Key Checks for a strong accounts & finance department in hotel industry
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Accounting and finance function is not just a support function for an organization, it is the key contributor to the success of any organization. As we grow, parallelly we need to develop a robust accounting & finance system to keep flying. In any industry to ensure a robust accounting & finance system, the management needs to carefully look into below aspects: -
1. Choosing the Right ERP
In terms of the nature of revenue & expenses, the Hotel industry is different from general manufacturing, trading or service business. A normal Tally or SAP ERP is generally not workable for hotel business. A lot of customized ERP solutions for the Hotel Industry are available. Some of them serve only front office, some offer other modules also like back office, material management, Payroll, Fixed Assets etc. Businesses had either chosen the single ERP with all modules, or different software for different functions and had done customized integration within their possible limits.
Every large Organization had evolved from a small to mid-size businesses. Especially hotel business is more identical to retail chains so its growth & size increases sharply in a few years. So, these businesses have a vertical growth trend, unlike slow & steady growing manufacturing businesses. Generally, in beginning being a small or mid-size company they use to have low-cost software, and after a sharp rise with huge network, locations, they feel the need to change the software but because they had already created a huge database in the old system, they feel uncomfortable in changing the entire new ERP rather they choose different ERP for different modules & customize some integration within old & new.
If with the right mindset, we had started a business, it had to grow over time so be ready for its key pillars from the beginning. At the initial stage itself we should analyze the different software available for the hotel industry, comparative cost, and our requirements. If we some software is quite good & can serve us even when we grow to a particular stage, but it seems costly comparing to our current business size, we can take one or two modules instead of all & can slowly add other modules as we grow. But we need to spend a thoughtful time on choosing the right ERP.
2. Choosing the Right Manpower
For the F&A function, we need to choose the right manpower from the beginning. Right manpower may not be too much experienced, following should be the criteria for right manpower of F&A function:
- Candidate should be fundamentally sound for the finance & accounting concept. Even many experienced professionals are not fundamentally clear. So, we should avoid the person for hiring for any post unless he is not conceptually clear of his domain area, that’s risky and is just filling a position, in the long term such type of person cannot contribute to the business.
- He should be open to learning, research, had the ability to listen more, able to express their ideas clearly.
- He should be comfortable to deal with team members, other department persons, and other stakeholders like suppliers, customers, bankers, etc.
- He should be an organized person, like to keep the records physically, digitally in proper files, folders & had a habit of refining their storage to get the trash out. We need to sensibly judge these qualities out of either interview or during the probation period.
- He should be comfortable and open to learning with computerized works, systems, relevant software, excel etc. Not necessary he knows your software deeply but should be equipped with the fundamental knowledge of how any software generally works, should be able to grasp the systems easily, this judgment you can make in probation periods. Keeping the persons who are not comfortable with automation are actually the dumb resources, avoid them, they will paralyze the system over time.
3. Choosing the Right flow of Chart of Accounts
Transactions in the business are captured through ledgers. And a flow tree of those ledgers is called a chart of accounts. How your captured data will populate in the system depends on how we had defined our tree of accounts. The second step after choosing the right ERP, we need to carefully define our chart of accounts. In a separate article, I will explain how we can define a good chart of accounts for the Hotel Industry.
4. Choosing the Right Banks & Financing Facilities
For financing, not necessarily every bank support us, so we had to keep our banking with the banks who give us major financing, but if multiple banks are ready to finance us on same terms, we should choose our banker considering following: -
1. We had at least 1 branch very near to the corporate office and had branches near to our hotel locations.
2. Banks charges for day to day functions like NEFT, RTGS, DD, LC / BG issuance, statements should be comparatively cheaper.
3. Banks should give cheap cash collection facilities on a daily or weekly basis from hotels & cash delivery facilities at least for the corporate office for cash withdrawal.
4. Banks should have a good package for salary saving accounts.
5. Banks should have a user-friendly online platform, should have the latest features of online approvals, tax payments, all types of payments, user accounts for corporate accounts etc.
I had seen even some multinational banks’ online platforms are ridiculous to use.
5. Setting the Right Physical Infrastructure
For a robust system, we need to equip our team with good, new & latest physical resources. If the business is of small size, take less but effective, new & latest physical resources instead of rusted junk of pile. Generally, we had a mentality of using old equipment for support offices, but that actually makes the effectiveness of our entire working including front office slow & creepy. For finance & accounts following are the main equipment: -
a. Computer, Laptop, Printer, Scanner, Server & other related IT equipment –
You might have seen in public banks & government offices, there are huge offices in main areas, huge manpower but a lot of queues, huge delays in processing a simple task; Why? Because they never bother to change their IT equipment. But when you go to the airport, there are only 2-3 ticket counters which continuously cater over 1000 of passengers, if somebody cancels his ticket from his computer, immediately at any airport it shows that vacant seat is available. Hotel is a luxury service, on hill stations I had seen people not choosing the hotel just because the billing counter is taking time to tell them the current room rates & applicable discounts. And leaving the dissatisfied guests when there is error or delay in their final payment summary due to system errors. Also, we need to have a high capacity server and digital storage.
b. Physical Files & Recordkeeping System
A proper physical place with proper storage furniture should be specified for physical storage. As per the law of India, we need to preserve the physical documents for 8 years. Also, a proper system and index should be drafted for statutory documents, licenses, centralized documents, one-time yearly documents like AMC, Lease deed etc., regular sales, purchase, expense invoices etc.
c. Networking system, internet & telecommunication system
The latest and high-speed networking, internet and telecommunication system should be established between corporate office, warehouses and network hotels to facilitate a smooth interface of data within the entire network. During audits of many hotels, I had observed there are a lot of wastage of inventory because their systems within network are not real-time updated so warehouse use to buy inventory on the requisition of one hotel even it is piled in other hotels which they could have internally transfer.
Even I had observed with poor networking systems, corporate offices are not real-time aware of the funds available in the network hotels so they face difficulty in deciding the supplier’s payment from the centralized system. Also amount lies unutilized at many locations.