Flying-by-The-Seat-of-Your-Pants – AKA No Hospitality Financial Leadership
April 4, 2017 7:56am
by David Lund
In most hotels, the system for forward looking financial management is nonexistent. We rely on the top line coming in and if it does we expect a certain profit picture to emerge. When revenues are good this works, sometimes. When revenues don’t materialize because of an event or something that produces headwinds in our business, we almost always fall flat on our face of the desired profitability. That’s flying-by-the-seat-of-your-pants.
We seemingly have no way of knowing what’s really going to happen financially in our business. We roll the dice every month. When we are in a fly-by-the-seat-of-your-pants hotel and we have a good month, things are great, but we really don’t know why. For example, why were expenses so low this month? Or, perhaps payroll seems too good to be true. When we have a bad month, the sins are obvious: missed invoices from prior periods; over forecast in payroll and revenues below forecast. Didn’t anyone see this coming? Well, actually, no. No one saw this coming because we don’t have a financial communication process to ensure we are on top of the business.
When we are in a fly-by-the-seat-of-your-pants hotel and we have a bad result the GM points fingers at the controller. The controller blames the department heads who didn’t submit their forecast on time. The department heads blame the controller because he/she created the forecast anyway! You see, it just goes around and around. No accountability, no ownership, lousy results and no financial leadership!
This is a dangerous and irresponsible practice that almost always leads to financial failure at some point. It is common practice in our industry and one that has led to many financial meltdowns. For some, the argument would be that the finance department is responsible of managing the numbers. That might sound like the right idea to the lay man but in practice it is short sighted. It rarely works because the finance department has no real way of knowing what is going on in the various and numerous departments within the hotel. The fact is the accounting departments' job is to record what happened, capture the data in the month for the month, report on the results and ensure the assets and liabilities are properly recorded and safeguarded. It is not to know what each area in the hotel will do next month, next quarter, next year. If we want that kind of forward looking intelligence in our hotel we need to create a system to generate it. What can we do to create this system?
If we want to have a system in our hotel that allows us to manage the financial picture properly we need to give our managers and leaders the responsibility for their results which means they need to create their budgets and forecasts. They need to know what is in the middle of their statements. Budgets and forecasts must be zero based and each area leader needs to own them. There is no other way to create this. If we try and manufacture numbers and give them to our leaders to deliver on, we are going to fail. Your department leaders and managers want to be fully and completely responsible for their departments' finances. And what they need to accomplish this, is training, support and your guiding hand.
So, there you have it. Stop flying-by-the-seat-of-your-pants and get your financial leadership on!
Call or write today and arrange for a complimentary discussion on how you can create a financially engaged leadership team in your hotel.
Tags: david lund,
hotel financial coach
David Lund is The Hotel Financial Coach, an international Hospitality Financial Leadership pioneer. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with Fairmont Hotels for over 30 years.
He authored an award-winning workshop on Hospitality Financial Leadership and has delivered it to hundreds of hotel managers and leaders. David coach’s hospitality executives and delivers his Financial Leadership Workshops throughout the world, helping hotels, owners and brands increase profits and build financially engaged leadership teams.
He speaks at hospitality company meetings, associations and he has had several financial leadership articles published in hotel trade magazines and he is the author of two books on Hospitality Financial Leadership. David is a Certified Hotel Accounting Executive through HFTP and a Certified Professional Coach with CTI.
Call today for a complimentary call and discover how you can create a finically engaged leadership team in your hotel or brand.
Contact: David Lund
949 791 2739
Hospitality Financial Leadership - How to Read Hotel Financial Statements and The Link
Hospitality Financial Leadership - Who Has ALL the Risk and Why?
Hospitality Financial Leadership - Create the Monthly Financial Circle!
Hospitality Financial Leadership - Is Your Hotel Culture Blame or Appreciation?
Hospitality Financial Leadership – Creating a Hotel Accounting Policy Manual – The Dos and Don’ts
Hospitality Financial Leadership - Free Property Management Software - More Disruption?
Hospitality Financial Leadership – Every Line Needs an Owner
Hospitality Financial Leadership - Recording Average Length of Stay
Hospitality Financial Leadership - Financial Statement Analysis and Your Hotel Career
Hospitality Financial Leadership - A White Paper on a 6-Month Client Workshop/Coaching Engagement – Part 3
Hospitality Financial Leadership - A White Paper on a 6-Month Client Workshop/Coaching Engagement – Part 2
Hospitality Financial Leadership - A White Paper on a 6-Month Client Workshop/Coaching Engagement – Part 1
Hospitality Financial Leadership - Testing vs. Trusting
Hospitality Financial Leadership - Runnin' Down a Dream
Hospitality Financial Leadership - Four Important Things to Know
Hospitality Financial Leadership - Using EFTEs
Hospitality Financial Leadership - Food Cost and the 80/20 Rule
Hospitality Financial Leadership - "Systems", Don't Change The People - Change the System
Hospitality Financial Leadership - How Can You Turn $250 Savings into $1,000,000 In Asset Value
Hospitality Financial Leadership - The Third Pillar
Please login or register to post a comment.