Preparing a Departmental Budget 4/6/2017 Preparing a Departmental Budget

4/6/2017

4/6/2017

4/6/2017

4/6/2017

4/6/2017

4/6/2017

Why Do We Need to Prepare a Budget? 4/6/2017 Why Do We Need to Prepare a Budget? To determine and clearly list our objectives To provide us with a guide to achieving our objectives To serve as a basis for evaluating performance Why do we need to prepare a budget?   To determine and clearly list our objectives To provide us with a guide to achieving our objectives To serve as a basis for evaluating performance Planning forces management to look ahead to set out detailed plans for achieving targets for each department. This prevents managers from relying on uncoordinated purchases which may be detrimental to the performance of the department. As budgets are prepared in advance (quite often the year before), they should be reviewed on a monthly basis (as a minimum) as the hotel industry is dynamic and fluctuations will occur within occupancy, F&B and external factors, e.g. increased rise in cotton, etc.

“…. Is The Backbone Of An Organization.” 4/6/2017 House Keeping…. “…. Is The Backbone Of An Organization.”

Preparing a Budget for Housekeeping 4/6/2017 Preparing a Budget for Housekeeping Different Types of Budgets Zero-based budgeting Incremental budgeting Different Types of Budgets Zero-based budgeting (ZBB) – this approach treats the preparation of budget for each period as an independent planning exercise. The initial budget is zero and every item of expenditure has to be justified in its entirety to be included. Incremental budgeting (IB) – this involves adding a certain percentage from last year’s budget to allow for growth and inflation. It encourages slack and wasteful spending to creep into the budget.   Advantages of ZBB – identifies and removes inefficient and/or obsolete operations and forces employees to avoid wasteful expenditure. Disadvantage of ZBB – it involves a lot of work, costs and benefits of different alternative can be difficult to quantify 10

Preparing a Budget for Housekeeping 4/6/2017 Preparing a Budget for Housekeeping Capital Budget Operating Budget Fixed Cost Variable Cost Operating Equipment Capital Budget – it is prepared to replace fixed assets, expand the business or for H&S reasons, not all of which may be financially beneficial.   The importance of capital budgeting is so that the organization will commit substantial sums of money, the purchase will affect a long period with potential uncertainty, it will be almost impossible to reverse and it may result in success or failure of the business. Example: Rooms Refurbishment >>>>>>>> show excel slide Operating Budget This predicts the Profit and Loss results for the forthcoming period. Advantages – commitment and motivation of managers, sets targets and standards, looks forwards and considers both internal and external factors Disadvantages – time taken and the cost of this time, may be unexpected events (e.g. volcanic ash clouds, terrorism) that affect later result. The main steps to achieving successful operating budgets are: Planning for attainable goals and objectives Comparing actual to budget and analyzing the differences Taking corrective action if required 11

Fixed Costs and Variable Costs 4/6/2017 Fixed Costs and Variable Costs Fixed cost A cost or expense that will not change as a result of changes in revenue or level of business Variable cost A cost that changes in direct proportion to the revenue or volume of business   Fixed cost A cost or expense that will not change as a result of changes in revenue or level of business Example: Cleaning Contracts Variable cost A cost that changes in direct proportion to the revenue or volume of business Examples: Cleaning and Guest Supplies Then show excel slide to show how it all works….

Fixed Costs and Variable Costs Payroll 4/6/2017 Fixed Costs and Variable Costs Payroll Payroll is an example of fixed and variable costs (the largest cost we control) Depending on Hotel Occ % this needs to be budgeted to flex. However this is one of the costs that needs to be monitored on a day by day basis.   Payroll costs can be a combination of fixed and variable. We won’t be focusing on payroll costs today as this could take up the whole day.

Operating Equipment How much you will use during a period? 4/6/2017 Operating Equipment How much you will use during a period? How much is the cost to order? How much is the cost to carry the items in inventory? Operating Equipment   How much you will use during a period? How much is the cost to order? How much is the cost to carry the items in inventory? Then show excel slide to show how it all works….

The Impact of Inventory on Cash 4/6/2017 The Impact of Inventory on Cash The cost of: The item Storing the item Money The impact of inventory on cash   The cost of: The item Storing the item Money This is where we need to work with Finance (that’s me!) to see if the organization can commit funds to purchase the items as we in Finance need to balance the funds for our cash budget and, occasionally, orders might have to be staggered in order to manage the company’s cash flow.

TEAMWORK! Financial Success is about teamwork. 4/6/2017 TEAMWORK! Financial Success is about teamwork. It is EVERYONE’S responsibility to ensure that the hotel is as profitable as possible and, therefore, meets its financial targets!

More Information Contact: Arletty Jooron Executive Housekeeper 4/6/2017 More Information Templates of the Slides are available from the UK HouseKeepers Association. Contact: Arletty Jooron Executive Housekeeper Cavalry & Guards Club arletty.jooron@cavgdsclub.co.uk Templates of the Slides are available from the UK HouseKeepers Association. Contact: Arletty Jooron Executive Housekeeper Cavalry & Guards Club arletty.jooron@cavgdsclub.co.uk

4/6/2017 Thank You