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5 Major Financial Considerations for Restaurant and Hospitality Sector
The restaurant and hospitality sector is a vast field and what makes it unique is the fact that there are a large number of components that make up the industry. This is the very reason why before venturing into the financial considerations it will be prudent to go into some details regarding the scope and depth of this segment.
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 considered to be an integral part of the hospitality sector.
There is however a common thread running through each element – the industry thrives on providing luxury services that are based on tapping disposable income of people. Restaurants provide food but not the type of basic food that is a part of everyday life. This is a very crucial reason why during times of recession, the hospitality sector is always the hardest hit in terms of turnover.
While most industries today have a fixed accounting method because of the precise nature of their business or product portfolio, the same is not true for the hospitality sector. For example restaurant accounting solutions will be quite different from that 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.
The comprehensive financial consideration of the restaurant and hospitality sector can be broadly classified under 5 heads. However it ought to be mentioned here that these cannot be placed in water tight compartments and any one of them can be good for a number of categories in this sector.
- Financial Accounting – The hospitality industry like most service sectors consist 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 the danger of being diverted away from the core task of selling leisure activities, such businesses prefer to outsource this financial accounting functioning to well established agencies in this field.
- 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 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 accounting 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 on a daily basis 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. This will be presented in appropriate formats to make the whole matter easily comprehensible. Here again, outsourcing this function will take a load off your shoulders.
- Managerial Accounting – This is basically 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 cover 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 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.
These then are the 5 major financial considerations for restaurants and hospitality sector. If you are looking for a top of the line company offering financial services and quotes to the restaurant and hospitality sector, get in touch with Cogneesol at email@example.com. Our team of highly experienced and qualified accountants will take comprehensive care of all your financial considerations.
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