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What is Hotel Accounting and Why It Matters?
Within the dynamic realm of hospitality, where each visitor encounter is painstakingly designed, hotel accounting stands out as the unsung hero working behind the scenes. Behind the opulent décor, fine meals, and friendly greetings, a hotel’s accounting systems drive its financial core. This crucial but frequently disregarded element is the foundation for efficient operations, legal compliance, and long-term success. We’ll explore hotel accounting in this blog, dissecting its complexities and explaining its importance.
What is Hotel Accounting?
A specialist area of accounting dubbed “hotel accounting” was created to address the particular financial needs of the hospitality sector. Unlike traditional businesses, hotels have an evolving spectrum of difficulties, such as fluctuating occupancy rates and variations in demand throughout the year. Their finance systems must, therefore, be robust and flexible.
Let’s look at some major ways hotel accounting adds value to the business.
Hotel bookkeeping is not an easy task. Thousands of regular transactions are happening, from bulk purchases of inventory to employee payroll. These transactions need to be accurately recorded and compiled in financial statements. Hence, a hotel bookkeeping specialist is essential for the task.
Hotel bookkeeping is special because the specialists are trained to work under heavy workloads and in a high-pressure setting. Especially in the holiday season, hotels can see thousands of people checking in and checking out. A lot of billing, invoicing, and bookkeeping is needed to keep track of it all. While accounting software does much to alleviate the problem. AI and automation are pretty much a requirement. But a human touch is still needed at the end of the day to maintain financial control and keep everything.
This is an essential aspect of hotel accounting. Hotels sell an experience, not a real product. The total money made comes from conference spaces, food and beverage sales, hotel rates, and other ancillary services. Hotel accountants are responsible for precisely monitoring and evaluating these various sources of income to maximize total revenue and enhance pricing tactics.
Cash Flow Management
Cash flow management is another main feature of hotel accounting. There are thousands, if not millions, of dollars worth of transactions happening regularly in the hotel business landscape. That’s why tight control of cash flow is of paramount importance. Hotel accounting specialists are trained to manage vast accounting loads. With the help of software and automation, they can easily not only manage and maintain positive cash flow but also introduce several process efficiencies that can reduce expenses and improve cash flow.
Hotels operate on relatively thin net profit margins compared to other industries. They are simultaneously expected to provide a very high experience standard to compete. This situation puts them in quite a tough spot, and effective cost-control measures are essential if one wishes to be successful as a hotel owner. Hotel accounting specialists are the only real solution in this case. They are well-versed in industry methods to cut costs without sacrificing the experience provided.
Budgeting and Financial Planning
Budgeting and financial planning are critical to hotel success. Poor budgeting can lead to unexpected shortages, and insufficient planning can leave your business woefully unprepared to capitalize on opportunities.
Fortunately, thanks to the now common practice of booking a hotel in advance, most hotels today can avoid budgeting and financial planning mishaps. Nowadays, people book their hotels months, if not a year in advance, for various reasons. This gives the hotel an immense advantage, handing over an entire year’s future foresight on a platter.
With all of this future data, a hotel accounting specialist can easily crunch the numbers and give detailed financial planning advice. This helps in planning back-end functions such as maintenance and expansion. It also gives the upper echelon of management a solid financial roadmap for reference in decision-making. While there are certainly cancellations and such that happen between booking and guest arrival, these can be accounted for within the margin of error. Hotels are among the few cases where budgeting and financial planning can be leveraged to achieve incredible gains thanks to the solid future consumer data available.
Why Hotel Accounting Matters
Hotel accounting is all about managing a hotel’s bookkeeping, accounting, and finances. While hotel accounting operates on the same principles as regular business accounting. But some distinctions make it unique and important.
For one, hotels are much more complex than other hospitality industries. Hotels collaborate with tens, if not hundreds, of vendors and business partners to function daily. For example, a hotel must maintain business relations with the retail sector quite heavily to receive a constant flow of essential inventory. From soda to soap, hotels must buy it in bulk and stock up their rooms. On top of this, many hotels need to collaborate with tour agencies and offer rooms and other tour perks to secure occupants. Just imagine the sheer number of daily transactions to make even a small hotel tick.
According to IBISWorld, even when a hotel can be called a “small” hotel, the typical staffing requirements, on average, come out to 18 staff members. Now, consider the hotel accounting workload from tracking and managing the payroll for that many employees. In the case of a 3–5-star hotel, the number of employees scales up to around 8-20 per 10 rooms. Effectively, a hundred-room hotel needs upwards of eighty staff members just to keep it running.
Another peculiarity of the hotel business is that it is a 24-hour running service. Unlike a restaurant or bar with the luxury of setting hours, hotels must operate at all times. The entire point of a hotel is to give people a temporary place to stay while away from home. Hotel owners can’t just turn the power off and leave for the night. This 24-hour operation generates even more financial work, besides everything we have mentioned.
We also need to mention that the accounting workload is multiplied if a hotel has multiple branches. Plus, an added complexity is thrown in with revenue and cash flow management required for various hotels to ensure each one operates efficiently.
Expertise Accelerated’s Outsourced Hotel Accounting Services
With so much cumbersome hotel accounting, nothing short of a team of accounts is sufficient long-term. This is why hotel management is one of the trickiest jobs in the hospitality industry. It makes hotel accounting among the most sought-after accounting services.
However, procuring a competent team of hotel bookkeeping and accounting specialists is quite a challenge. Industry experience is at a premium nowadays, and hotel owners need deep pockets to afford such services. Or not.
With EA’s outsourced hotel accounting services, hotel owners can sigh relief. Whether big or small, EA can link you up with some of the most capable remote professionals in the world. With access to the global talent pool through EA, hotel owners need not be forced to hire the cheapest local option. With up to 60% guaranteed payroll savings, not to mention amazing cost-efficient gold-standard hotel accounting, EA is the accounting solution you need.