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Imagine a world without order, where everything was a mess and no one knew where anything was. Where money and resources were being thrown out it all directions without knowing how much was spent, how much was left, or even where it went to. This wouldn’t be very sustainable, not to mention comfortable.

Now imagine if this was in a hotel environment; how could you even accommodate guests? Hotel staff wouldn’t get their salaries, guests wouldn’t get what they paid for, no improvements would take place, and money would just disappear. That doesn’t sound too good, does it?

This is where proper hotel management accounting comes in. But before we delve into what accounting can do for hotel management, let us first understand what hotel accountants do.

Key responsibilities include:

  • Producing an accurate set of month-end accounts
  • Comparing profit to previous periods and forecasts
  • Preparing budgets and business planning
  • Financial statement and balance sheet production
  • Cash flow statements
  • Payroll control

Now that was very technical and you probably aren’t sure how this applies to your business. Allow me to lighten it up for you; with proper accounting, in and out cash flows are easy to keep track of. Recording transactions make sure that you know exactly how much was spent or received and where it went to. Resources would be properly allocated to each division without budget shortage and it would be easier to know how to improve your business.

To further understand why accounting has such a significant role in hotel management, take a look at some examples of important questions accounting can readily answer for hospitality managers:

  1. What was the total sales achieved by the business last year?
  1. What was the average prices of our hotel rooms last week? How does it fare compared to our competitors?
  1. How is this month’s profit compared to last month?
  1. What was our most popular menu item? What was our least popular one?

Knowing the answers to these questions are vital to be able to plan for the future and improve the business to better serve clients and increase profits. However, it is important to distinguish accounting from management. Accounting is a tool used by good managers. Let us consider these questions that cannot be best answered by accounting alone.

  1. Would our guests prefer an increase in the number of cheaper, or of higher quality but more expensive beverages in our new menu?
  1. Would we see an increase in guest room sales if we open the swimming pool for 24hrs per day instead of the current 16 hours? By how much more?
  1. Who should I assign to train the new waiting room staff?

The best answers to these questions require experience in hotel management supplemented by a fundamental knowledge in accounting. When these two vital elements are present, this allows a business to be as efficient as possible with the potential for maximum growth. With this information, it is clear why accounting is such an indispensable aspect of hotel management.

Jojo Balagosa

Jojo Balagosa

Sales and Marketing Manager at Jinisys Software Inc.
A software Consultant for hospitality and real estate solutions in the Philippines. General manager for sales and marketing for Jinisys Software. You may follow me on Jojo Balagosa
Jojo Balagosa

One response to “Importance of Accounting in Hotel Management”

  1. Handsome says:

    Wow! This was so cool and informative!