Introduction In the modern business world, firms struggle to survive and find its place in the industry through winning customers. To keep abreast with the very unpredictable business environment and to remain competitive, managers must have a forward-thinking attitude. This is where planning comes to place. There is an adage that says, If you fail to plan, you plan to fail. Planning becomes even more important in the business setting where resources are scarce and hence must be allocated effectively and efficiently. In this regard, profit planning proves to be essential. It plays a vital role in a survival of a business and it gives management a direction for its decisions. It encompasses the use of accounting, finance and management tools to forecast demand, project revenues and plan and control expenditures. Whilst focusing on the short-term, it gives businesses a sense of direction on how to manage scarce resources. In the very competitive hospitality industry, businesses try their best to market their facilities and services aggressively. Here, satisfied customers are the lifeline of the business. Winning customers is the way to compete. Internally, resources have to be managed in the most efficient way in line with the goal of winning customers. Hence, managers and prospective managers should know how to win customers, project revenues and plan and control expenditures. It is therefore an imperative that managers should have a working knowledge of profit planning and short-term budgeting tools because the same will prove to be handy in determining their businesses viability in the immediate short-run and in the short- run. It is for this reason that the researchers look into the prospective managers proficiency on profit planning tools. In this pursuit, the researchers envision an even more aggressive competition in the hospitality industry through detailed profit planning and budgeting.
Background of the Study Solaire Resort & Casino (formerly known as Solaire Manila) is a resort complex operated by Bloombery Resorts and Hotels Inc., a Filipino corporation listed in the Philippine Stock Exchange. The facility includes a five-star hotel with 488 room and a casino. It is first casino and hotel to be located in the Entertainment City complex along the Bay City area of Paraaque City, Philippines. It was opened on March 16, 2013 and became the tallest hotel in the Manila Bay area outside Manila, a distinction previously held by Sofitel Philippine Plaza. Solaire aims to bring Las Vegas standard to Manila in terms of quality entertainment and hospitality. The company is run by Bloomberry Resorts and Hotels Incorporated through a subsidiary Sureste Properties, Inc. (formerly Bloomberry Investments Holdings Inc), headed by Enrique K. Razon Jr., chairman of the Manila-based company, International Container Terminal Services Incorporated. The project was given an investment of $1.2 billion. Solaire takes pride as a majority Filipino-owned business that competes well with many multinational players in the industry like Resorts World. Despite being a baby in the industry having been operational for barely just one year, Solaire already posed a profit of P2.3 billion in the first half of 2014 (http://www.abs-cbnnews.com/business/08/01/14/bloomberry-resorts-posts-p23- b-profit-h1 Retrieved August 5, 2014). The proficiency of Solaires finance staff in profit planning and short-term budgeting is the subject of this study. This study looked into the finance staffs understanding of the business and its operations and rationalization on profit planning and budgetary planning and how it contributes to the companys success. Theoretical Framework This study is primarily founded on the Theory of Constraints (TOC). Dr. Eliyahu M. Goldratt (2007) introduced the theory of constraints in his book entitled The Goal. It is based on the application principles and logic reasoning to guide human-based organizations.
Figure 1. Theory of Constraints TOC is geared to help organizations continually achieve their goals. TOC is based on a set of basic principles (axioms), a few simple processes (Strategic Questions, Focusing Steps, Buy-In processes, Effect- Cause-Effect), logic tools (The Thinking Processes or TP) and through the logical derivation of these some applications to specific fields (Operations, Finance, Distribution, Project Management, People Management, Strategy, Sales and Marketing). TOC brings in the powerful five focusing step methodology to identify the constraint in the company and systematically attack the associated problems. Many times, when we finally break a constraint, we do not go back and review THEORY OF CONSTRAINTS TOC is geared to help organizations continually achieve their goals TOC is based on a set of basic principles (axioms) Simple Processes Logic Tools Logical Derivation - Strategic Questions - Focusing Steps - Buy-In Processes Thinking Processes - Operations - Finance - Distribution - Project Management and change the rules and policies that caused the constraint initially. Most constraints in organizations are policy constraints rather than physical constraints. The result is dramatic improvements of throughput (or contribution) and customer order due date performance, and inventory reduction. The steps in applying TOC are as follows:
If the Constraint is broken Figure 2. Steps in Applying Theory of Constraints 1. Identify the systems constraints. 2. Decide how to exploit the systems constraints. Once it is decided how to manage the constraints within the system, how about the majority of the resources that are not constraints? The answer is to manage them so that they just provide what is needed to match the output of the constrained resources. 3. Subordinate everything else to the above decision in Step 2. Since the constraints are keeping us from moving toward our goal, all the resources are applied that can assist in breaking them.
Identify constraints
Exploit systems constraints
Subordinate everything
Elevate systems constraints 4. Elevate the systems constraints. If we continue to work toward breaking a constraint (also called elevating a constraint) at some point the constraint will no longer be a constraint. The constraint will be broken. 5. If the constraint is broken, return to Step 1. When that happens, there will be another constraint, somewhere else in the system that is limiting progress to the goal. The process must be reapplied, perhaps many times. It is very important not to let inertia become a constraint. Most constraints in organization are of their own making. They are the entrenched rules, policies, and procedures that have developed over time. Many times, when we finally break a constraint, we do not go back and review and change the rules and policies that caused the constraint initially. Most constraints in organizations today are policy constraints rather than physical constraints. According to Theory of constraints: Every organization has at any given point in time at least one constraint which limits the systems performance relative to its goal. These constraints can be broadly classified as either an internal constraint or market constraint. In order to manage the performance of the system, the constraint must be identified and managed correctly according to the Five Focusing Steps. Over time the constraint may change (e.g., because the previous constraint was managed successfully, or because of a changing environment) and the analysis starts anew. (http://en.wikipedia.org/wiki/Theory_of_constraints. Retrieved July 14, 2014). Dr. Elihayu Goldratts (2007) Theory of Constraints Series will serve as one of the most effective platforms to improve business productivity in Production, Supply Chain, Logistics, Project Management and other important segments. The application of Theory of Constraints reveals the reasons projects never finish on time or within budget or within specifications, and develops an alternate approach to managing projects. In terms of financial aspects, it will play a big role to utilize all the financial resources of the company and it will serve as a guide in making a financial planning. Theory of Constraints as a holistic approach will enhance the quality of decision-making, improve communication and stimulate new solutions, providing benefits for the entire company.
Conceptual Framework
The conceptual framework discussed the flow of the study to be taken. The study used the systems approach. The system of three (3) frames is composed of input which went through the process or operation and emerged as the output.
Figure 3. Conceptual Paradigm Feedback
Profile Age Sex Civil Status Highest Educational Attainment Level of Position in the Company Length of Experience in Hospitality Industry
Understanding of Entitys Operations
Rationalizing Profit Planning Use of Cost Data Budgetary Planning o Revenues o Expenses o Financial reports o Human aspects Survey Observation Documentary Research Unstructured Interview Statistical Analysis Frequency and Percentage Ranking Weighted Mean Chi-Square
INPUT PROCESS OUTPUT Statement of the Problem This research aimed to look into the working knowledge and proficiency of Solaires finance staff in profit planning and short-term budgeting. Specifically, the study sought to answer the following: 1.0 What is the profile of the representatives of Solaire Resort and Casino in terms of the following: 1.1 Age; 1.2 Sex; 1.3 Civil Status; 1.4 Highest Educational Attainment; 1.5 Position in the Company; and 1.6 Length of Experience in Hospitality Industry? 2.0 What is the respondents understanding of entitys operations? 3.0 How do the respondents rationalize profit planning and control in terms of the following: 3.1 Use of cost data; 3.2 Budgetary planning; 3.2.1 Revenues; 3.2.2 Expenses; 3.2.3 Financial reports and projected financial statements; and 3.2.4 Human aspects of budgetary planning? 4.0 Is there a significant difference between the profile of respondents to the following lead variables: 4.1 Understanding of entitys operations; and 4.2 Rationalization of profit planning?
Scope and Limitation
Significance of the Study This study sought to provide supplementary information that will guide and help raise consciousness about the importance of the working knowledge of management accounting tools in profit planning. The study will benefit the following individuals and organizations. Business Owners. This study will be very beneficial to business owners, small and large alike, especially those engaged in the hospitality industry. It may help them gain insights on short-term budgeting as it relates to profit planning. In so doing, they can use these short-term plans in strategizing for their businesses long-term survival. Management. This study may prove to be useful as managers and employees review and assess their working knowledge of essential budgeting tools as used in profit planning. Findings of the study will serve as a valuable tool for the management in generating quality reports as an input in formulating financial management policies and strategies towards profit maximization. Investors. This study will help prospective investors delve into the profit maximization, planning and management of businesses within the hospitality industry particularly in the aspects of planning, decision making and control as they relate to maximizing shareholders value. Academe. This study could be used as reference material and case study in teaching management accounting subjects, particularly topics dealing with the hospitality industry, use of cost data, profit planning and short-term budgeting. They could be furnished with technical literature and situational analysis as tailored input to suit their classroom lectures and case study methods in accounting. Other researchers. This study will be an effective tool and reference for the researchers who would intend to make any further relevant study about profit planning, short-term planning and businesses within the hospitality industry.
Definition of Terms The following terms used in this study are operationally defined to provide better understanding. Actual cost. Actual amount paid or incurred, as opposed to estimate. Age. This refers to the number of years the respondent has been living during the conduct of the study. This is classified according to the following brackets: below 25, from 25 to 29, 30 to 34, 35 to 39, 40 to 44, 45 to 49, and 50 above. Budget. A financial plan for a future period of time. The budgeting process translates the strategic plan for an entity into financial terms and identifies the steps for achieving the goals of the plan. Budgetary planning. Use of budgets in planning. Budgeted cost. An expense that has been planned for in advance. Cash flow. Actual peso that are received by an organization or paid out by an organization. Civil status. This refers to the respondents marital status during the conduct of study. It is classified into: single, married, separated and widow/widower. Cost center. A responsibility center in which the manager is held accountable only for controlling costs. Decision Making. The thought process of selecting a logical choice from the available options. Expenses. Costs incurred in the ordinary course of business aimed at generating revenue. Financial reports. These are reports intended for internal users of financial information, i.e. managers. Highest Educational Attainment. This refers to the classification of respondents according to bachelors degree, masters units, or masters degree. Human Aspects of Budgetary Planning. It refers to the respondents perspective on how budgets affect human behavior in the organization. Length of Experience. The duration of service or employment of the respondents in the hospitality industry during the conduct of the study grouped into the following brackets: less than 3 years, 3 to less than 5 years, 5 to less than 10 years, and more than 10 years. Level of Position in the company. This refers to the managerial area or level the respondent belongs during the conduct of the study. It is classified into the following brackets: top managerial level, middle managerial level, supervisory level, lower managerial level and staff level. Planning. The management function concerned with identifying goals and the specific methods of achieving them. Profit center. A responsibility center in which the manager is held accountable for sales and costs. In Solaire, this refers to the revenue-generating departments, i.e. hotel, casino and resort. Profit planning. It refers to the projection and budgeting of revenues and expenses in the short run aimed at maximizing profits. This will be the main subject of this study. Revenues. Gross inflow of economic benefits during the period arising in the ordinary course of activities of an entity. Sex. This refers to the biological classification of respondents as to male or female. Standard cost. The planned or expected costs as reflected in the companys budgets. Theory of Constraints. a management paradigm that views any manageable system as being limited in achieving more of its goals by a very small number of constraints. Variance. The difference between the actual figures and standard or pre- determined figures reflected in the budgets. Figures may be used to express revenues or costs. Differences are reported as either favorable or unfavorable, as the case may be.