The Cost of Improper Accounting

Regardless of size, hospitality businesses that are not properly investing in their back-office resources, specifically in accounting, are potentially losing money due to the inability to collect and analyze adequate data. Now that the busiest part of tax season is behind us we want to remind hospitality business owners what an effective accounting process can do for their business.

Spend money to make money.

In this business, whether you have a hotel, restaurant, or a combination of both, it may not initially appear that accounting would be an area of worry, or an area where significant dollars need to be invested. Accounting, to some, is a commodity. However, if you do not have the right accounting and financial reporting software – or the right people to analyze your data – you cannot make appropriate business decisions.

How do you know if your catering business is bleeding you dry? Or if you are overspending on cleaning rooms? Or if you are under-investing in technology? Simply put, you need accurate, in-depth data to form a strategic, long-term plan to help your business meet its goals.

Fully understand the tools you are using.

It is important to take the time to understand what you want to get out of your reporting and to make sure that your systems and people can help you achieve that result. The systems and people also must record the data in a way that allows them to analyze it correctly. For example, if you have three profit centers, you should have revenue and expenses coded properly to each center. If they are all recorded in the same ledger, you may not be able to tell which profit center is making money and if you can afford to hire an extra server or a new food and beverage manager.

To ensure you can make appropriate decisions, you must be able to assess each department individually – both revenue and expenses. If you are recording revenue by department yet all expenses are recorded in one ledger and not split out by department, you will never be able to get a picture of how each is performing. This also is true for the controller. If you have an inexperienced controller who does not understand the need for accounting by profit center, you will be unable to make the appropriate business decisions.

Have the right people in the right places.

Hire the right people. The right people cost money – sometimes, more than you want to spend. But as the saying goes: you get what you pay for. That goes for people as well. You cannot expect that because someone is able to process cash receipts and disbursements that they would be able to analyze revenue streams and profit margins and become the next controller. They may be able to learn, but how much money are you losing daily in the meantime?

Each day that a business waits to make a change can ultimately cost them money. It is extremely important to have the proper accounting department in place to be able to budget and forecast and make management decisions based upon reading the story that the numbers tell.

Do not wait to make these changes that may help your business run more efficiently, potentially saving you money. Speak to one of our Restaurants & Hospitality Practice professionals to learn more about how to properly structure your accounting and bookkeeping processes.