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Ten Top Tips To Beat Late Payment

If you have business customers you will often be expected to invoice rather than taking payment at the time of their visit. Late payment is a problem for any business and in the current economic downturn there is a worsening climate of late payments and bad debts, and the associated impact on cash flow. How many times have we been told “The cheque’s in the post”?  It is reported that 59% of small and medium sized enterprises encounter difficulties with outstanding debts, with 33% claiming that customers’ failure to pay on time risks the survival of their business.  Despite the fact that you have a right to charge interest for late payment at 8% above the Bank of England’s reference rate, do we really want it to get to this stage?  Here are a few things you can do to avoid getting to this:

Credit check your customers 

Check out their ability to pay before you confirm big bookings, or agree to credit. Speak to your accountant about th best ways to do this, which might include via their bank, credit reference agencies, or some of their existing suppliers.  Further financial information may be obtained from Companies House or the Institute of Credit Management.  Consider bi-annual checks for existing customers. 

Diversify your customer base

Having all your eggs in one basket can be risky.  If this one customer runs into difficulties or fails to pay, this will have a far bigger impact on you than if your business is spread over a number of customers.

Agree payment terms in advance

Ensure you discuss payment terms at the outset, and record the agreed payment schedules.  If invoicing for any of the services or expenditure up front, ensure you set a precedent and ask for this before you start work or deliver.  Then ensure that payment dates are clear on each and every invoice.

Split invoices

When you have supplying over and above what was included in your original quote (e.g. extra covers, or additional bar bills), invoice the two amounts separately.  This means that if any amounts are then in dispute, the main invoice (which should match your quote) will not be held up, only the variations. 

Invoice on time

Your customers won’t pay until they receive the invoice.  If payment terms are for example 14 days from invoice, it stands to reason, the longer you leave it to send the invoice the longer you will need to wait to be paid.  But there are other reasons to invoice promptly.  The longer the time gap between providing the service and receiving the invoice, the more likely the customer will forget the value they have received and the more likely they are to question or challenge items.  It also reflects the professionalism of your business – if you don’t take the effort to invoice on time what message does this send the customer about the importance of being paid promptly?  Make sure you have a system in place to ensure invoices are sent within days of completion, or for on going business on the specified day each month.

Put controls in place

Set up a system, which ensures you know at any one time what is due in this week, and what is outstanding.   I come from a sector of the industry where everyone’s performance was measured by ‘debtor days’ – the number of days’ debt outstanding at any one time.  This was published to all client managers on a daily basis, and it was their job to ensure that anyone who had not paid in 30 days (our specified payment terms) was followed up immediately.  It doesn’t need to be anything complicated, just a spreadsheet, which someone has a responsibility to monitor daily.

Make payment simple

Ensure that payment methods are simple.  If you encourage payment on line how easy is it for customers to set up a payment.  I have had a number of different suppliers recently who have either failed to give bank details, or who use a third party to monitor payments, where it is not clear what details to put into the payee section.  If paying by cheque, is it clear who to make the cheque out to, and where to send the cheque?  And how easy is it for you to monitor your bank account to check who has paid, and which invoice this relates to?

Communicate with customers

If payment is due, speak to the customer!  We complain to everyone that so and so has not paid, but have we actually asked for the money?  Sometimes it is a genuine over sight, and other times they are just putting it off to help their own cash flow, but rest assured if we don’t chase your invoice will be bottom of the pile.   This does not need to be done in an aggressive way, simply pick up the phone and ask the question “I noticed that you have not yet paid your invoice, which was due yesterday.  Can you tell me when we will receive payment?”  Be prepared for any ‘excuses’ and have your response ready; remain polite, but firm.   Identify who holds the purse strings and initiates payments, and build rapport with them.  Note I have said to phone – it’s far harder to ignore than a letter or e-mail, and you know for certain that they have received the message.  Better still, call in if they are local.  If you are worried about damaging your relationship, get someone else to call, who can be detached and objective. 

Spot potential problems early

Don’t rest on your laurels.  Just because you have called once, keep checking for payment and keep calling. 

If the theme of late payment continues try phoning them before the date it is due – “Hello, Jo, I just wanted to remind you that your invoice is due this week.  To help me monitor my cash flow, it would be useful to know which day I will receive your cheque”, or something along these lines. – This just acts as a reminder and lets them know you are monitoring it.  It is also implied that payment is only a day or two away, not weeks.

Keep any eye on customers’ behaviour – are they acting differently?  Are they suddenly difficult to get hold of?  Are they sending post-dated cheques?  Remember, prevention is better than cure.

How it impacts them

Let them know the implications of late payment.  We may not want to resort to threats, but make customers aware that failure to pay you may mean that you can’t hold their rooms or confirm their next booking until they are up to date with their payments.  If you say this you need to be prepared to carry out.  Their late payment could also potentially mean that you are unable to pay suppliers or your staff, which in turn could have a knock on effect on the quality of service they receive.  Letting them know how it will affect them is sometimes enough to prompt some action.  

Look at options

If a customer is struggling themselves and simply cannot pay you in full consider the options.  If this a long term agreement you may not want to take the risk, but it is better to have some money than none, so discuss what they can give you now and when they will be able to pay the balance.

10 tips to cut down on waste at breakfast service

1. For self service dishes use appropriate sized serving utensils – the bigger the spoon, the bigger the portion your guest will take
2. If serving fresh fruit have this sliced or portioned in some way – grapes are a classic example – unless you cut the bunches into portion sized ‘mini bunches’ your guest will waste half by trying to break off a portion, or even take the whole bunch
3. Label your fruit juices clearly – how many times have you seen a juice left barely touched because the guest thought it was grapefruit and it turned out to be something different such as pineapple?
4. Avoid over filling teapots (especially those with poor fitting lids that have a tendency to dribble).  This avoids guests wasting napkins and table linen in mopping up avoidable spillages
5. If you use table clothes, reduce your laundry costs by seating people on an appropriate sized table.  If most of your guests will be breakfasting alone or in twos and your most popular tables are those by the window – position your smaller tables here and place large tables for bigger parties where they are less likely to be requested by solo guests
6. Ask before automatically serving toast – you’ll be shocked to see how much of it ends up in the bin (often because it is served cold and rubbery!) 
7. Listen to the guest’s order, and only cook and serve what is asked for – if they ask for one egg, only serve one egg, not two
8. Cook to order when you can, to reduce wastage. This might not be possible for ingredients such as sausages, but there should be no excuse not to cook eggs to order, or at least batch cook for busier hotels
9. Ask for feedback, so you can learn what your guest like and don’t like.  Watch and monitor what comes back on guests’ plates – and follow this up to check the cause of this – are your portions too big, was it not cooked enough, was there a problem with the ingredients or flavour?
10. Monitor wastage and costs in the exactly the same way as you would for any other meal service.  Do you know your exact cost per item and average cost per head for a full English breakfast including cereal, fruit, toast, juice, condiments, and table linen?

Stock is no different than cash – so treat it as such.

You wouldn’t leave your safe unlocked or your till drawers open, so why would you leave your store rooms open to anyone and everyone? 

Here are my top 30 tips on controlling your stock

1. Check suppliers’ prices before ordering, and adapt your order if price changes will reduce your margin
2. Keep stock as low as possible by only ordering what you need ~ you’ll benefit from easier control, staff wont be tempted to use more than they need, reduced wastage from perished or damaged stock, and most importantly it helps your cash flow
3. Only ever buy products on offer if you know they are needed, or can be utilised cost effectively e.g. incorporated into the menu without it affecting your sales or margins
4. Control who is allowed to place orders for high priced items
5. Don’t allow purchases for staff to go on your invoices ~ ensure they are invoiced directly to avoid any discrepancies or disputes
6. Keep an order book so you have a permanent record of what’s been ordered
7. Check all deliveries are complete, adequate shelf life and in good condition ~ never accept anything that is not to standard.  Keep a dedicated set of scales and a thermometer in the food delivery area
8. Check invoice prices against suppliers’ list or quoted prices, and don’t accept expensive substitutes for out of stock items
9. Conduct your own spot checks on deliveries ~ check what your suppliers send and what your staff are willing to accept
10. Keep stores tidy, with everything having its own place – it’s far easier to control. Print out a layout of the stores and label shelves to ensure everything goes back to its proper place
11. Separate items to avoid risk of cross contamination and subsequent wastage ~ high risk foods away from low risk, cleaning chemicals away from food or laundry, etc. Not just in the stores, but on housekeeping trolleys or baskets too
12. Ensure correct storage for the product ~ i.e. stored at the correct temperature, correct atmosphere
13. Keep stores locked, with access only from those who need it, and only allow staff to take what’s needed for the day to avoid excess items going to waste
14. Keep particularly high value items somewhere it is easy to monitor e.g. gifts, saffron, truffles ~ anything that is easy to steel, or easy to over use – even if unintentionally
15. Date stamp perishable products clearly and ensure stock rotation to avoid spoilage
16. Write the prices of items on their box so staff see what they cost
17. Fit dispenser pumps on cleaning materials to avoid over use
18. Take stock regularly, and at the same time each period, weekly if possible, but as a minimum monthly – to get accurate stock consumption figures (this also encourages low stocks and good rotation)
19. Ensure all items are physically counted on each stock take ~ don’t just assume the contents of a box is the same as last time
20. Use an independent stock taker for high value stock such as liquor, or even for all your stock takes if you don’t have the staffing to do this accurately
21. Check stock and consumption in all areas ~ don’t forget disposable items such as napkins, foil, printer paper, ink cartridges, toilet rolls, etc
22. Follow a regular cleaning and maintenance schedule on all your store areas ~ freezers, fridges, chilled areas checking for temperatures, air circulation, cleanliness, rotation of stock, door seals on fridges and freezers, evidence of pests, security
23. Know your expected usage and check your actual consumption figures against this.  If you know on average only 60% of guests use the body lotion and you’ve had 100 room nights this week does your body lotion bottle consumption equate to this
24. Openly investigate any discrepancies as soon as they are identified.  If you have a problem with pilfering this will make people less inclined to take the risk
25. Check your detergent dispenser concentrations on dish washers yourself – don’t leave this to the sales rep
26. Keep your choices limited to avoid low stock turnover.  Don’t be tempted to buy in items just because one of your regulars requests it; you’ll never be able to please everyone all of the time (and when it comes to the menu, too big a choice gives the customer the perception of low turnover too)
27. Ensure all staff are trained in stock control - this means chefs/service staff are trained in portion control, housekeeping staff are trained in the correct storage and use of toiletries and cleaning materials to avoid wastage
28. Educate staff in the budgets and margins involved in the businesses – if they think you make a fortune on every sale they wont control costs
29. Make it crystal clear to staff what the rules are on use of materials – including what’s allowed and not allowed for personal use. Post a sign by the staff entrance reminding them of the rules
30. Accidents do happen ~ but ask staff to let you know when there has been anything out of the ordinary to affect wastage or stock levels

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So it can be make or break for some hotels or restaurants in what has been for some a difficult year. 

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With so much focus on increasing sales, are we remembering to keep tabs on our costs too?
Here are my 25 essentials to controlling food costs.
I’m sure there are many more ideas, but these are the basics…..

1. Plan menus around seasonal availability
2. Create costing cards for every menu item, and update ingredients costs as they change
3. Include methods for all recipes, train chefs and provide the right tools to follow these methods
4. Establish yields of all recipes, and check these are being achieved though production and sales controls
5. Check suppliers prices before ordering, and adapt menu if costs reduce margin
6. Only ever order what you need – chef will only be tempted to use more if it’s there, or it goes to waste
7. Negotiate drop discounts with your main suppliers – if they can save on delivery costs they might be willing to negotiate
8. Only ever buy products on offer if you know you can incorporate into the menu without it affecting your sales or margins
9. Check invoice prices against list prices
10. Don’t accept expensive substitutes for out of stock items
11. Check all deliveries are complete, adequate shelf life and in good condition – never accept anything which is not to standard
12. Keep stores tidy, with everything having its own place – it’s far easier to control
13. Keep stores locked, with access only from those who need it
14. Ensure stock rotation to avoid spoilage
15. Take stock regularly, weekly if possible, but as a minimum monthly – to get accurate stock consumption figures (this also encourages low stocks and good rotation)
16. Keep your menu choice limited to avoid low stock turnover – customers usually perceive this anyway with very extensive menus
17. Keep records of patterns in menu popularity to help planning and ordering
18. Batch cook as orders come in to meet demand
19. Check what comes back on plates – and ask if wastage is due to poor quality or too big a portion?
20. Keep a wastage book to track all wastage – you’ll be amazed how much goes in the bin and for avoidable reasons
21. Investigate cost of a blast chiller if you don’t already have one – it could pay for itself in short space of time
22.  Ensure all chefs/service staff are trained in portion control
23. Supply the right size serving equipment for a standard portion – if a portion of chips is 8 oz and you provide a 10 oz scoop that’s 25% over and your margin gone
24. Educate staff in the budgets and margins involved in the businesses – if they think you make a fortune on each dish they wont respect food costs
25. Have guidelines for staff meals and what they can and cant eat or drink
       ….And a bonus point…
26. Accidents do happen – but ask staff to let you know when there has been anything out of the ordinary to affect wastage

I have just published  a new free report: “57 Ways to Boost Sales and Get More Repeat Bookings for your Hotel”. To get your copy click the link here.

It’s good to read of hospitality businesses doing their bit for the environment. What concerns me is how ineffective these measures appear (from a customer’s perception at least) - despite the potential positive impact on their bottom line at a time when most could do with a boost.  Some do have good intentions – re-using towels, key cards for lighting and AC, but without the necessary staff training I fear these do little. 

These are some simple suggestions for hotels based on my observations from my past 2 weeks travelling alone:

• Train reception to issue only one key card per guest – to avoid one being left in the room all day (Last week I was issued with 2 and told one was for the lights….).
• Train chambermaids to switch off all lights after servicing the room and allow the guest to determine which lights they want on (especially in mid summer).
• Train chambermaids to only replace towels clearly left for replacing (9 times out of 10 all are replaced regardless).
• Train chambermaids to switch off TV’s in rooms rather than leaving on stand by.
• Train porters and cleaners to switch off lights and heating in rooms at the end of the day.
• Train chambermaids to turn off heating in rooms in summer or turn down to a reasonable temperature in winter.
• Train restaurant and bar staff to switch off TV’s in restaurants and bars when empty (why do we need TV’s in every corner of the bar anyway, especially when music is playing already?).

What you save on power will probably soon pay for these longer term measures:

• Fit sufficient towel rails to hang up used towels separately to keep used and unused apart – otherwise all have to be replaced regardless at the end of your stay. 
• Allow guests the option to open windows for fresh air instead of being obliged to use AC. 
• Install movement sensors in meeting & function rooms.

And that’s just on front of house. Who knows what savings could be made BOH?

I have just produced a new report “57 Ways to Boost Sales and Get More Repeat Bookings for Your Hotel“. To get your copy click the link here.