Activity5_Prepare and monitor budget (1)




Activity5_Prepare and monitor budget (1)


  • Identify and describe 5 major budgets for a hotel business and explain why those individual budgets are important.
  • Master Budget – A master budget is a detailed overview of a company’s financial plans. It is normally an annually calculated document. It typically includes smaller, separate budgets that can be divided into two main categories: the operating budget and the financial budget. This is important for giving the company a direction or goal to reach each year.

    Cash BudgetCash budgets are forecasts of how much cash the organization has on hand and how much it will need to meet expenses. The cash budget is important because it helps managers determine whether they will have adequate amounts of cash to handle required disbursements when necessary, when there will be excess cash that needs to be invested, and when cash flows deviate from budgeted amounts.

    Revenue BudgetA revenue budget identifies the revenues required by the organization. It is a budget that projects future sales. Helps to identify how much income can be gained and also can be used to forecast how much supply is necessary for the demand.

    Overhead Budget – an overhead budget is the financial forecasting of the indirect costs of operating such as electricity, gas, wages, etc. it is important to control the overhead as if these overhead costs are not controlled, they can impact the profit a lot.

    Static Budget

    A static budget contains elements where expenditures remain unchanged with variations to sales levels. Overhead costs represent one type of static budget, but these budgets aren’t confined to traditional overhead expenses. Some departments may have a fixed amount of money set in budget to spend, and it is up to managers to make sure such amounts are spent without going over-budget. This condition occurs routinely in public and nonprofit sectors, where organizations or departments are funded largely by grants.

  • Explain how room occupancy forecast would affect or contribute to the budgets of other operational departments in a hotel.
  • Room occupancy forecast can help to measure how many sales the hotel will make. This will then identify the revenue the Hotel will make, as well as the amount of fixed expenses must be paid. Overhead can also be impacted, as an increase in sales, will also mean an increase in overhead, as customers will use the gas, electricity and water.

    This can also help to identify how much the hotel must spend on other cost centres, such as food, beverages, staff, etc.

    Room occupancy forecast can identify an estimate of the number of hotel guests. This help to identify how much supply are needed for this number of hotel guests. This helps the housekeeping department because the hotel will be able to purchase enough supplies to service each room.

    Food and beverages can also benefit from an accurate room occupancy forecast, because many foods have very short expiry dates. Therefore, it is important to minimize the amount of ingredients being purchased to minimize wastage. If there is too much food purchased, the food will go to waste. If there is too little food, the customers will not be satisfied. An accurate room occupancy forecast will make the purchase more accurate and minimize wastage.


    Activity5_Prepare and monitor budget (1)
    Last updated: Sep 2023

    Page 1

    astage. If there is too much food purchased, the food will go to waste. If there is too little food, the customers will not be satisfied. An accurate room occupancy forecast will make the purchase more accurate and minimize wastage.

    The front office will also be more prepared when they know how many customers are going to come into the hotel, or make a booking. The office supplies must also be monitored according to the room occupancy.

  • Explain the incremental budgeting method and calculate the July Revenue Budget of a café based on the following information.
  • Incremental budgeting is a traditional approach to budgeting is to take the previous year’s budget and to add on a percentage to allow for inflation, other cost increases and increases in production volumes.

    If volumes or costs are estimated to fall, the opposite process will take place, i.e. last year’s budget will be taken and a certain percentage will be subtracted.

  • As an operation manager, explain who you would discuss a draft budget with and why it is necessary.
  • I will discuss the draft budget with the accountants, owner and managers of each hotel department. The accountants are able to make accurate forecasts of the sales, expenses and overall financial performance, and this will help to make a more accurate and effective budget.

    The managers such as the HR managers, IT managers, maintenance department managers, etc. will all have a lot of knowledge about what expenses are necessary and what expenses can be avoided. This will make the budget more effective for reducing any unnecessary expenses or wastage of resources.

    Overall, it is necessary to discuss the budget with other stakeholders to ensure that the budget can satisfy all stakeholders, and also helps to make the budget more accurate, effective and reliable.

  • Explain who and why you should communicate with once the budget is finalised.
  • The budget will impact almost all stakeholders because it limits how much anyone can spend. The people that need to be communicated to about the budget are:

    Employees – need to know how to comply with the budget, such as turning off equipment and lights when not being used. Trying to minimize wastage of resources. The employees are the ones that can control the expenses the most, because they are the ones which prepare the food and beverages, housekeeping and also the customer service.

    Managers – can help to encourage workers to minimize wastage and can also implement new policies and procedures. The managers include HR Manager, Financial Manager, Food and beverage Manager, Housekeeping manager, etc.

    Suppliers – they need to know the budget so that they can be able to satisfy the organisation’s new budgeting needs. The suppliers should be communicated to because they should know how much the hotel is budgeted to spend. The…


    Activity5_Prepare and monitor budget (1)
    Last updated: Sep 2023

    Page 2

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