Hotel Financial Management Report Free Essay

Executive Summary

The Hotel industry is a complex business that requires adopting with speed and precision its nature by implementing an effectual financial management. The success of a hotel relies on financial management solutions that align business stratagems and operational functions while enhancing the hotel’s visibility into trends and other aspects that could influence the performance of the hotel. A good financial management scheme that will solve the current plights of the hotel takes into consideration the following; financial accounting and reporting, cash handling, client/customer management, staff compensation, and staff management. This report analyses the significance of an effective financial management entailing; sustainable financial planning procedures and proposes 4 steps towards attaining it as follows; adequate documentation and record keeping, a definition of business cycles by writing policies and procedures, fundamental review procedures in financial records, and enacting a formal ethical policy. In addition, there is a need to incorporate computerization in the processes by employing a Property Management System. Further, the report identifies and comments on the risks the hotel should manage and culminates on conclusions and recommendations.


The Hotel industry is a complex business that requires adopting with speed and precision its nature by implementing an effectual financial management. This, therefore, means that being a financial manager extends further than just handling the various day-to-day hotel transactions. The financial manager propels the hotel performance through sharing of vital information within transaction data and adopting procedures seamlessly in the face of any prevalent business conditions. The success of a hotel relies on financial management solutions that align business stratagems and operational functions while enhancing the hotel’s visibility into trends and other aspects that could influence the performance of the hotel (Basak Denizci n.d., p. 9). This paper is a business report written addressed to the chairperson of the board of directors concerning cash handling and control measures within the hotel, presents the benefits of computerization of hotel processes and identifies key risks.

A good financial management scheme that will solve the current plights of the hotel takes into consideration the following; financial accounting and reporting, cash handling, client/customer management, staff compensation, and staff management. These help in the reduction of transaction costs, shorten the procedure cycles, achievement of consistency, and enhance financial transparency (Basak Denizci n.d., p. 10). This report aims at proposing to the board of directors of the hotel a feasible financial management scheme that will cover process and procedures on cash handling and control measures for the hotel. It will address the benefits of computerized operations, and comment on various identified risks. The report will explain why the proposed financial management scheme is necessary for the success of the hotel in terms of cash management, staff management, and efficient operations.

The range of issues that will be addressed in this report includes; insufficient cash funds in the hotel’s bank account, the need for focus on computerization of processes, the use of cash registers, and feasibility of the purchasing a local hotel. The report will be addressed to the board through its chairman on practical financial planning, provide effective and accurate business forecast for acquisition, effective control systems, and management of working capital, and a guide for decision making in the hotel.


Cash handling and control measures

So as to overcome the challenge where the hotel’s general manager has to use his credit card to for wage payment and to later reimburse them, a sustainable financial planning procedure should be undertaken. This should start by making a sales forecast which will be used for the establishment of the revenue for the recurrent budget for wage payments (Dmitrieva 2014, p.5). Being the financial manager of the hotel, I would ensure that the sales forecasts for the hotel are realistic and practically attainable. This will ensure that the recurrent budgets such as wage payments are not flawed as will not require the general manager to dig into his own credit card to meet these payments.

Together with the general manager, we will work across all divisions within the hotel to determine operating budgets that encompass projected revenue, the number of employees, pricing, and other expenses that the hotel might accrue in its processes. One way to conduct the sales forecast would be to consider the revenues and expenses of the previous year so as to inform the current budget. The other ways would be flexible and zero-based budgets which permit businesses to amend expenses and budgets centered on the drivers of the revenue that the hotel boasts of (Dmitrieva 2014, p. 5). On the other hand, zero-based recurrent budget planning will obligate the justification of expenses based on the activity-drivers.

The leaders of every department within the hotel will be held accountable for attainment of revenue targets and management of expenses. The budget will be updated on a monthly basis based on the consolidation of accounting data and apt steps will be taken to curb any variance between the expense/revenue and the financial capability of the hotel. The financial management scheme that will be undertaken will aid in making decisions and accounting for yield management in the sense that it will determine pricing of products and services such as foods, drinks, and room service (Dmitrieva 2014, p. 6). Once all the above are done, a clear budgeting of wage payment will have been attained and hence the general manager will no longer have to use his own credit card to pay for wages.

Using money directly in the cash register leads to control deficiencies which lead to the loss of resources and a decline in resources. This report proposes a number of steps in ensuring proper cash handling and control measures that are profitable for the hotel. First, there is a need for adequate documentation and record keeping which serves as the evidence for all transactions done and is the input for the establishment of apt financial records (Harwood 2014, para. 2). Financial documents that are numbered ensure that every single transaction is noted and accounted for. This aid in avoidance of duplication of records and with such easily traceable financial records, the board of directors can easily find answers to all financial-transaction-related queries. Further, this aids in internal audit, a compilation of financial records, and filing of tax returns.

Secondly, there is a need for a proper definition of business cycles by writing policies and procedures as this enables the hotel to add value without much effort. An effective procedural policy will seek to align the hotel’s goals and its operational procedures (Harwood 2014, para. 3). This will be critical for sales and accounts receivables, handling of cash, and all other financial undertakings such as payments of small expenses that the general manager used cash registers. The need to document the hotel’s key controls for all processes is to enhance transparency, consistency, and role allocation. Further, it will aid in case changes and improvements are to be undertaken as this will enable the hotel to inform, train, and bring hotel staff up to speed on the changes. Within this same undertaking, there should be a policy that requires control of authorization of transactions such that no payments are made without proper authorization.

Several levels of authority say the general manager and the hotel director should jointly make authorization of purchases as this will aid in the elimination of the risk of inappropriate spending. In addition, authorization of purchasing options gives the hotel administration the opportunity to examine various purchase options and choose the one that will support the hotel’s goals. Thirdly, the board of directors will be needed to perform fundamental review procedures in financial records such as revenues in each month, reports of expenses, as well as the budget deficits(Harwood 2014, para. 4). This is a step towards fraud aversion, a performance review of the hotel, and serves as a decision-making tool to make requisite changes in areas where the hotel is performing poorly.

Fourthly, the hotel should enact formal ethical guidelines and policies for all the staff. This will ensure that access to tools, petty cash, and other valuable possessions of the hotel are handled ethically and with integrity to avoid inefficiency and misappropriation (Harwood 2014, para. 5). Such a guideline is a disclosure of how the hotel will operate and is a reflection of the principles and objectives of the business. The value of this policy for the board of directors is overarching as it will ensure that all hotel staff adheres to this code of conduct (National Conference On Vanijya Sammelana – 2015, 2015a, p. 1). Being the financial manager, it will be my role to interpret the same to every worker in the hotel. The employees of the hotel who frequently handle cash are to be trained in regards to these ethical guidelines.

Computerization of processes

The expectations of the customers of any hotel are very dynamic hence there is a need for incor

c poration of a tool that suits such dynamic needs (Castillo et al. 2014, p. 285). This tool is technology which is incorporated to all the hotel processes so as to make the hotel relevant and competitive in the market, conduct efficient operations, and enhance customer satisfaction. A good financial management scheme helps in integration and streamlining of all financial processes in an end-to-end format. It aids in reducing transaction costs, shortening processes cycle times, help in the attainment of data consistency, and improvement of financial accountability (National Conference 2015, p. 1).

In this regard, the hotel needs to enact a Property Management System coined PMS; which is software or collection of web-based applications that manage the day-to-day running of the hotel (Castillo et al. 2014, p. 287). It integrates management of revenue and marketing efforts with front-office undertakings like reservation, check-in and check-out, room allotment, billings, and room pricing. The hotel’s computerized PMS is focused on customer experiences and profitability of the hotel and encompasses the following services; computerized services on food and beverages, house-keeper services, marketing of sales, and helps in the management of revenue generated by the hotel (National Conference 2015, p. 2).

The benefits that the hotel will benefit from this system in terms of marketing of sales include; determination of what and how products and services are to be offered, pricing of products/services, customer awareness creation, and satisfaction of customers. In terms of revenue management, since most transactions will be made based on a computerized system, all undertakings will be documented making it easier for review and accountability (Basak Denizci  n.d., p. 17). The work of the general manager and other workers will have been also reduced. Further, it will aid in decision making on revenue based on the prevailing market conditions. In addition, the PMS provides a Point of Sale which manages all the cash handling in the hotel.

Identification and comment on risks

The key risks that many hotels face and this hotel not being an exception may face include; market risks, sociopolitical risks as taxes and legislation, lease agreements, branding and reputation, and talent management. Market risks involved in matters such as the acquisition of a local hotel may include the kind of services that the hotel will offer vis-à-vis the domestic demand and developments such as room occupancy and the need of technological services in a hotel (Scandic n.d., para. 2-7). They also include market downturns in certain periods of time. Sociopolitical risks include social and political factors such as taxes and legislation enacted by authorities which may affect business viability.

Lease agreements of involved in the acquisition of a new premise should be considered since it impacts the profitability of the business immaterial of the potential of the location of the business (Scandic n.d., para. 8). The hotel should ensure that risks associated with a bad brand are avoided by ensuring consistency and quality of services, which will increase its reputability. Lastly, in the acquisition and continuous services, there is a need for the management of human-capital that is employees of the company to ensure that they are loyal to the hotel to avoid customer non-satisfaction.

Conclusion and recommendations

The significance of financial management for a hospitality entity such as this hotel is very significant since proper cash handling and internal control measures for a hotel are never negligible. This is because it aids in financial record keeping, saves a lot of money, forms a basis for planning, and cultivates a positive working environment which ensures that customers are satisfied. This report recommends that the hotel enacts proper financial planning and budgeting and conduct a frequent review of performance to enhance its profitability. Further, there is a need to first compare the various available PMS models to ascertain the very appropriate one for this hotel considering its market and capacity (National Conference 2015, p. 3). In addition, the management must always conduct a risk analysis before making new ventures.