Activity5_Prepare and monitor budget
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 Budget – Cash 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 Budget – A 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.
Labour budget – The direct labor budget is used to calculate the number of labor hours that will be needed to operate the hotel effectively. A labour budget is very effective because it makes sure that the hotel does not spend too much on labour. The labour budget should be communicated with the HR department to get a good understanding of the Organisational structure. A labour budget that is too low, may reduce the effectiveness of the hotel because there are not enough workers to provide fast and efficient customer service.
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.......
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.
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.
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.
HR managers can provide a lot of information and understanding about which expenses are necessary for the Hotel’s performance. They may also identifies workers which may not be necessary or could benefit from training. Also HR managers can also help with the labour budget.
Maintenance managers are responsible for the hotel’s facilities and flow. Hotels take customer service very seriously, and therefore, if there are any issues which may cause problems for the customer, such as a broken elevator, facilities not working, water leaks, etc, then the maintenance manager has to resolve the issue. Because of this, they know which tools, equipment, and other needs the hotel needs to run properly. If the lift has broken regularly the past week, the maintenance manager will know what is needed to fix the problem and this helps the budget for the hotel.
Employees such as front desk, maids, cleaners, etc will also be very helpful. Since they deal with the customers the most, they will get a lot of feedback which could help improve the hotel’s performance. Consulting with employees could identify opportunities of improvement and also identify areas of the budget…...
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