There’s a lot of great hospitality-industry focused content out there to help hoteliers make smarter decisions that lead to more efficient and profitable operations, and one of the best is Doug Rice’s “Definitely Doug” column, published bi-weekly in Hospitality Upgrade. A lifelong hotel data and technology advocate and the founder of Hospitality Technology Next Generation, Rice’s column is a must-read for anyone interested in the inner workings – good and bad – of the hotel technology framework.
In a recent column, Rice focused on the crucial topic of financial reconciliation that can save your hotel or hotel company thousands of dollars per month.
“I was shocked when I heard some of the revenue/expense recovery numbers, sometimes running into $10,000 or more per month for a full-service hotel, not to mention labor savings from eliminating manual processes,” he wrote.
Financial reconciliation involves processes that identify and resolve discrepancies in financial records, preventing unnecessary revenue and expense leakage. Rice emphasizes the imperfections in some hotel technology and the need for reconciliation tools to bridge gaps in various financial processes.
He sheds light on the emergence of new vendors specializing in specific financial reconciliation issues, specifically mentioning MDO as a tool that can help with bank and Online Travel Agency (OTA) reconciliations.
- Bank reconciliation is a set of processes to help ensure that the cash and credit card revenues you collect are correctly making their way from the Property Management System (PMS) and/or Point-of-Sale System (POS) to your bank account.
- OTA reconciliation is applicable when hotels pay commissions directly to OTAs for reservations where the guest pays the hotel direct, updating OTA systems with cancellations, no-shows, date changes, rate changes, etc., and then verifies the amount of the commission paid.
Such tools can lead to substantial revenue/expense recovery, Rice says. The costs involved are minimal, and certain solutions, particularly those addressing OTA revenues and commissions, pose no financial risk to hotels, as payment is based on results.
From Manual to Automated Financial Reconciliation
Automating financial reconciliation, instead of the traditional manual methods, is crucial for hoteliers today, as discrepancies are often difficult to find manually, and manual processes require expensive labor. Automatic data reconciliation speeds up month-end closing processes, offering real-time reporting of profit and loss statements, and providing better visibility of hotel performance.
Reconciling commissions is more difficult than capturing uncharged revenue from virtual credit cards, for example, because it requires integration with the PMS to extract actual reservations and revenue, Rice says.
“While many of the discrepancies found may be small, they add up, and there are some specific situations where they can be large,” he writes. “Unscrupulous travel agents are known to make fake reservations through OTAs, often in the name of a celebrity and for an expensive suite for many nights. If a no-show is not detected and reported to the OTA, the travel agent can receive a large commission this way, even though the guest never showed up or paid.”
Other financial reconciliations include, gratuities, accounts payable, sales and occupancy taxes, and call center fees or commissions. Rice dives into each, providing insights into the challenges faced by hotels and the potential benefits of automated reconciliation solutions.
Automated reconciliation tools play a critical role in maximizing a hotel’s profit, finding lost money, reducing manual labor, speeding up reporting processes, and improving data accuracy.
“To be sure, not every financial reconciliation process will generate a big return, but the closer I looked, the more places I found where hotels are leaving money on the table,” Rice writes. “If you are not using reconciliation software to identify and fix discrepancies, you are almost certainly experiencing unnecessary revenue and expense leakage, unnecessary cost for manual labor, or both.”
Book a demo to learn how MDO’s financial reconciliation tools can help ensure you’re not leaving money on the table.