By David Lund
Practice is what we are missing. Practice with the financial piece is somehow a foreign concept. But in the hotel world practice is everywhere, right?
If you and I worked in banquets and we were both rookies, we would show up every day and listen, work and learn, and in a relatively short period of Time, we would both be pretty good at setting up, servicing and tearing down the banquet.
How is this different from learning the financial piece? It’s not, that’s the illusion. It looks different because it is money and we see that it has a certain illusionary power.
The monthly financial circle in a hotel is the practice schedule and it includes the different routines that we must rehearse to improve our whole financial game. The circle repeats itself each month like clockwork, always overlapping and never missing a beat.
In our business, it can seem like the financial machine never stops, it can seem relentless. It’s like we just finish one month’s commentary and it’s forecast time again, and before you know it, it’s time for month-end close and statement reviews. These tasks seem to pour over each other and the timer never stops.
The real beauty in all of this is that the window opens and closes 12 times each year. To look at this in a positive light means I have 12 opportunities each year to learn. Twelve opportunities to re-set and learn from what worked and what didn’t work. Throw out the bad and keep the good. If I look at each monthly financial cycle as an opportunity to learn, I will move to master this financial discipline.
In most hotels, the circle will start a week or so before the end of the month with the timely arrival of the rooms on the books and the occupancy, rate and room revenue projections for the next 90 days. From this data, I plan my department’s payroll and expenses. I know based on the budget what I have as a base. I know the zero-based expenses in the budget for my department, and based on the projected volume of rooms, I plan my month’s activity.
It really does not matter what department I’m in; what matters is I see how the next three months out look and I adjust my payroll hours and expense dollars accordingly to match those projections, using my budget as a base. I submit my forecast on-time and the next day I get my properties consolidation report. From here I have a quick conversation with our financial quarterback and she tells me we need to improve the bottom line in month one and two, month three for now looks OK. She asks several of my counterparts and me for an improvement in payroll and expenses in the next two months. She gives me a real number to hit, we go back and forth, and agree on how much I can reduce my costs. She leaves it up to me to find these dollars in the details.
This is nothing new, we do this every month and sometimes what I propose is on the mark; other times I get a recommendation to add, and some months like this one, I need to trim. I make my changes, resubmit my numbers and a day later I have my final forecast for the next 90 days.
From the forecast stage, we move into the actual month. I know the total volume of business anticipated for the month and I even have it day-by-day for my area. I prepare my work schedules and my purchase orders for the first part of the month, all the while keeping an eye every day on the pickup report, the daily sales, and the month-to-date sales all relative to the latest forecast. I quickly see and hear where we have a softness in the month and where the pickup is behind. I know based on this trend that we won’t hit our monthly total, so I adjust my work schedule, send a manager on holiday and reduce expense requests for the coming weeks, all the while balancing where I see the business ending up and what I need to maintain the standards in my department. Because I have a zero-based expense budget in detail and a staffing guide that has fixed and variable positions, I know what levers I can pull. As we move through the month, I look at my stats daily and it only takes a few short minutes.
We finish the month and I get my general ledger detail report and financial statement first draft. I go right to the top level and look at the revenues and business volumes and they are exactly what the last daily report said they would be. I then flip to my page of the statement and look at my payroll and expense lines. I then review the general-ledger (GL) detail for my accounts and compare this quickly to my checkbook. I find two items that don’t belong on my accounts. I communicate with accounting; they make the correction and now I know I have a clean statement. A couple of days later the final statement is complete. I have another look and my lines of the financial are correct.
From this phase, I sit down and write my piece of the commentary. What happened in the month with my payroll and expenses relative to the volume of business expected vs. what materialized and what changes did I make to what was originally forecast.
I submit my portion of the monthly commentary; it’s consolidated and edited. A couple of days later I get a final copy of the property commentary and now the monthly circle is complete. But wait! The next month has already started, I have already completed the next 90-day forecast, and I’m already tracking the new month’s volumes and adjusting my spend accordingly.
