Are You Prepared for a Back-Office Digital Transformation?

Editor's note: This article has been modified from an original version first published in the Fall issue of Hospitality Upgrade.

This year’s HITEC in Charlotte was easily one of the top five out of the past 25+ years I’ve attended. Maybe it came from visiting Charlotte for the first time. Or maybe it was the number of first-time vendors that caught my eye. Regardless, it was certainly one for the record books. 

What I learned at HITEC 2024.

I set a goal for HITEC to visit as many back-office software vendors as possible to stay abreast of their latest enhancements. This list included those with core accounting applications, purchasing, HR/payroll, and others designed to fill gaps for budgeting, analytics, and AP automation. 

What I learned is today’s back-office applications are starkly different than those available 10 years ago. Most of the vendors are the same, but the enhancements to their solutions have certainly grown with features that improve efficiency and accuracy. My high-level observations of the core accounting applications were:

• Each solution is full of features, though they vary between vendors.

• Most vendors have strategic partners to fill in functionality gaps.

• Most are offering cloud/hosted environments.

• APIs are the leading method of data integration.

• AI is showing up at a rapid pace. 

If you haven't considered replacing your back-office apps in the past five to 10 years, then you might benefit from a digital transformation. Digital transformation involves using the latest technology to transform the way you do business. For clubs, this transformation is already underway in the guest-facing world of POS and member experiences, but many organizations overlook advances made in back-office technology. 

However, updating your applications alone will not achieve the greatest digital transformation. 

How do you get started?

In overly simplistic terms, there are three phases to digital transformation.

1. Assess your current environment.

2. Configure applications and integrations.

3. Transform your organization’s operating effectiveness. 

Your first step in preparing for a digital transformation is to perform an objective assessment of your current environment, which includes practices, processes, and tech stack. This step should not be performed by a single individual, it needs input from all stakeholders. Having an independent third-party to guide the process can often improve outcomes. 

Your goal is to find opportunities to enhance support provided to operations. Management reporting should be at the top of this list. Meaningful management reporting requires information to be consistent, accurate, and timely. Taking data from different reports and entering them into Excel for reporting purposes is prone to errors and consumes more time than necessary today. 

A key element to focus on is streamlining data flow as it passes from one application to another. For instance, does your POS data flow seamlessly into your back-office accounting application? Or is the flow interrupted by constantly finding errors that require correcting, i.e., new POS menu items not associated with general ledger accounts, or maybe daily sales journals are entered manually? 

This is just one example of the need for a digital transformation. Think of the other key systems that deliver data to your core financial applications. How smooth is the data flow from timeclocks to payroll to general ledger, including the calculation of month-end payroll accruals? Do you use purchasing software to electronically place orders using catalog-specific products from vendors, but then post invoices manually into AP followed by printed check payments mailed through USPS? 

As you complete the assessment phase, you should have a comprehensive gap analysis highlighting inferior or missing features. The summarized gap analysis will likely fall into one of these areas:

1. Minimal changes needed, with minor tweaks to processes, and improved integration with current applications.

2. Current tech stack and processes are somewhat optimized, but there are major gaps in desired functionality.

3. Processes and tech stack are so antiquated that it is best to start from a blank sheet of paper and evaluate a complete overhaul. 

If you’re in the first category, congratulations! Consider yourself lucky, and in the minority of most hospitality businesses. Often, minor changes to the configuration of an application are all it takes to alleviate what were once essential workarounds. Workarounds come about when a feature or integration doesn’t exist. You may find the feature now exists with a recent upgrade. 

Those in the second category can often benefit from configuration updates but still find their current tech stack has key functionality gaps. Today, it can be easy to fill these functionality gaps with various third-party solutions (i.e., analytics, budgeting, or AP automation). You might be surprised at how many solutions exist, so be specific on the features and integrations you need. 

However, if you find your organization fits into the third category, or even somewhere between two and three, then you have an opportunity to create meaningful changes in the way you operate and manage financial reporting. Many changes might be “low hanging fruit” easily checked off someone’s to-do list, but the reality might reveal a need for organizational change management. Do you still follow legacy processes that conflict with the parallel application data flow? Purchase order and invoice approval hierarchies are good examples where the software and physical practice may not be coordinated. 

Throughout the assessment process time needs to be spent reviewing application configurations. Many configurations set up when the application was originally installed may no longer be relevant. I am a firm believer in conducting a vendor-led review of the application configuration at least once every three to five years. Exposing new managers to this review can often bring about innovative ideas on how to improve a process. 

One last critical step in performing an objective assessment is to understand how much you are presently paying to vendors involved in your tech stack. Finance and IT need to partner with each other to perform a full inventory of all current applications in use with specifics about cost and contract terms. This process is often filled with revelations. You may find several overlapping features amongst your tech stack that can be combined into a single vendor with overall cost savings and enhanced integration. 

So how long does a digital transformation project take?

Depending on the scope of the project, the full process could last six to 12 months for planning, training and implementation. There’s a lot to think about when charting a course for digital transformation in your back-office tech stack. Try to be objective and consider various approaches. Take the time to check references and develop vendor demo scripts designed to answer your questions. 

A thorough assessment phase might take three to six months, depending on how extensive your needs are. This might include proposed re-writes of policy and procedure manuals throughout the organization. 

The configuration phase might begin during the assessment phase, but with a major overhaul you could spend another three months with vendors configuring the underlying applications and integrations. The vendor should offer a test environment where the configurations can be checked without interruption to the production systems. 

The last phase, transformation, might be another three to six months if you are doing a major overhaul. In these scenarios, the configuration phase would have laid out a roadmap for a logical migration from existing to new. Some modules may need to be live before other modules can be used. Training is a major part of this phase and a key to a successful transformation. 

The key to a successful digital transformation is the full alignment of goals and participation from every level of the organization.

Ron Strecker, CHAE+, CHTP+, is an independent consultant, author, and speaker with over 40 years of experience in senior hospitality finance roles. He presently serves as chair of the HFTP CHAE Advisory Council, member of the HFTP Academy Advisory Council, and an advisor in the HFTP Certification Advisory Program (CAP). Throughout his 40-year career, Strecker has applied his finance and technology skills to improve the organization’s financial and management reporting. His consulting work aids clients in improving their back-office practices and technology. In addition to consulting, Strecker has authored numerous articles related to hospitality finance and technology and spoken at various conferences including HITEC, HFTP Annual Convention, and the FEI Leadership Summit.