Most hoteliers understand the importance of creating a budget and sticking to it, but it is fair to say that achieving this goal is easier said than done.
As a leading expert in budgeting and forecasting in the hospitality industry, Broadvine has some key insights to share on the subject. Property management companies can learn to narrow down on their business’s critical details to produce more accurate budgets and forecasts, which in turn lead to improved operations, financial performance, and investor relationships.
Learn to identify details that will improve the accuracy of your planning process. Explore technology tools brought to you by industry insiders, and gain a better understanding of your profits and your losses. This article covers:
- USALI: What is it and why does it matter?
- Drivers: Technology that automates complexity
- Active Management: Taking advantage of the opportunity
- Why Broadvine?
USALI: What is it and why does it matter?
It is appropriate to kick off the discussion of hotel finances with the Uniform System of Accounts in the Lodging Industry, or USALI.
So what is USALI?
USALI is the standard for hotel financial and operational performance reporting. USALI has been accepted as the universal standard globally, enabling an understanding across the industry and providing a common language among hoteliers and owners / investors.
The details and guidance that USALI provides enables a structured and consistent framework for reporting hotel performance. The enables a deeper level of analysis for an individual hotel, as well as the opportunity to make meaningful comparisons between hotels or aggregate multiple properties to a portfolio level.
USALI defines standards; for example, do you include complimentary rooms in your occupancy percent? And do you record in-room mini bar revenue to your Rooms department or to your Food & Beverage department?. USALI also showcases different types of accounts; for example, department-level profitability or the comparative cost per occupied room between companies.
This type of financial investigation facilitates a deeper understanding of your business’s finances. By embracing the style presented in USALI, a company in the lodging industry can learn to excel and optimize its financial strategy.
Why is USALI important?
As one of the most universally recognized manuals in the industry, the standards set by USALI are considered common practice. Based on the joined efforts of multiple industry experts, USALI provides a basis of knowledge for the industry. Not only is this helpful in terms of operations, but it also improves communication throughout the industry.
Accounting and finances are a vital part of any business. However, the roles and best practices can vary from industry to industry. USALI represents an essential resource for the unique goals and patterns of the lodging industry.
The concepts depicted in these texts are uniquely applicable to the hospitality environment, creating a practical and reliable guide.
Drivers: Technology solutions that automate complexity
USALI may offer a universal language that applies to various industry companies, but what about company-specific details? Don’t underestimate this category. In fact, an understanding of these features should be actively pursued.
When creating a reliable budget, it is vital to understand the intricacies that lie in each property. To delve deeper into this understanding, Broadvine offers an array of industry-specific drivers.
Think of drivers as the gears within a machine. If the machine is a hotel, then an example of these gears might be a hotel’s occupancy or a room attendant’s wages. Drivers encompass the broad range of players in a business and can be customized to fit any hotel.
Property management companies can choose from Broadvine’s list of 90 drivers and create a model that accommodates their business. With this mechanism, hotels can acquire a thorough understanding of core business operations and underpinning financial performance.
With the help of drivers, a property can significantly improve the accuracy of its financial forecast. This is accomplished by narrowing down on these business specifics and monitoring the way different accounts interact.
For example, a company can define the cost of food as a percentage of food sales revenue.
What are the key values of Broadvine Drivers? Drivers will help hotels:
- Define relationships between accounts.
- Promote an underlying understanding of the business.
- Save managers time with automated updates in near real-time
- Apply “reverse calculations” and use historic data to establish future periods
In short, it is possible to create a fundamental formula customized for a specific property. By using the data from a hotel, Broadvine drivers help define a company’s successes and failures.
Active management: Taking advantage of the opportunity
Hoteliers should be thinking of budgeting as a strategic process. Businesses that actively create, track, and update their budgets can get a leg up in the industry and better control their business results.
The drawback to budgeting is that it is traditionally a static process. A budget is usually created to define an entire year and remains fixed in place for that duration. As such, it can be hard to account for unexpected changes that can dramatically affect your business’ finances.
Most times, only keeping a budget is insufficient, which is why Broadvine specializes in budgets and forecasts.
Forecasts are living documents, adding a dynamic element to the static budgets. Forecasts are updated in response to a situation’s reality, providing useful and live information to a business’ accounts.
The events of 2020 provide a prime example of how a budget can fall short. No one could have foreseen what the year 2020 had in store for most businesses. From the global pandemic to the collapsing economy, many business’ budgets did not account for this twist. It was safe to say that these budgets did not provide a realistic strategy for such an unpredictable year.
Simply put, in 2020, budgets became worthless overnight. Meanwhile, developing reliable forecasts became critical! By implementing forecasts, resourceful businesses could hit the ground running, and make appropriate edits to their accounts as needed and survive the rough climate fostered by COVID-19.
It is important to note that merely having a forecast is not enough. To attain the full benefit of a business forecast, employees must interact with it regularly. Users should establish a weekly update schedule and stick to it to ensure a real use comes from these tools.
With Broadvine’s strategy, this process does not have to be monotonous or time-consuming. By integrating a revenue management system, historical data in an accounting system becomes integrated with future-looking data. This data set enables a user to make small changes every week to keep the forecast up-to-date without wasting too much time.
Once a team gets into the habit of regularly updating their forecasts, analysis can compare differences between budgets and what really occurs. By monitoring forecast accuracy at the account level, operators can learn their blindspots and focus on their misses.
An accurate forecast means ownership groups will not be surprised when the monthly financial report is delivered. By calculating, knowing, and communicating in advance, a win-win scenario emerges where both the owner and operator are satisfied.
The Broadvine software was crafted and perfected by dedicated industry experts. With a deep understanding of what the hospitality business entails, Broadvine software enables users to create budgets and forecasts that can be put to use and help them navigate their business.
By incorporating the language described in USALI and creating industry-specific drivers that enable account customization, Broadvine delivers a unique and user-friendly approach to budgeting.
Focus on the accounts that matter to your business to perfect your budgeting and forecasting strategy. Learn more about what Broadvine can do for you, contact us today!
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