Do Your Hotel Financial Statements Pass the Test? Part 2
By David Lund Hospitality & Leadership Expert, The Hotel Financial Coach | April 30, 2017
Do your hotel financial statements give you the information you need to effectively manage your hotel? Are you able to see if your profits are where they should be in an enhanced top line statement? Do your statements measure flow thru? Do you record your rooms business by proper segments and track the rooms occupied, rate and revenue in each segment? Do you record customers served in F&B and do you separate meal periods? Do you record liquor, beer, wine and mineral sales on your financials separately? Do you measure labor productivity in your financials? Do you record hours of work in your financials? Do you have payroll segmented by management and hourly classifications? Do you have a separate supplemental payroll and benefits statement? Do you track arrivals and departures?
Most statements I see do not have most of these critical elements included. They're lacking these incredibly effective items that can easily be added. Most people use the standard format as outlined in the 11th addition of the uniformed system of accounts for the lodging industry. This is great however you can produce an enhanced statement with just a little more detail added that will greatly assist you in effectively managing your hotel.
How Would These Elements add Insight and Value to your Business?
In part one we covered the Top Line Statement format, Flow Thru, Rooms Segmentation, F&B Customers and Average Checks by Meal Period. If you missed part one check out my website and blog post from February 27th, 2017, to get the article.
Measuring Productivity on Your Financial Statements.
The only truly effective way to measure labor productivity in the hotel business is by expressing the productivity in hours per room occupied in the rooms division, hours per cover served in the F&B division and EFTE's per 100 rooms available in the non-operating departments. In this article, we will concentrate on Rooms and F&B productivity. The reason why hours per is the best way to measure productivity is we divide actual hours worked by the actual volume of business, units sold. Others may say that measuring labor percentage, or dollars of labor per unit sold are effective but the fact is our managers and leaders have no control over wage rates, but they do have control over hours worked, the schedule, and this is what we want them to focus on. Being able to see the hours worked and the number of rooms or covers served in our financial statements means we need to record and book these statistics monthly in a statistical journal entry. We accomplish this by adding a "stats" department to our chart of accounts and the statistical entry and department net to a big fat zero each month.
The beauty of knowing the hours per room occupied is powerful stuff. If we were making cars we would want to know how many hours of work it takes to make a car. We would then want to innovate and find ways to reduce this. In the hotel, it's the same. We split off the rooms and F&B because they are very different. In the hotel business, we want to know how many hours it takes to service one room or one cover. We then want to innovate to see if our malmanagement practices are actually producing better or worse results and adjust accordingly. The only way to do this is with hours per calculations.