and supply chain disruption, mean the window for turning a profit is getting smaller and more volatile by the day.
Whilst there is continued pressure on managers to increase revenue, many businesses in the hospitality sector still struggle to control costs. Reducing operational spend might seem straightforward and common sense, but without innovation and investment in process and system change, it can be an uphill battle to make the incremental changes needed to transform cash flow and cash control – and give businesses a much-needed competitive edge.
Here, Zupa outlines five obstacles that can get in the way of improved operational efficiencies and cost savings:
1. Barriers to technological change: the speed at which technology is progressing today is astounding, but the reality is, businesses want to use systems that are easy to use, cost-effective to implement, and are fit for purpose in today’s climate.
Yet, the conservatism around change balanced by the lack of end-to-end integrated systems on the market, does mean many businesses are operating with outdated or disparate technology or, worse still, spreadsheets and other manual processes. While this might not seem an obvious place to look for wasted opportunities to maximise revenue, poor technology can be responsible for lost margin, not to mention lost resource if staff are spending more time than they need to on admin.
With staff shortages continuing to rise, it is perhaps more important than ever to reduce the paper chase burden and make use of advances in technology to boost productivity within your team. Key misconceptions around adopting new technology are affordability, speed of implementation, potential disruption and buy-in from staff.
2. Lack of control: in a challenging financial environment cash flow is everything, so the accuracy of stock and assets held within a food and beverage operation has to be spot on. Overspending on stock is a common mistake and is an ideal way to tie up otherwise free cash. The impact of over-ordering can be considerable in terms of value, depending on the complexity of multiple stock locations and teams.
Using an automated business operating platform with real time visibility of available stock, reduces room for error when new stock orders are placed.
3. Regular overspending: inflation is at a record high right now and with the impact of the conflict in Ukraine, this is only set to rise further as the cost of food, oil and production goes up.
Avoiding overspend on supplies is a top priority for hospitality firms. Having access to a live supplier network to ensure you are buying at the most competitive prices is a huge benefit and gives you great powers of negotiation too. Managing spend can be challenging in large teams where multiple staff can be ordering goods at any one time, so using eProcurement technology which allows you to set fixed spending limits and raise alerts if an order is likely to exceed budget, can be a lifesaver in triggering potential overspend before it happens.
Having that insight up front will also help businesses make more accurate and informed purchasing decisions.
4. Food wastage: food and beverage operations are notorious for wasting food at service time, but even more importantly, not learning from their mistakes. Having one single source of truth that provides end-to-end visibility of money going in and out of the business, plus the ability to accurately forecast (planning), during (operating) and after (results), will make a big difference to both an operation’s savings and profitability.
Likewise, buying only what you need when you need it, will reduce both wastage and spend.
5. Too much paper-shuffling: the traditional manual ordering process, invoicing, confirming of goods received, and supplier payment workflow is archaic, but is still prevalent in many businesses today.
Disjointed information, time-consuming admin along with the large potential for error can – and do - prove costly. Organisations can save significantly, purely on reducing paperwork in this area. Re-entering of the numbers/details, searching for invoices or credit notes, and disputes with the suppliers three months down the line for instance, are all admin drains which can be avoided with the adoption of an automated paperless environment. This in turn frees up resource and will boost staff productivity and agility, allowing them to focus on their core role.
The impact on the hospitality sector over the last two years is devastating. With thousands of businesses closed, many on the brink of collapse and countless struggling to keep their businesses operational, the industry needs to account for - and keep hold of - every last penny.
There has never been a more crucial time to turn to innovation to stay on top of cost control; using fit for purpose procurement solutions that connect disparate systems and eliminate reliance on manual intervention, could be the lifeline many players need right now.