There is no doubt that the Tourism and Hospitality Industry are the primary sectors that are greatly affected by the current pandemic, COVID-19. With the enforcement of lockdowns, hoteliers and restaurant owners are forced to close down the business. Experts estimate that the world will slowly recover by mid of July to August. With the industry taking a nosedive, it is a critical time for business owners to re-examine their budgets and financial forecasts and if none, now, is the proper time to make one.
The hospitality industry, prior to the current pandemic, is still one of the fastest expanding business sectors in the world. With the global expansion of business, rise in demand for air travels and the increasing numbers of middle-class population in the past 2 decades, it is not surprising why the hospitality industry is booming.
Aside from providing an excellent service and outstanding management, one key element in a successful hospitality business is accounting. A properly organised accounting system is an essential requirement for any business and the hospitality industry is no exception when it comes to this rule.
How does accounting help the hospitality industry exactly?
Access to Sales Data at any given point in time
Accounting involves the tracking of sales on a day to day basis. In a restaurant set up, it is impossible to operate without a proper Point of Sale (POS) system nowadays. With a proper POS in place, managers are able to track the sales on a daily basis, analyse the trends on which products are selling best and which ones are not. This enables them to make a better decision on what product to promote and which ones to phase out.
Analysis of Cash Flow and Management of Liquidity
Accounting provides information on the companies’ cash flows and its liquidity. It is important to know if the company will be able to sustain itself with its available resources. Managers cannot make rash decisions on the purchases, project spendings, and or additional human resources without consulting their accountants. Accountants can assess the situation and suggest if there is a need to seek capital from investors or the need to secure a loan from the bank.
Summary of the Financial Performance and Financial Position
The basic reports, accounting provides to business owners are the Monthly Income Statement and the Balance Sheet. These are the standard reports, an accountant provides every month to managers the summary of their operations for the month. Income Statement provides insight on the company’s earnings and expenditures. This will enable managers to check if they succeeded in hitting their sales target or they manage to spend beyond or below the budget and make adjustments in the succeeding months. Balance Sheet, on the other hand, provides managers, insights in the company’s value and its liquidity.
Forecast and Budget
Lastly, accounting enables business owners to make realistic forecasts of the company revenues and make budgets for the succeeding periods. A proper financial forecast and budget give managers a path and plan to follow and the actions to take in the future. A good financial forecast involves, taking into account the market trends, anticipating the future and adapting changes.
Managing the day to day activities of a restaurant or hotel is tremendously daunting itself. Adding to the burden of carry out the financial side of the business is only inviting more trouble. It is important to know which fields you need to focus on and which ones you need to outsource. Having an expert accountant and financial advisor on your side helps you build your business to success.
We at CRESCO Accounting can help you in your business. Our team is composed of Certified Public Accountants with varied expertise and experiences from different industries, including hospitality.
For more information, you can check our website at crescoaccounting.com and have a chat with our AI support or better yet, have a video conference call with our accounting team based in F02-04, Oceanic House Providence Estate, Mahé, Seychelles.