The following is a step-by-step process for using this Workbook. If you have any questions do not hesitate to contact your Operations Support Manager or the SVP of Operations.
Step #1 Budget
Prior to the start of each month review the prior three months of financial performance versus the budget. Determine if you are running ahead of plan or behind plan and by how much. Also try and understand why and if there are trends that you expect to continue. Then look at your volume of business on the books both in the Property Management System and also through the Sales Department. How does it look? Are you going to do more or less? What percentage more or less? Once you have determined your best estimate of what business will be, compare it to the Budget. If you are expecting to have less revenue that budget, then your expenses must be adjusted downward proportionately. If the shortfall is due to an expected shortfall in occupancy or F&B patronage, your variable costs must decline proportionally. Look at the % or formula used in your budget. Apply that % or formula to your adjusted forecast and revise your expense allocation for each line item down so that your expenses are now in the same proportion as the original budget. If the shortfall is due to an expected shortfall in ADR or F&B pricing, then you are going to have to find other ways to reduce expenses to offset the shortfall.
Step #2 Log Invoices
As invoices are received each day, they are to be coded according to the Chart of Accounts. The total number of invoices per code should be entered in the journal.
Step#3 Track Expenses
Weekly the spreadsheet will tell you the running total for each category and it will total each week. As a successful department head you will compare the running total back against your revised budget and make the determination if you are on pace to meet that budget. You will also need to compare revenue to make sure that your forecast is accurate. If you missed your forecast either high or low, then you once again need to adjust accordingly. This ongoing evaluation is the core practice to ensure profitability.
A Final Note
The above requires a certain amount of discipline and organization. Ocean Partner Hospitality recognizes the demand placed on a hotel’s management team and knows that it is sometimes difficult to make the time to do these management functions. However, we can not and will not excuse them not being done. If we do then we are failing in our fundamental obligation to our clients to provide management and control profitability. The burden is on the management team to be good time managers and place the proper priority on this component of management. If at anytime you are falling short in this function please inform the General Manager so that we can guide and assist you in resolving the issues that are keeping you from being successful.