01Tips for Better Cloud Expense Management
The term “cloud expense management” has been co-opted by many parties, from those selling employee expense management software hosted in the cloud, to telecom expense management software (TEM), to IT expense management software, to cloud cost management software which focuses on SaaS, IaaS, and/or PaaS services. For the purpose of today’s blog we will slant towards cloud management software and specifically key in on infrastructure, IaaS and PaaS offered as public cloud services.
One of the greatest benefits of cloud computing is supposed to be cost efficiency, but there is a flip side to the agility gained by using public cloud computing. Costs can easily get out of control if your cloud services are not effectively provisioned or properly governed and managed. Most organizations have not yet fully migrated all their applications to the cloud. Because of this hybrid cloud structure, public cloud services can become an added cost to their overall budget, making understanding, planning and managing these cloud services extremely important. That is where cloud expense management software comes into play, it really needs to be part of your overall cloud management strategy from day one.
Cloud Computing Services
Before we discuss further how to manage cloud expenses, let’s take a look at the different cloud service types in more detail to get a picture of the expenses there are to manage. Remember there are literally hundreds of IaaS and PaaS services offered in the public cloud — as of this blog writing AWS alone has 190+ cloud services.
Infrastructure-as-a-service (IaaS) is a category that offers traditional IT services like compute, database, storage, network, load balancers, firewalls, etc. on demand and off premise – vendors like AWS, Azure and Google dominate this market.
Platform-as-a-service (PaaS) is a category of cloud computing services that provides a platform allowing customers to develop, run, and manage applications without the complexity of building and maintaining the infrastructure typically associated with developing and launching an app – AWS, Azure and Google offer PaaS along with IBM, Oracle, and RedHat to name a few.
Recommended For You Webcast, March 5th: How AI Can Find Opportunities and Shorten Your Sales Cycles Register Now
Software-as-a-service (SaaS) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. It is sometimes referred to as “on-demand software” – vendors who dominate this space include Salesforce, ServiceNow, Microsoft and SAP (and ParkMyCloud) to name a few.
Enterprise expenses in these categories are skyrocketing as outlined in our cloud waste blog, along with the difficulties of administering an effective cloud expense management for a single cloud, let alone a multi-cloud or hybrid cloud environment in order to protect a company’s bottom line. Companies now require visibility and insights into their cloud-based services, and automated controls and actions to remediate and manage those cloud service expenses.
Where does Cloud Expense Management fit?
As mentioned, cloud expense management should be a key element in your overall cloud management strategy. Enterprises need a clear strategy here and generally tools fit into the following categories — please note functionality can be both natively provided by the cloud service provider or via a third-party:
We believe cloud expense management is a subcategory of Cloud Cost Management and Optimization. Tools in this category generally help enterprises with:
Simply put, the cloud is a utility and it needs to be managed as such – cloud costs need to be reported and allocated, cloud services need to be optimized, and in order to reap the benefits of cloud these cost control actions needed to be automated. Whether cloud expense management is your full-time, or “when-you-have-time” responsibility, it is important to build it into your cloud management strategy from day one. It will take time but what you get in return is increased optimization and validation of your cloud services and costs, ensuring you maximize your ROI.
Author: Jay Chapel
Jay Chapel is a co-founder and the CEO of ParkMyCloud, a lightweight web app to schedule on/off times for AWS EC2 instances. Prior to co-founding ParkMyCloud, Jay founded Ostrato in 2013, a provider of cloud management software. Before that, he spent 10+ years with Micromuse and IBM Tivoli, a… View full profile ›
02
Cash control tug-of-war: Hotel management agreements
Here are some tips on how hoteliers should negotiate control of operating accounts and working capital in hotel management agreements.
A frequent point of contention between owners of real estate assets and the management companies that operate them is control over operating accounts and working capital.
These disputes arise in negotiation of contracts for management of hospitality assets (e.g. hotels, spas and golf courses), office buildings and other commercial properties, and multiunit residential buildings. The focus of this article is on cash control issues within hotel management agreements.
Under an HMA, the hotel owner hands over control of day-to-day operation of the hotel to a management company. In the United States, it is usually (though not always) the management company that employs all of the employees who operate the hotel. The management company orders supplies, arranges for utility services and hires outside contractors when needed. It is usually the management company that receives payments from individual guests and organizational customers and pursues collection actions against debtors. The hotel’s receipts and outlays usually go in and out of an operating account. Although this account belongs to the owner, it is the management company that uses it every day.
Control of the operating accountThis raises the first issue related to operating funds, which is who has what control over the operating account. A management company’s preferred position on this issue is simple: it is the management company, and only the management company. This means the owner cannot make withdrawals of its own funds from this account, even to make hotel-related payments (e.g. for capital expenses). For some owners new to the hotel industry, this is difficult to accept. This money does, after all, belong to them.
However, in my experience, very few hotel management companies—and absolutely no brand-affiliated ones—relent on this issue. They will not accept the risk of an owner withdrawing too much from an operating account and leaving the management company with too little money to operate the hotel properly. For a brand-affiliated management company, a cash-starved hotel jeopardizes the image of the brand. For any management company, an inability to pay a hotel’s trade creditors can jeopardize the company’s relationships and reputation.
The one group of creditors that a management company absolutely must be able to pay on time is its own employees who work at the hotel. Even if the company acts as the owner’s agent in everything else it does for a hotel, in most instances it will have its own employment relationship with these employees, and will be liable to them if it cannot make payroll. (As noted above, in most hotels in the United States, it is the management company, and not the owner, that is the employer. I have seen management companies try to make this ambiguous, with language suggesting that the hotel is the employer. Such ambiguity should be avoided.) When pressed, some independent management companies will concede to allow an owner access to all operating funds except those in a separate payroll account, which must be under the management company’s exclusive control. The owner might also be required to have real-time access to all of the same account data that the bank makes available to the management company.
Controlling the working capital balanceA related issue pertaining to operating funds is the amount of working capital that must be kept in the operating account at any given time. Here, again, brand-affiliated management companies take stricter positions than non-branded ones. A hotel management agreement with a major brand for a full-service hotel is likely to give the management company broad discretion to require the owner, upon request by the manager and within a specified timeframe, to deposit into the operating account as much additional working capital as the management company believes is reasonably necessary to operate the hotel in accordance with brand standards. The management agreement will not identify a dollar figure as the minimum working capital balance. If the owner fails to forward the working capital demanded, the management company might be given a right to withhold the deficiency from subsequent distributions to the owner, or to lend the management company’s own funds to cover the deficiency at a high interest rate.
At the opposite end of a spectrum of management agreements, an owner with sufficient bargaining power might demand an approach under which the hotel management agreement does not give the management company any right to require the owner to deposit working capital. (The hotel will hold some amount of working capital when the term of the HMA commences, and this amount and any subsequent adjustments should be acknowledged by the parties. However, the HMA will not require the owner to maintain any minimum balance.) The HMA will require the management company, after paying all of the hotel’s operating expenses (including the base management fee) for each month, to forward all of the hotel’s net operating income to the owner. Absent extraordinary circumstances, it becomes the management company’s responsibility to spread expenses as needed to make these income distributions and retain a sufficient amount of working capital, even if this requires the management company to delay payments to some trade creditors. Additional infusions of working capital are at the owner’s discretion. This requires a management company to provide the owner a thorough explanation for any request for additional capital, and the owner must be convinced.
Between these two ends of the spectrum, an approach I have seen used by several independent management companies is for the HMA to require a specified minimum working capital balance (a dollar amount subject to adjustment for inflation). At the end of each month, the management company forwards to the owner any amount in the operating account in excess of the applicable working capital balance. If the account falls below that amount, the owner is required to deposit funds sufficient to maintain the balance. This compromise approach adopts a cash method of accounting that is more rudimentary than the accrual method based on generally accepted accounting principles (GAAP). It is beyond the scope of this article to discuss the differences between cash and accrual accounting. However, I will note that it saves time and frustration in HMA negotiations (in addition to later conflict) if the parties agree early on the method of accounting to be used in operation of a hotel and clearly document this in the HMA.
Negotiate carefullyIn any scenario in which a hotel (or any other real estate asset) is owned by one party and operated by another, when negotiating the management agreement, both the owner and the management company should pay particular attention to these and other provisions that govern control of cash management, and be mindful of the parties’ objectives and relative bargaining power.
Robert W. Lannan is an attorney and the Principal of Lannan Legal PLLC, based in Washington. D.C. He advises and represents hotel owners and operators nationwide in a variety of transactions. Mr. Lannan also serves on the faculty of Georgetown University’s Global Hospitality Leadership graduate program. He can be reached at robert.lannan@lannanlegal.com.
The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.
03
Map Out All Your Costs
Booth Space and Contents (51% - $22,950)
Personnel, Travel, Lodging, Meals (18% - $8,100)
Electricity, Wi-Fi, Drayage (12% - $5,400)
Technology Rentals, move-in/move out (11% - $4,950)
Marketing, Collateral, and Giveaways (8% - $3,600)
Set up Your Budget by Asking Vendors for Ballpark Figures
Minimize Overtime, Especially if the Venue has a Union
Use Social Media and Free Tools to Get the Word Out
Rent Equipment
Don’t Always Rely on Preferred Vendors
Get Rid of Paper and Promotional Items
Take Advantage of Early-Bird Rates
Reduce the Size of your Booth
Double-check Your Invoices Against the Agreements
10 Tips to Tame Your Trade Show Budget
There’s no question about it, exhibiting at a trade show can be expensive. There are the booth cost, show services and other essentials that will help draw in attendees to your exhibit. However, it’s essential to keep these expenses under control. Here’s a summary of 10 ways to do just that.
According to EXHIBITOR Magazine, the average trade show budget breaks down in five broad categories. For example, if your budget is $45,000, you can expect to pay the following percentage for dollars for each:
If you are going to your first trade show or don’t exhibit regularly, it’s okay to ask for estimate pricing. Most suppliers welcome this opportunity as a way to give you what you want at a price you can afford.
Every show manager has negotiated on your behalf the move-in and out rates. In your contract, it will spell out the union’s role is at the trade show and which hours and days are within standard billing rates. Once you know their part, plan accordingly. This mantra also extends to temporary booth staffing.
Rather than sending direct mail, create a content calendar for social media posts. Promote those posts to your target audience. Use the show’s free press release distribution channel. Offer to write a guest blog on the trade show’s website in exchange for identifying your booth number at the end of the piece. Not only will you save money, but you’ll also be able to measure the impact of your efforts along the way.
Through the rental process, you’ll save money on shipping and storage. National rental companies can 1) deliver, setup, and strike their laptops and tablets, 2) preload your apps and 3) Keep their equipment’s operating systems and apps up-to-date, minimizing your risk for problems, including a cyberattack.
If you are traveling to a new city or exhibiting at a venue you’re not familiar with, preferred vendors can give you peace of mind. However, that doesn’t mean you’re required to use them unless it’s stipulated in the contract. When possible, use your trusted provider or obtain at least one other quote.
Brochures, flyers and giveaways (unless they are expensive) end up being thrown away or left in many attendees’ hotel rooms or cars. Instead, focus on sharing business cards or investing in a lead retrieval system that can easily capture pertinent information about your booth visitors.
Register for the trade show, book your flights, hotel rooms and event rentals as early as possible for maximum discounts.
Evaluate your 2019 trade show ROI. Do you need all that exhibit space? If you didn’t close a significant amount of business, don’t have any new product offerings or want to tighten your spending belt, it may be the perfect time to go smaller.
Billing mistakes are made, especially with large trade shows. Pull out your contracts to ensure you received everything you wanted at the agreed-upon price.
By following these ten tips, you have an excellent opportunity to keep your budget intact, enjoy the show, and collect valuable leads!
Don’t miss any event-related news: Sign up for our weekly e-newsletter HERE and engage with us on Twitter, Facebook, LinkedIn and Instagram!
- Get link
- X
- Other Apps
- Get link
- X
- Other Apps
Comments
Post a Comment