Being in control of your finances is one of the key ways to ensure your Hotel actually turns a profit.
Hotels have a number of different income streams. It is, therefore, essential to analyse the income from these different income streams and match the associated expenditure with the income e.g. effectively create distinct ‘profit centres’ – codes within your accounting software that collate all transactions for one department under a specific tag or heading.
Being able to break down your revenues and expenditure into separate, discreet profit centres gives you more control and a better overview of where the hotel is making money – and where it may be losing money.
The need to analyse your hotel finances
Keeping a close eye on your income and costs is the key to effective financial management as a hotel owner.
Regular analysis of your different income streams, alongside all the associated overheads and expenditure, helps you to see the bigger picture and get an improved overview of the financial health of the hotel as a whole.
Setting up profit centres for each area of the business, and then tracking your revenues and costs through these centres, improves your overview and allows you to drill down into your accounts and reporting in far more detail.
Each profit centre needs to be managed effectively, and that means looking at each individual profit centre on a regular basis. Regular analysis ensures that any loss-making areas of the hotel are not hidden by the more profitable ones – for example, it’s possible for gross profit margins on food and beverage sales to be masked by room income that has a low marginal cost.
Customising your accounts and reporting
Saints Tourism & Leisure can provide you with specially formatted hotel accounts that show the results of all the different profit centres within your hotel – and give you helpful key performance indicators (KPIs), such as gross profit margins on food and beverage sales, to help you track your profitability over time.
Having a breakdown by profit centre provides an extremely useful tool for you, as the owner or general manager of the hotel. You can investigate poor results and control each element of the hotel in fine detail, as well as be able to delegate some of the financial management tasks to your departmental heads or line managers.
Hotels are a labour-intensive business to run, so one of the biggest costs you will incur will be your payroll. Our detailed payroll reports give you a full analysis of payroll-related costs for each profit centre, giving you the numbers you need to keep your staffing effective while keeping expenditure to a minimum.
A better view of your costs and budgeting
Being able to see your costs and overheads in such granular detail can have a significant impact on your ability to manage those costs.
Many costs can be allocated directly to a profit centre – these are known as your direct costs and will cover elements like the bulk costs of food for your restaurant, or drinks for the bar area. Other costs are indirect or fixed costs that will need to be allocated between all the different centres – generally these will be overheads such as utility bills, business rates and other expenditure that covers the whole hotel, rather than one particular profit centre.
Setting clear budgets for each profit centre at the start of each period is a good practise to get into. When you have a defined budget for each area of the hotel, it gives you something to aim at and provides a benchmark that you can use to compare your actual results against.
Variances will occur and you will see differences between your actuals and your budgeted costs. The main thing to understand about your profit centre budgets is why these variances have happened. For example, was the weather particularly bad in the previous month, lowering your occupancy rates and affecting the overall revenue into the hotel? Or are you overspending on your fresh produce and creating loses for your restaurant profit centre?
Talk to us about improving your profit management
At Saint, we have decades of experience in the hotel industry to help you get the absolute best from your hotel finances.
Saints Tourism & Leisure will set up your accounting software to provide you with a customised system that includes profit centres for all the important areas of your business, alongside easy-to-track KPIs that give you the overview required to manage your financial performance.
But we don’t just provide the numbers. We will also work with you to analyse and review your profit centre numbers and help you to spot the loss-making element of the business – while giving you sound advice on ways to improve and enhance the overall efficiencies of the hotel as a whole.
Contact Saints Tourism & Leisure to arrange a call and see how effective management of your profit centres will cut your costs and boost your hotel’s profits.
