Hospitality Financial Leadership – Why is Hotel Accounting Different?

By David Lund - The Hotel Financial Coach

17 January 2022
Lund

I heard this about 40 years ago and it has stuck with me. I was a newbie cocktail waiter working part time in my hometown hotel. One of my regular weekend customers was the controller and he was telling me he needed an income auditor for the summer line-up. I suggested my brother who was recently out of work at his articling job at a CA firm.

He told me rather strongly I recall that my suggestion would never work because my brother had no hotel experience and hotels are different. I pressed him on it and all he could say is, “We have a different way of doing things in the hotel world.”

At the time I was in hotel school, had taken my hotel accounting 101 and was curious about what he really meant.

It took me several years to end up in the accounting department in another hotel, quite by accident, you can read that story here at brotherly love. To be completely honest I have never worked in an accounting capacity in any other business than a hotel but I am pretty sure I know the reasons why hotels are different than most other businesses.

Number 1. Hotels are a retail operation and they never close

So, much like the retail world we need to balance the receipts each and every day. On top of that we operate 7/24/365.

When a hotel opens, we literally throw away the key to the front door – that is how open we are. If you are an accountant in another business, let’s say a transportation company or a construction company, you create your revenues by billing your customers through accounts receivable and you can do this at your leisure. In the hotel world we have revenues and settlements coming at us like a blizzard each day in several different streams and that means managing cash, credit cards, our in-house guests (more on that in a minute) and accounts receivable.

Number 2. Hotels are a sub-ledger heavy business

This business requires additional attention to detail and operational understanding. So, what exactly do I mean by that statement? In the hotel world we operate “systems” to help the hotel function efficiently. The property management system, F&B point-of-sale systems, SPA and golf systems, inventory systems, labor management systems…just to name a few. And all these systems have the operational features like reservations, check um in and out, tee times, recipes, staffing guides, as well as the money and the accounting transactions flowing through them at the same time. You will not survive and prosper as a hotel numbers person if you are not comfortable getting your hands dirty under the hood. Let’s just say that leaving these devices to someone else to manage just won’t work.

Number 3. Balance everyday: This flows from No. 1 and 2

With all the retail and systems activity happening 24/7 in all the areas of the hotel this means we need to balance things up completely and we need to do this EVERY DAY. Not only do we need to balance revenues with receipts. We also need to ensure the separate revenue systems all balance to the property management system. This means ensuring all the sub ledgers balance including credit cards, guest ledger, city ledger and advance deposit ledgers.

Then throw in a mountain of:

  • Gratuities to be tracked and paid, some as cash and some to paychecks
  • Individual cash and credit cards sales from waiters and bartenders, not to mention the other outlets like the SPA
  • Daily reconciliations of inventory and operating stock for the bars and restaurants
  • Payroll tracking and analysis for hundreds of employees, etc.

Before you can say good morning there are a mountain of things to record correctly and this means balancing and tracking all these functions and the resulting transactions because they all require accounting treatment. That means they require the accounting department’s oversight and, ultimately – and here’s the killer – constant monitoring and correction.

Number 4. Manage multiple revenue, expenses in multiple departments that roll up

This is a mind bend for many other accounting types. In most other businesses they have what I call a straight line, one revenue source and directly related expenses leading up to the profit and loss line. So, their financial statements are “straight forward.” In the hotel world we have multiple departments meaning multiple revenue and expense lines that roll up into departmental statements and then into the top-level report. We use USALI to make sense of it all. You can read more about Sally right here.

So, to sum things up, what this means is the hotel accounting world is a full contact sport. You cannot and will not survive if you are not intimately familiar with how all of these “things” work simultaneously together. You will need to direct the show and be able to operate on the wounded daily. On top of this you need to be able to balance the books, do the budgets, forecasts, and keep the owner happy.

As for my brother, he got the job and, as I recall, he didn’t pay me any headhunter fees. Let’s see, 40 year’s salary x 15% = $$$$$$.

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For more information about David Lund, visit hotelfinancialcoach.com

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David Lund

28 Kineo St
Portland, ME 04103
United States
Phone: 4156969593
hotelfinancialcoach.com

David Lund

David Lund is The Hotel Financial Coach, an international hospitality financial leadership expert. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with an international brand for over 30 years. He authored an award-winning workshop on hospitality financial leadership and has delivered it to hundreds of hotel managers. David coachs hospitality executives and delivers his Financial Leadership Training throughout the world, helping hotels increase profits and build financially engaged management teams. He speaks at hospitality company meetings, associations and he has had several articles published in hotel trade magazines and he is the author of three books on Financial Leadership. David is a Certified Hotel Accounting Executive through HFTP and a Certified Professional Coach.

David Lund

The Hotel Financial Coach
Phone: +1 415 696 9593
david@hotelfinancialcoach.com