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5 Major Financial Considerations for Restaurant and Hospitality Sector
The restaurant and hospitality sector is a vast field. But what makes it unique is the fact that there are a large number of components. That’s why before you start a business, understanding restaurant financial services is crucial.
There is a general misconception amongst the uninitiated that restaurants and hotels form the backbone of the industry. Nothing could be further from the truth. These are just a part of the whole. Others that fall in this category are clubs, casinos, theme parks, and resorts. Even a portion of the luxury transportation sector such as cruise ships and famous fancy trains are integral.
There is however a common thread running through each element. This include the industry thrives on providing luxury services that are based on tapping the disposable income of people. Restaurants provide food but not the type of basic food that is a part of everyday life. Therefore, during recession, the hospitality sector suffers the most in terms of turnover.
While most industries today have a fixed accounting method because, the same is not true for the hospitality sector. For example, restaurant financial services will be quite different from those followed in clubs or cruise ships. Hence it is necessary to see the financial aspects of this sector not in terms of the total structure but what is exclusive to each of them.
How to Evaluate the Restaurant Financial Services
- Financial Accounting
The hospitality industry like most service sectors consists of buying and selling goods and services. The main areas are hotel rooms and F&B. However other areas include gaming, forms of entertainment, and other club and cruise ship services. Business accountants will analyze and summarize all these financial transactions and draw up reports and balance sheets that will accurately reflect the earnings over expenditure to arrive at profitability. However, because of its complexities and diversion from the core task of selling leisure activities, such businesses prefer to outsource this financial accounting function to reliable firms.
- Cost Accounting
This is very important as it classifies and records hundreds of expenses made in a whole lot of different departments. The focus over here is the classification of heads which will have to be exact if the final balance sheet has to be accurate in all respects. An example will illustrate this point. If you are a manager of a resort you cannot stop at restaurant financial services. Your deputies in various departments such as the golf course, F&B, and the spa will be spending money to keep the operations running.
This is impossible for you to track daily but you are the person who will be accountable for the entire operations. Cost accountants will dissect the total costs as per area of functioning and products and services sold. You will need to present it in appropriate formats to make the whole matter easily comprehensible. Here again, outsourced restaurant accounting benefits can prove to be a game-changer.
- Managerial Accounting
This is forecasting of activities based on past experience and is a major financial consideration for the restaurant and hospitality sector. Based on previous expenses and utilization of goods and services it has to be decided what level of inventories should be stocked. Too much is blocking precious capital, too little might result in poor customer service. You’ll do well to outsource this inventory management to well-placed agencies offering restaurant accounting services so that your holding of inventory is optimized.
- Tax Accounting
This is a very onerous task for the hospitality sector. The range of taxes payable covers a broad spectrum that includes amongst others, hotel room occupancy, F&B, entertainment, and allied services, all with varying tax rates which might also differ between states. Let specialist agencies take care of this aspect for you.
- Audit Functions
Even though the audit is an independent verification of accounts by external agencies, professionals of outsourced agencies will carry out a pre-audit check to ensure that all tax-related statutory regulations have been carried out and all taxes have been accurately paid. Don’t get bogged down doing this exercise yourself.
What’s Next for Restaurant Owners?
These then are the 5 major financial considerations for restaurants and the hospitality sector. If you are looking for a top of the line company offering restaurant financial services and quotes to the restaurant and hospitality sector, get in touch with Cogneesol at +1 833-313-3143 or call us at [email protected]. Our team of highly experienced and qualified restaurant accountants will take comprehensive care of all your financial considerations.
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