Having a financial system that produces regularly scheduled information about your hotel and the direction it is going is paramount to your survival. Without this regular reporting, you are really flying by the seat of your pants. But what exactly do you need to be looking at and who produces it and when?
That is what this piece is about. I am going to lay out the cast of characters you need to include, the documents they need to produce, and a schedule to follow. The beauty of this system is it is pretty routine and we repeat it every single month like the cafeteria menu. Having a simple system that everyone knows and can follow is beautiful.
The 1,2,3 Punch: Accrual, monthly & forecast or AMF, if you like acronyms
- We must use the accrual accounting system and the hallmark of this is producing a monthly financial statement that matches all revenues and expenses from the current month. The format for the statement is in the USALI layout and it includes year-to-date information and comparisons to budget and the latest forecast. If you’re not familiar with USALI – learn more here.
- We must do this on a regular and scheduled monthly basis. Waiting till the end of the year or the first quarter of the new year to lean our annual fate is unacceptable. We need monthly reporting. If you have to wait for your “accountant” to pull all the information together at the end of the year then you are sentencing yourself to living in a kind of purgatory where you’re unable to learn your own fate. Your business is in permanent limbo and this is not necessary, professional, or acceptable.
- Each month we actualize the previous and YTD financial statements we also prepare the latest 30-, 60-,90-day forecast and update the 12-month year-end forecast.
Right now, if you are reading this and you complete this process inside your hotel business then you know what I am talking about and you can stop reading. If you do not do these three processes and you want to then this is your wake-up call. You may have all kinds of excuses and reasons why you do not or cannot but know this: Without accurate and timely financial information your business is not going to be as profitable as it could be. Full stop, period, exclamation point.
To run your business with only annual statements and a running track of the current revenues is what is known as the cash basis. That may have been OK for the past or the previous establishment but not for you. So, ask yourself, How can we make this move at this time? That is the first step.
You may be thinking it will cost more to produce this information and, in the end, the results will be the same. Wrong. The truth is, it may take some additional steps and involve more people, but it is worth it because it is what is required if you want to be able to manage your financial endeavor properly. You have made the investment in your business and taking the easy way is penny wise but pound foolish.
Read about the detailed steps you need to follow to create your budget and monthly forecast here.
The best way to utilize the reporting and monthly information are by getting the key members of your team involved. This brings up another sticky subject and that is, sharing the financials inside your business. This is a paradigm and shifting the way you look at this trust issue is the secret to mastering this dish. Read about learning how to and why you should share the financials here.
Finally, creating the process, sharing the information, and making this transition stick is what you want. It requires your leadership, commitment, and a willingness to learn and grow. I wrap up the entire process to follow here.
If you have read this far it is certain that you’re looking to make a change in the way you do your hotel financials or you’re just bored. Either way, it is OK. If you want help and a path to better reporting, then reach out. Waiting and worrying will not help, but I can.
PS: If your accountant has been telling you this is not possible or practical, it’s time for a new one. 😊
At Hotel Financial Coach I help hotel leaders and teams with financial leadership coaching, webinars and workshops. Learning and applying the necessary financial leadership skills is the fast track to greater career success and increased personal prosperity. I significantly improve individual and team results with a proven return on investment.
Call or write today and arrange for a complimentary discussion on how you can create a financially engaged leadership team in your hotel.
Contact David at (415) 696-9593.
Email: david@hotelfinancialcoach.com
www.hotelfinancialcoach.com