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- December 17, 2024
Implementing an Effective Accounting System for Your Hotel: Tips and Best Practices
Is your hotel business struggling to manage books and accounts? Well, that’s a common issue with hotel businesses. There are instances where hotels go out of business even after delivering quality customer service.
More often than not, accounting and bookkeeping are the culprits. Every business runs on accurate finance management. Any failure here can be catastrophic for a hotel business. So, how do you steer clear of these problems? Well, it’s pretty simple. You implement an effective hotel accounting system for your hotel.
Here are some tips from our experts that might help you with this:
Tip#1: Establish Clear Accounting Foundations
This is a no-brainer. You’ll need some rock-solid accounting foundations. For this, you’ll need a structured chart of accounts first. You can use It to categorize all your financial transactions. And When you can track your financial transactions, you get a clear picture of your revenue, expenses, assets & liabilities. We strongly recommend our clients categorize their revenues into categories like room revenue, food & beverages sales, and more.
The next step is to define your accounting methods. For most of our hotel clients, we prefer the Accrual accounting method. In general, most hotel accounting experts prefer this method as it records expenses and revenues when they are incurred. This is different from other methods where the revenues and expenses are recorded when the cash changes hand.
Tip#2: Manage Diverse Revenue Streams Efficiently
Each hotel has multiple revenue streams. You might be making money from room rent, dining, events, and more. So, you’ll need an expert’s help to make sure nothing slips through the cracks. We recommend our clients assign specific codes to each revenue stream. This makes tracking easier. For example, the revenue from room rentals will be different from the revenue via dining. This gives you a clear picture of what’s making you the most money.
Develop procedures to monitor revenue sources daily. Reason? Well, this step will help you collect real-time data error-free. You can detect discrepancies and manage proper financial transparency.
Tip#3: Implement Proper Internal Controls
You will need extensive internal control to reduce the risk of fraud or errors in your accounts. The best way to do so is to delegate duties. Assign a different staff member for a distinct part of the financial process. For example, the individual collecting payment should be different from the one who is recording it.
Another important step is Regular reconciliation of your bank statements, credit card transactions, and vendor invoices. Such redundancy eliminates the risk of financial issues spiraling into the big ones.
Finally, a stringent approval process must be established for all the big expenses and payroll changes. You do not want big transactions to take place without your consent, right?
Tip#3: Control Costs with Precision
Cost management is vital for the hotel industry. The expenses are often sky-high. There are massive expenses like labor and procurement. You’ll have to categorize these expenses for better tracking. You can create categories like operational costs (utilities, wages, and maintenance) and non-operational costs (depreciation, interest, etc.).
Then, implement redundant inventory management. It will help you bring your food and beverage wastage down. Meet with your suppliers and push them a bit harder for better terms. Also, automate your vendor payment to reduce the risk of errors. Remember, a happy vendor can come to your rescue when you need them the most.
Tip#4: Focus on Cash Flow Management
You will need a healthy cash flow to sustain your hotel’s routine operations. For this, you have to track every penny coming in and going out. Such a price cash flow management can help you maintain liquidity. You can use this cash flow to meet your obligation and invest in future growth.
But how exactly do you manage a healthy cash flow? Well, you begin with your cash flow tracking. Identify how much cash is coming in and going out of your hotel every day. You’ll get a clear a idea about trends and seasonal fluctuations with it.
Then focus on how much cash you’ll need in the future. So pay attention to peak seasons, loan payments and any planned investment. Also, focus on strict billing and collection policies. Do not ignore overdue and delayed payments.
Remember, a hotel needs money to thrive and survive. You cannot be lenient in your collections and overdue. Only then, you’ll be able to meet your financial obligation and keep your hotel profitable.
Tip#5: Adapt to Dynamic Pricing and Demand Variations
The demands in the hotel industry change continuously. Demands change with seasons, holidays, and certain events. You can utilize these changes to improve your finances. This does not mean you rip off the customers in peak season. But you can charge a premium during these seasons. While you’ll need an accounting and bookkeeping expert to manage this dynamic strategy, it’s a worthy investment.
Hotel Accounting experts in the USA like CROWNGLOBE can help you handle dynamic pricing models, automatic rate adjustments, and seamless data collection.
Tip#6: Monitor Key Financial Metrics (KPIs)
KPIs offer you a quick insight into your hotel’s financial health. There are numerous KPIs like Average Daily Rate (ADR) and Revenue per Available Room (RevPAR). Such KPIs give an insight into your business’s financial health.
The idea is that you gather insights from these KPIs and make the changes where needed. Let’s say your RevPAR is way below your expectations. You can identify the possibility of pricing adjustment to fill this gap. But you’ll only learn about RevPAR if you trace that KPI.
Tip#7: Partner with Accounting & Bookkeeping Experts
If you are trying to manage all your hotel accounting and bookkeeping with your in-house team, you are missing the point. You cannot rely on one or two internal accounts to manage the complexities of hotel business accounting.
Instead, hire an expert like CROWNGLOBE. Such accounting and bookkeeping companies have experienced teams to manage all the financial aspects of your hotel business. They can take care of your cost management, accounting and bookkeeping, KPI tracking, and more.
Result? You’ll get a breather from the headache of your accounting and bookkeeping. You can utilize this extra time to identify new ideas to grow your business.
Take the Right Steps
The competition in the hotel industry is tough. We understand that. So, it’s better to let our tax experts handle your books and finances. You focus on your customer service and bring in more customers while we will handle the rest.
Did you find this blog post helpful? We regularly come up with useful insights into accounting, bookkeeping, and taxation. So don’t forget to follow and subscribe to our mailing list.
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