Financial Management - Controlling I - Lecture 8 - Controlling in Hosp Ind

Financial Management -
Controlling I.
BGE – 2021
Based on the course materials of Ágnes Siklósi, Ph. D.;
Dr. Lajos Körmendi – Antal Tóth: Basics of Controlling
and the book ‚Controlling’ by Horváth & Partners
Lecture 8
Controlling in the
Hospitality Industry
Managerial Accounting and the Business Environment
RECAP: Lecture 7: ABC
Steps for Implementing ABC
Identify and define activities and activity cost

pools.
Trace costs to activities and cost objects.
Assign costs to activity cost pools.
Calculate activity rates.
Assign costs to cost objects.
Prepare management reports.
1. ABC assigns both manufacturing and non-manufacturing costs to products
2. ABC DOES NOT assign ALL manufacturing costs to products.
3. ABC uses several ‚cost pools’
4. ABC uses several ‚allocation bases’ (not only the volume of production)
5. ABC charges products with the costs of capacity they use
a. the unused capacity is treated as period expense
Activities
When combining
should only be activities, they should be
combined within a level grouped together only at
if they are highly the appropriate
correlated. level.
Limitations of Activity-Based
Costing
Lecture 8
Controlling in the
Hospitality Industry
Managerial Accounting and the Business Environment
Lecture 8: Controlling in the Hospitality Industry
Internal control
Management uses the information provided by management
accounting to make decisions and implement procedures to:
safeguard assets
safeguard assets control costs
safeguard assets
increase sales revenue
control costs safeguard assets maximize profitability

control costs
increase sales revenue
The information provided must be accurate and up-to-date to

assist managers in carrying out their responsibilities.
Effective and efficient internal control policies and procedures must apply to all
facets of an establishment’s operations, from purchases to sales.
Aim of This Lecture
UNDERSTAND
Principles and procedures of
internal control,
such as implementing preventive
procedures,
Human resources
Management should have an
effective philosophy of control, and
it should also monitor the control Inventories
system…
Cash
…in the following areas of
operation:
Assets/ Financing
Problems unique to the
hospitality industry
BUSINESS SIZE
CASH TRANSACTIONS/BANK RECONCILIATIONS
INVENTORY
HIGH EMPLOYEE TURNOVER

Cash transactions / Bank
reconciliations
Many hospitality industry customers already
use
credit cards to pay for their transactions,
many others still pay cash particularly in

restaurants and beverage outlets
This means that there is a great deal of cash

accumulating in sales departments each
Day.
Cash delivery procedure and

bank account reconciliation is
essential
Inventory products
The assets in inventory for most
hospitality operations are only a small
proportion of total assets,
STILL many individual products in those
inventories (such as bottles of quality
wine and
expensive containers of food products,
room amenities) are valuable, and
must be controlled during production,
service and sales
High employee turnover
The industry is characterized by a much

higher employee turnover rate than
most other businesses
Employees often do not receive the

training they need because they are
often unskilled, nor do they have the
same loyalty to the operation that long
time employees often develop
Principles of Internal Control
ESTABLISH PREVENTIVE PROCEDURES
ESTABLISH MANAGEMENT SUPERVISION OVER
PROCESSES
MONITOR CONTROL SYSTEMS
SET UP AN EMPLOYEE SELECTION AND TRAINING
SYSTEM
DEFINE RESPONSIBILITIES
PREPARE WRITTEN PROCEDURE DESCRIPTIONS
MAINTAIN ADEQUATE RECORDS
SEPARATE RECORD KEEPING AND CONTROL OF
ASSETS
AREAS TO CONTROL AT A HOTEL: REVENUE
Payment guarantees – In the modern world of
cash,cards,banktransfers journalism, there are the
so-called “5 Ws” used to
Discounts, gratis services – who, to guide journalists in writing
whom, approval by whom their articles: “who?,
what?, where?, when?,
Deductions, corrections, stornos – why?”.
explanation, signature
“Quis, quid, ubi, quibus
Reconciliation – orders/bookings auxiliis, cur, quomodo,
versus invoices versus payments quando”
Clarify responsibilities Bonus Homework – whose quote is this?

AREAS TO CONTROL AT A HOTEL: COSTS
Labour: one of the biggest Bonus Homework – Collect

controllable one famous financial fraud
expenses story from your home region
(one)
Food and Beverage: stocks, Send in PPT or PPTX, we will
inventories display on next lesson, max 2
slides
Purchase reconciliation of:
orders/delivery/price Must have been officially
acknowledged (no rumours)
FINANCIAL MGMT OF HOTELS
1.Financial management areas

2.Financial result elements
3.Self-financing
4.Liquidity management decisions
Management of funds(Money)
1. Money management rules - Cash management
1. The General rules for the handling of petty cash
2. Money management responsibilities
3. Petty Cash management
4. Documenting the cash income and expenditure
5. Strict management and record keeping forms
6. Deposits and securities
7. Foreign exchange rules
“Quis, quid, ubi, quibus

auxiliis, cur, quomodo,
quando”
„cui bono?”
2. Cash income and expenditure
management – Recommended tool
Submission and settlement of revenue
Preparation of cash delivery
Cash delivery rules
Check bank receipts
Manage customer and supplier accounts

Receivables management
SHIFT and money transfer
Money storage
Rules for purchases in cash
Petty cash management
Hotel cash flow and financial process
management
‚Accounting Policy’
a)
the inventory policy of assets and liabilities
b)
the e valuation policy of assets and liabilities
c)
the internal calculation rules of break even point
d)
the money management rules
CASH FLOW
Liquidity management decisions
Improving liquidity - management decisions
PROVISION BASED PLANNING = TRAP

The Liquidity Situation
IMPROVING LIQUIDITY
REAL HOMEWORK: FIND A HOSPITALITY BUSINESS F.S. AND CALCULATE
THE RATIOS IN EXCEL

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Financial Management -

Identify and define activities and activity cost

control costs safeguard assets maximize profitability

The information provided must be accurate and up-to-date to

HIGH EMPLOYEE TURNOVER

many others still pay cash particularly in

This means that there is a great deal of cash

Cash delivery procedure and

The industry is characterized by a much

Employees often do not receive the

Clarify responsibilities Bonus Homework – whose quote is this?

Labour: one of the biggest Bonus Homework – Collect

1.Financial management areas

“Quis, quid, ubi, quibus

Manage customer and supplier accounts

SHIFT and money transfer

PROVISION BASED PLANNING = TRAP

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