Hospitality financial management includes some best practices such as: creating an annual budget; building a detailed financial tracking model, having on-going audits and creating a reporting structure that helps managers keep tab on P&L information.
These tasks take place in 3 different phases:
Before the opening: The most important part is at the beginning, investment decision. Therefore a feasibility study either justifies or rejects the investment decision. In order to prevent losses feasibility studies are vital.
Operational Budget and Sales and Marketing Budget: The managers have to focus on the sales forecasts and budgets of a business to create a financial plan. At this point, operational budget takes place as a “plan” for the first year. A sales and marketing plan should accompany the departmental operational budget.
Pre-Opening budget is a detailed document that reflects anticipated expenses associated with the hotel. It covers everything ranging from major operational activities required to prepare for a hotel’s opening, to minor pre-opening expenses.
Physical Control of House Inventory: Either a self-owned or a management agreement hotel operation, all the assets must be complete and without defect at the premises.
Setup of the chart of accounts: The accounting system must match the reporting needs of a hotel.
During the Soft Opening: Accounting and finance tasks are a complex set of activities that integrates with the other departments of the hotel. In this phase all the integration and correct usage of the accounts are verified.
After the Opening: Monthly P&L (profit and loss statement) provides an analysis of a hotel’s revenue, cost and profit performance. Here the basis is Uniform System of Accounts for the Lodging Industry. Also a presentation file is prepared for the owner or the board of director meetings.
Cost Control is a major area of control which must be installed between purchasing and food and beverage. The training of the cost controller and correct setting of the software enables control over not only F&B costs but complete hotel costs in general.
Audit: Departmental Risk Based audit helps to ensure significant amount of control over the business to detect and prevent future errors or frauds. It safeguards the financial interests of the hotel. It is proven that periodically repeated audit decreases the fraud or thest incidence. This s applied not only to audit departmant but all operational and non-operational departments in the hotel.