Hospitality businesses can open doors with innovative finance solutions

The time has come for hoteliers to take control of their cash flow to unlock business growth, writes John Morton, head of operations at Hitachi Capital Invoice Finance.

The UK hospitality industry is going from strength to strength and hotel businesses in particular are growing as a result of increased consumer confidence and continued business investment.

According to the British Hospitality Association’s economic outlook report, one per cent of total investment in the UK economy is made by the hospitality industry. It is the second-fastest growing UK industry in terms of employment and as a result of more hotel businesses setting up; this is increasing competition and the need for firms to raise the finance to take full advantage.

At a time when there are a number of opportunities for hotels and suppliers, it is those firms that are able to navigate the financial market and take control of their own cash flow that will ultimately prosper, explains John Morton, head of operations at Hitachi Capital Invoice Finance.

Businesses that explore all of their available finance options and opt for a more creative approach to fund their growth will seize the day. The hospitality industry is the fourth biggest in employment terms in the UK and currently accounts for 4.4 million jobs nationwide. It has played an integral part in the improving jobs market in recent years and many hotel businesses and suppliers to the industry are using flexible finance options to secure contract opportunities and alleviate cash flow issues.

The increased confidence in the sector has led to a rise in demand for temporary staff, particularly in catering and events, as hotel businesses look to host one-off events to increase revenue streams and showcase their premises to potential clients. This is creating opportunities for businesses further down the supply chain, such as those that supply temporary staff to the hospitality sector.

However, to take advantage of these opportunities, businesses often require an alternative lending facility to cover costs and carry out the work. For those companies that supply temporary staff to the hospitality industry, they are often faced with a ‘catch 22’. Whilst suppliers wait to be paid by business customers, the temporary staff on their books often expect payment immediately or on a weekly basis. This can cause particular cash flow issues as many bigger businesses often impose payment terms of at least 30 days. The same scenario applies for hotel businesses hosting one-off events where finance is required upfront to sources goods and services and pay providers on time. In order to alleviate these pressures on working capital, businesses can utilise alternative finance options such as invoice finance which means that instead of having to wait nearly a month to receive payment for an invoice, businesses can unlock the cash they need straight away based on the value of any unpaid invoices, minus a small fee.

Many companies have the ability to take control of their own cash flow but it’s quite surprising how firms overlook basic contractual etiquette which often leads to unwanted disputes and further delays in payment. To avoid this, buyers and suppliers should follow simple communication measures to create an open and honest relationship. A courtesy call after the goods or services have been supplied to ensure that the customers needs have been fulfilled allows both parties to tackle any queries and helps avoid potential delays in payment.

For those businesses looking to take advantage of the current favourable market conditions, realising the importance of flexible financial solutions to aid business growth is key. Companies that look beyond their bank for alternative finance solutions have the opportunity to gain greater market share and place themselves in a stronger future position.

For more information, please visit http://www.hitachicapitalinvoicefinance.co.uk

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