The top 10 purchasing controls

Managing a hotel involves juggling various responsibilities, and purchasing is a critical aspect that can impact the bottom line. Here are ten essential hotel purchasing controls to ensure efficiency and compliance, with practical examples for each:

1. Mandatory Use of Purchase Orders

Why It Matters: Purchase orders (POs) provide clear documentation and authorization for purchases, preventing unauthorized spending.

Example: A department manager needs to order new linens. They must complete a PO, get prior written approval from the Director of Finance and the General Manager, and submit it before the purchase.

2. Approval Hierarchies

Why It Matters: Ensures accountability by specifying who can approve purchases and expenditures.

Example: Only department managers listed in the accounting department's approved signatory list can submit purchase requests. This prevents unauthorized staff from initiating purchases.

3. Emergency Purchase Protocols

Why It Matters: Emergencies should not bypass accountability.

Example: After-hours, the on-duty manager needs wine for a VIP event. They email the Director of Finance for approval and pay with a personal credit card, with receipts submitted the next day for reimbursement.

4. Vendor Approval Process

Why It Matters: Approved vendors ensure reliable quality and pricing.

Example: A chef wants to try a new produce supplier that is not on the corporate-approved list. Before any transactions occur, the vendor must be approved by the Director of Finance.

5. Separation of Duties

Why It Matters: Reduces the risk of fraud by dividing responsibilities among staff.

Example: If the restaurant manager orders supplies, the receiving clerk checks the delivery, and the accounts payable team processes payment, ensuring checks and balances.

6. Competitive Bidding for High-Value Items

Why It Matters: Encourages cost-effectiveness and transparency.

Example: For a $3,000 kitchen repair, the maintenance manager obtains three bids and submits them with the purchase request for approval.

7. Contract Pricing for Regular Supplies

Why It Matters: Ensures stable pricing for frequently purchased items.

Example: The purchasing department negotiates a contract for dairy supplies with a local vendor, locking in pricing for the next six months.

8. Online Purchasing Controls

Why It Matters: Prevents impulsive or unauthorized online orders.

Example: A housekeeping manager researches cleaning supplies online, adds the pricing to the PO, and gets approval before placing the order.

9. Handling Gifts from Vendors

Why It Matters: Maintains integrity and transparency in vendor relationships.

Example: A vendor gifts a case of wine during the holidays. The Director of Finance logs it, and the wine is used at a staff appreciation event.

10. Capital Purchase Approvals

Why It Matters: Ensures alignment with strategic goals for large investments.

Example: A $15,000 furniture upgrade is part of the approved capital plan. Competitive bids and POs are submitted for review before making the purchase.

By implementing these purchasing controls, hotels can maintain financial discipline, minimize risk, and improve operational efficiency. These practices ensure compliance and contribute to building trust and accountability within the organization.

David Lund – The Hotel Financial Coach

Contact David at (415) 696-9593
Email: david@hotelfinancialcoach.com

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