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Lean and Green: How to Cut Costs While Improving Environmental Performance

The utility data management system offered by HVS Eco Services allows hotel and restaurant operators to significantly reduce accounting costs and utility consumption, and accurately document environmental performance.

As hotel and restaurant operators prepare for post-9/11-like operating conditions, an effective way to reduce internal accounting costs and utility consumption is to adopt a sophisticated utility data management system. The majority of multi-unit hotel and restaurant operators have utility invoices sent to their headquarters where they are processed by internal accounts payable clerks or they are processed at the property level by management who should be focused on service delivery and revenue management. While on the surface the direct labor costs may make this seem like an efficient strategy, if one were to dive deeper into the indirect costs, and opportunity costs associated with this strategy, they would quickly see that outsourcing this function has a very high return on investment.

The utility data management system offered by HVS Eco Services receives and processes utility invoices on behalf of clients, which drastically reduces the operational workload of the mail-handling department, accounting department, and on-property staff. Upon receipt at our processing facility, invoices are digitized, intensely analyzed for accuracy, paid at just the right time, and uploaded into a web-based dashboard. The payment information then flows seamlessly into a client's existing accounting system for ACH settlement.

When utility invoices are processed at a management company’s headquarters, invoices must be sorted, opened, and prioritized, after which accounts payable clerks cut a check for the amount due, attach the check stub to the invoice and file it away, either digitally, or worse yet, in an actual filing cabinet. When processed at the property level, the general manager must approve invoices for processing, by either an accounts payable clerk or controller on property, or invoices are sent to the management company’s headquarters, which is often located in a different state than the property itself. The shortcomings associated with these processing methodologies are presented below.

Billing Errors

Very few accounts payable clerks or general managers are capable of detecting utility billing errors - this is simply not their area of expertise. Paying utility invoices without proper auditing allows billing errors such as incorrect utility rates, meter readings, and inaccurate application of prior payments to go unnoticed. The result of inaccurate bill auditing is that operators literally give away hundreds of dollars each month to utility companies.

Even if internal accounts payable clerks did have such expertise, intensely auditing each invoice for a portfolio of hotels or restaurants would require a team of utility experts who would command a significantly higher wage than a standard accounts payable clerk. HVS Eco Services conducts a sophisticated audit of each utility invoice to ensure that all of the billing data is accurate before sending payment.

Cash Management

Sending payments to utility companies too early limits an operator's ability to earn valuable interest on their cash. Sending payments too late results in costly late fees. HVS Eco Services employs a sophisticated approach to paying invoices at just the right time, which allows operators to maximize the amount of time that their cash is earning interest, while minimizing the chance that a late fee will be charged. This well-established method ensures that cash management will be optimized, which is particularly important in a challenging operating climate.

Core Competency Focus

During challenging economic times, general managers and on-property staff must focus more keenly than ever on what they do best: grow market share by ensuring that service delivery and sales and marketing initiatives are being properly executed. A general manager would be the first to admit that their expertise does not lie within the field of utility invoice auditing. By removing utility invoice processing from the general manager’s list of responsibilities, they will have more time to spend on the floor interacting with guests and staff to ensure that guest expectations and other aspects of service delivery are being properly carried out. Reducing the amount of invoices that must be processed at the property by the controller or accounts payable clerks results in a direct labor expense reduction.

Packaging and physically sending invoices in a weekly parcel to management headquarters has several shortcomings as well. This practice presents the potential for bills to be lost, arrive after the due date resulting in late fees, and requires the task of sorting and prioritizing invoices, a task that has already been completed at the property level, to be repeated at headquarters.

Access to Data

In addition to the direct costs and opportunity costs associated with having on-property staff process utility invoices, perhaps the most compelling reason to abandon a "pay and file" system, is the opportunity cost associated with not having convenient access to utility data. Under the archaic "pay and file" system used by many operators, once invoices are stamped as "paid" and filed away, the door is closed to the million-dollar mine that is their historical utility consumption. Rather than burying this valuable data, HVS Eco Services intensely analyzes utility data to develop a strategic plan to reduce consumption.

The adage "you can't manage what you don’t measure" has never been as fitting as in the case of utility consumption. Operators that don’t have an intimate knowledge of their properties' utility consumption profiles are more susceptible to risks associated with spikes in energy prices that will have a directly negative impact on the bottom line.

In addition to minimizing risk associated with increasing energy prices, consider how important it is to be able to convey performance to stakeholders such as guests, equity partners, and lenders. HVS Eco Services puts all of this information at an operator’s fingertips, or more accurately, a few clicks away. After receiving utility invoices directly from utility companies and running the aforementioned quality audits, all of the information is uploaded to a client's web-based dashboard allowing them to conveniently access their portfolio's consumption patterns and view images of invoices in real time. This system will give operators a new set of key performance indicators to track, just as they track occupancy, average rate and other vital performance metrics.

Competitive Shopping in Deregulated Utility Markets

Properly collecting and organizing utility data allows operators to create an accurate consumption and demand profile, which is the key to negotiating favorable utility contracts in deregulated markets. How much energy a property consumes is only part of the profile however. Timing of peak demand levels play an important role in determining the attractiveness of a hotel's utility profile. The more attractive the profile, the more aggressively utility companies will compete for a hotel's utility business. Not having an accurate consumption and demand profile limits an operator's access to money-saving competition among deregulated utility providers. HVS Eco Services allows operators to maintain accurate consumption and demand profiles that enable utility companies to quickly evaluate the attractiveness of a particular property's utility business.

Conclusion

The utility data management system offered by HVS Eco Services is the most cost-effective way to reduce billing errors, allow on-property staff to focus on revenue management, and conveniently access utility data. Accurately documenting utility consumption is the clearest way to convey environmental performance to lenders, equity partners, staff, and most importantly, guests.

As the world’s largest hospitality consulting firm, HVS is in tune with the needs of hotel and restaurant operators who will face steep challenges in the near term as revenues are expected to deteriorate, and utility costs are expected to increase.

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