By Analytix Editorial Team
Accounting needs for hotels differ from general business accounting in a few ways, mostly dictated by the fact that guest satisfaction forms a huge part of hotel operations. Almost every aspect of a hotel business has an element of client interaction woven into it. Whether it is about managing accommodations, food and beverages, or housekeeping supplies, each of these categories influences the guest experience.
As a business function, accounting and bookkeeping are essential to a hotel business and mistakes in recording transactions, income, expenses etc. can result in a loss in revenue as well as a negative guest experience.
The competence of staff and a thorough understanding of the system on the part of the employees managing accounting are critical to ensure consistently positive experiences and returning business.
What Constitutes Hotel Accounting and Bookkeeping Mistakes?
Errors could occur in various categories, for example, in recording income and expense. Some of these can directly affect the finances of the business, influencing the amount of cash available for expenses, eventually leading to problems even in day-to-day operations. Operations like management of cash flow and accounts receivables and payables are a result of diligent accounting and bookkeeping.
Mistakes in accounting and bookkeeping could be as small as forgetting to record a transaction or as big as missing out on recording critical entries for smooth tax filings. In reality, there is little room for errors, big or small, in accounting and bookkeeping.
Forgetting to record a transaction can quickly snowball into overdue payments, while mistakes in tax filings could affect business sustainability.
Both are situations that can be avoided with judicious planning.
Below is a list of a few hotel accounting and bookkeeping mistakes that should be avoided.
Mistake #1 – Not Planning for Unforeseen Events
Disasters can be entirely unforeseen, catching a business unaware and leading to crisis situations that can affect the business stability. Apart from events like a hurricane or an earthquake, disasters may include:
The mistake lies in not planning for such events and failing to create adequate backups. Backups are a critical component of hotel accounting for everything from managing payments for accommodations to inventory for food and beverages and housekeeping supplies. While backups may not be 100 percent foolproof for resources, at least key areas of responsibility and work status can be shared so that it can be picked up by others without harming business sustainability.
Mistake #2 – Neglecting Everyday Bookkeeping Tasks
Are all hotel transactions being recorded without fail? What about statement reconciliations? Are inventories being tracked, together with variations in merchandise prices, etc.?
Each of these tasks are directly connected with cash and finances in a business and if neglected, can provide business owners with an erroneous picture of the health of the business. Not only does this affect buying decisions, it can also hamper critical investment decisions for the business. In a hotel business, this is compounded by the variations possible across categories: room rates, food and beverage varieties, staff holidays and off-days, etc.
Mistake #3 – Not Thinking Through to Tax Deductions
Failing to preserve receipts for smaller amounts, or not deducting sales tax, or not recording transactions diligently, can affect a business when it comes to tax filing time. Tax deduction claims vary according to the nature of the business and missing out on certain exemptions can negatively impact a business at tax time. Also, practices such as missing out on deducting sales tax on transactions could result in an inflated figure of tomtal sales, thus increasing the amount of tax due.
Mistake #4 – Improper Categorizing
Categorizing is basic to bookkeeping and accounting; however, it is possible to get this wrong, resulting in errors when measuring profitability as well as losing out on tax savings. Mistakes can happen when categories such as income and expense get switched or when entries are made incorrectly.
In hotels, the categories can increase, given the variations as discussed in a previous section: varying room rates and rentals, price variations across package deals, and deals with and without food and beverages, housekeeping expenses, other guest requests, etc. Improper entries in these ledgers and categories can result in mistakes in accounting figures, cascading into financial losses for the business.
Mistake #5 – Inability of Software Systems to Adapt to Growing Needs
Accounting software systems can take care of critical bookkeeping and accounting tasks for a business. However, if it is unable to keep up with expansion, or manage work situations where the hotel experiences heavy sales or a period of sudden growth, it can result in an accounting backlog and reason enough to be considered as a mistake. The system then fails to carry out bookkeeping and accounting tasks, resulting in figures that may be inaccurate and unreliable, in addition to a huge gap in numbers owing to lapsed records. Sometimes, this may not be discovered until it is too late and nearly impossible to resolve.
Finding Solutions to Manage Hotel Accounting Challenges Better
Given the nature of accounting services, it is imperative that a business invests in solutions that are tried and tested. Solutions that are effective will help in several ways:
Choosing Solutions for Productivity and Profitability
At Analytix Solutions, we have been helping businesses, including startups across diverse industries, for scores of years now. Our depth of experience has helped us understand requirements better, creating customized solutions and also coming up with industry best-practices. This allows business owners to address their challenges in a systematic manner, helping the process of streamlining operations faster and rapidly.
Insight360 by Analytix is one of the solutions we offer our clients who are involved in hotel businesses. It is a proven provider of accounting solutions. It complements existing capabilities of a hotel to take operations to a higher level, one where growth and expansion of the hotel business are complemented by consistency in quality and adherence to high service standards. This immediately results in more reliable finances while owners can focus on critical business issues, such as customer service and business development.
Analytix Solutions is a single source provider of business solutions to startups and small to mid-size businesses that are positioned for growth. Call us at 781.503.9002 or email us [email protected] to learn more about how our customized and scalable solutions can help your business manage challenges better.