Managing Financial Operations Financial Operation Requirements Managing Financial Operations

Scope of Financial Management Requirements The industry is made up of a lot of small business and only a few large operations that can afford the luxury of full time accountants and financial managers. The understanding of Financial Management will depend on the size of the operation. Profit margins are usually very small in the hospitality industry.

Budgeting and Forecasting The key to successful business is careful planning. Have a “Business Plan”. Planning must include Profit and Loss and Cash Flow projections. (minimum 1 year). Larger business will have a “Master Budget”. “Fail to Plan is Planning to Fail”

Why Budget Advantages Ability to: determine financial situation at any given time. See problems as they arise and act to correct. See the impact of potential transactions before they occur e.g. Before employing a new full time employee. “What if” analysis available for different scenarios.

Why Budget Disadvantages Time and cost Expertise and research required. Effort required Requirements for further checks and analysis to be completed at regular intervals to ensure budget compliance.

Who looks at budgets Banks (Financial Institutions) Managers Owners Potential investors Departmental Managers

Reporting and Controlling Requirements Monthly reviews of Actual Performance against Budget. “Variance Analysis” Determine if “Corrective Action” is required. Other Controlling Methods: Daily Sales Summary Ave Cover Ave Room Rate Ave Spend Ave Waiter Bill

Why Do I require Financial Skills All levels of Management need some financial skills. Ability to create reports Ability to be able to interpret reports.

Identifying the need for Specialist Assistance. External Accountant: Prepare end of year financial statements and tax returns. Assist in: setting up accounting system. Preparing budgets. Recording and reconciling transactions. Advice on : correct invoicing. Cash management processes. Clarifying taxation implications. Legal requirements of tax law and compliance issues. Cash Flow management

The Business Plan The S M A R T Principle: Specific Purpose Mission Strategy Measurable How will it be done and how do we know that it has been achieved. Achievable Realistic goals Results orientated Who will do what and how is it measured. Timed When will the short term and long term goals be achieved

To be included in the Business Plan Master Budget Cash Flow planning Ratio of debt to equity and the terms of the debt to prevent excessive gearing. Control systems for Stock Debtors Creditors Financial Objectives Volume of trade Costs Pricing strategies Financial record keeping mechanisms for monitoring and compliance.

Different Options for Financial Management Standard Operating Procedures (SOPs) for Float reconciliation Float transportation Stock Control and receipt of deliveries Purchase order, delivery docket, credit notes, invoice, statement. (Matching of documents) Reconciliation of income to cash register and monies received.

Separation of Duties Different person banks the money to the person that receives the money. People who process invoices should not be the ones to authorise payment. The waiter should not be the one to take the order and take the money as well.

Financial reporting To be beneficial reports need to be Timely Accurate Acted upon when the need arise.