Archive for the ‘real time accounting’ Category

Real-Time Accounting Improves the Ease and Accuracy of Budgeting

Monday, August 17th, 2015

For most bottom line managers budgeting season is a royal pain.  Every year they have to forecast revenues, project their cost of goods sold and payroll, and budget their operating expenses.  The process is always time consuming; and it always seems to come at a time when the manager is pressed with ongoing operations and other urgent issues.  The good news is that there is a better way!

Recognizing that the best predictor of the future is the recent past, the discipline of Real-Time Accounting and tracking of key data is, among other significant benefits, a simple way to improve both the ease and accuracy of the budgeting process.  As an example, the HRI Tools to Beat Budget program organizes the discipline of:

1.   tracking daily revenues on a week by week basis,

2.   benchmarking and analyzing cost of goods sold on a monthly basis for F&B and retail operations,

3.   recording the details of payroll cost on a pay period basis, and

4.   detailing other operating expenses monthly.

The beauty of this discipline is that at the end of the year, all of this information is in a three-ringed binder – available to the manager at his or her fingertips to create next year’s budget.

There are even some managers who take their operating results month by month and build their future budget as they progress through the year.  Come budget time, their budgets are pretty much done – and they breeze through budget season without breaking a sweat.

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the hospitality industry and its challenges. From time to time, we will feature guest bloggers – those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hardworking hospitality managers throughout the country and around the world.

Hospitality Resources International – Management Resources for Hospitality Operators!

 

 

The Necessity of Real Time Accounting

Monday, July 27th, 2015

Most every month a familiar scene takes place in many clubs.  The financial statements have been prepared and distributed to all stakeholders – the general manager, the department heads with bottom line responsibility, the finance committee, and the board.  It’s around the 15th of the month following the end of the reporting period, sometimes later, and the GM’s phone starts ringing and the questions start coming – “Why are F&B revenues down?”  “Why is Golf Course Maintenance over budget by so much?”  “Why is food cost so high?”

Sometimes there are recriminations – “You told me last month that the cost of food would come back in line this month.”  “How can we avoid assessments if we can’t meet our budget objectives?”  “After last quarter’s overages, you said we’d do a better job controlling payroll, but it didn’t happen!”

Often the general manager or department heads don’t have ready answers for what’s going on.  “We’ll have to look into it and get back to you,” seems to be a common response – certainly not one to build confidence in the club’s management team!

The usual attitude in many clubs seems to be that monitoring the financial performance of the club and all its departments is the sole responsibility of the club controller.  The fact is that all department heads with bottom line responsibility in profit or cost centers must be held accountable for the performance of their units.  In addition to their expertise in a chosen profession – food and beverage, golf, tennis, membership marketing, agronomy, aquatics, spa and fitness, and activities – department heads are expected to master the skills of running a successful business.  Further they are expected to analyze the performance of their operation on an ongoing basis, demonstrate initiative to stimulate revenues and control expenses, and take all necessary steps to meet or exceed their budgets.  This can only be done by tracking their revenues and expenses in real time.

Some department heads aren’t inclined to do this, either because they don’t relish or truly understand the numbers side of a business or feel it takes too much time from other more enjoyable tasks.  In any case, these excuses are inappropriate.  Running a business requires a commitment to the financial aspects of the operation and without knowing where the business stands financially at any given moment prohibits the possibility of corrective intervention.

A modest effort to better organize oneself and the task of collecting critical data on a daily basis along with the disciplined routine of entering this information into spreadsheets is all that’s necessary to stay current with the numbers.  Some may say that such collecting and recording of data is the proper role of computers and specialized software.  Such managers may rely on software summaries, delegate the task of tracking to an assistant, or will wait until the end of the period to bring their numbers and benchmarks up to date.  In so doing they lose the opportunity of spotting adverse trends and taking timely corrective action to ensure they meet performance expectations.

While I agree that computers make the task of organizing daily data much easier, I strongly argue for the necessity and benefit of managers “touching” their numbers every day.  Doing so ensures both a conscious and intuitive understanding of one’s business; helps spot anomalies, adverse trends, or erroneous entries; and makes a manager more attuned to the cyclical ebbs and flows of the business.

If department heads owned their individual operations and had their own money at risk, you can be sure they’d move heaven and earth, including a real time accounting of their revenues and expenses, to ensure its success.  While they don’t own their club department, they are being compensated to run it professionally and demonstrate the same proprietary interest in its successful performance.

Given the general manager’s responsibility for the club’s performance, he or she must ensure that the proper fiscal disciplines are established club-wide and that department heads have a complete understanding of and fully meet their fiscal responsibilities.  Two resources to accomplish this are Tools to Beat Budget and Basic Accounting and Financial Management for Managers.

Bottom Line:  Though each club must design the most efficient means to track departmental operating data in real time, the overall benefit of real time accounting to the club is immediate and compelling.

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the hospitality industry and its challenges. From time to time, we will feature guest bloggers – those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hardworking hospitality managers throughout the country and around the world.

Hospitality Resources International – Management Resources for Hospitality Operators!