Evaluating Financial Strategies for the Hospitality Business: A Report

This report delves into the financial aspects of the hospitality industry, providing a comprehensive overview of key concepts and practices. It begins by evaluating various revenue-generating methods, emphasizing the importance of transparency, accountability, and quick decision-making. The report then discusses essential elements of cost, including direct materials, labor, and overhead, along with the calculation and significance of gross profit percentages and selling prices. It further assesses the source and structure of financial statements, such as the trial balance, income statement, balance sheet, and cash flow statement, from an accounting perspective. The report also examines the process and purpose of budgetary control within a hospitality business, highlighting its role in planning, coordination, and performance evaluation. By analyzing variances and implementing corrective actions, businesses can improve their financial performance. The report includes references to relevant academic sources.

Finance in the hospitality
industry

Evaluating the contribution made by a range of
revenue generating methods within business
• To find new customer for growing the business and to earn more profit.
• Transparency is most important in any business because the information about
business activities should be clear and accessible to their stakeholders and the need to
understand it.
• Accountability is a culture, people desire and have control over the system .it also
include financial controls and governing policies which is clear to everyone who
work in that company.
• In any business there is most important work is to take a right decision and take
decision frequently and quick. So this is also help in generating revenue by the
company.
• Alignment is also a revenue generating activities for a company. More effective
internal positioning in any business that emphasize.

Cont.
• Sales should be attained in a better way by providing adequate facilities such well-furnished
rooms, quality foods, beverages so that income can be produced in effective manner. This
will help Tasty Cactus to earn revenue with much ease and as such, customer satisfaction
can be achieved as well.
• Commission is another way of revenue and it provides contribution to the business in
effectual way. This may be accomplished from supplier to the business which is a source of
income.
• Sponsorship can be attained from other businesses to effectively promote their brand name.
Thus, business will be able to inject revenue in the best possible manner.
• Receiving grants from government is best way of generating income with much ease.
Moreover, this can be accomplished from any trust as well.
• Sub-letting is useful source of producing income by letting premises to other parties and
thus, it effectively contribute to generate revenue for the business.

Discussing elements of cost, gross profit percentages
and selling prices for products and services:
• Cost is price of any product which is purchased and giving an amount to seller.
• It is a monetary value of that company the money which is spend by company for
producing something.
• The main elements of cost is direct material, selling and distribution, direct labor, direct
expenses, factory overhead and administrative overhead.
• The costs includes materials which means that it is incurred to provide final products to
customers. E.g. cutlery, silverware, glassware that are needed for imparting services.
• Furthermore, another element of cost is consumables which requires processing to
provide the same to consumers.
• This includes beverages and foods etc. Labor is another cost which consists of paying
salaries to employees.
• Overhead includes electricity and printing and stationery expenses etc.

Cont.
• Gross profit percentage is to measures how much left after cut the cost
of making and selling the product.
• This gives the valuable information about your business.
• The formula for calculating gross profit percentage is: - Revenue –
cost of goods sold /revenue*100.
• Using this formula company get the strong indicator that the market is
becoming more competitive and then the company may control their
losses.

Cont.
• Selling price must cover cost and profits.
• It is the market value of any product.
• Gross profit margin is the part of a selling price over and above the cost acquiring or producing a product.
• Selling price is the addition of cost price and gross margin profit.
• Various pricing methods can be used by Tasty Cactus to fix price of products and services.
• First is rate of return pricing method which implies that firm makes and sets individual contribution
margin to various segments.
• This can be rooms, beverages or foods.
• Thus, after doing this, contribution rate is selected by the business.
• Hence, selling price would be based on sales mix and as such, gross profit can be calculated by subtracting
cost of goods sold from revenue.
• Another method is product costing which implies that selling price should be decided by adding in it,
service cost and after adding markup profit to unit cost.

Assessing the source and structure of the proposed balance from the
perspective of accounting:
• In accounting the journal is a book that keeps the original entry of financial transaction.
• Everything start from source documents and then it moves to a journal.
• Then the transaction entry is posted in general ledger. Then it is posted in a trial
balance of company.
• In a trial balance company records all debits and credits for every financial transaction.
• Its main objective is to determine where the company stands financially.
• Trial balance is generated from the general ledger.
• Sum and total of all debit and credit separately the balance must be equal.
• If the trial balance does not match the reason is transactions are recorded in the wrong
accounts.

Cont.
• After preparation of trial balance, next step is to prepare income statement
which provides clarity to business about the expenses incurred and income
earned from operations.
• This statement imparts firm to initiate control over its costs so that desired
profits can be accomplished with much ease.
• Thus, minimizing expenses will help Tasty Cactus to effectively earn more
revenue.
• Balance sheet can be prepared which shows that assets and liabilities of firm at
a particular point of time.
• Generally, it is prepared at the end of year to know how much quantum of
asserts are present in relation to liabilities.

Cont.
• Thus, it provides business to reduce its liabilities in order to invest
more in assets.
• This will help entity to effectively attain adequate profitability,
solvency, efficiency and liquidity position in effectual manner.
• Cash flow statement is also prepared that effectively shows changes in
income statement and balance sheet affects cash position of the entity.
• There are operating, investing and financing activities in the cash flow
statement.

Discuss the process and purpose of budgetary control in chosen
business:
• Budgetary control is a system which includes preparing budgets,
compare actual performance with budgeted, coordinate with the
departments and establishing responsibilities to achieve maximum
profitability.
• The main purpose of budgetary control is to ensure planning for future
by setting up various budget.
• And to eliminate the waste and increase in profitability budgetary
control is also an instrument of coordination.
• Another purpose of budgetary control is to centralize the control
system, and to fix the responsibility of employee of the organization.

Cont.
• Budgetary control main aim is to maximize the profits of the
organization for achieving this aim it is necessary that the organization
does a proper planning and co- ordinate with the team and take a right
decision.
• Resources are used up to a high extent and as such, optimum
allocation of resources can be made.
• Furthermore, business is able to analyze actual performance with
budgeted one to remove variances if any.

Cont.
• Budgetary control establish a target of performance which coordinate
the activities of the business.
• The next step is to record the actual performance of organization. And
then next compare the actual performance with planned performance.
• And then evaluate the differences or variances and give the reasons of
them.
• And the last if any problem in that then cure it on immediate basis.
• The process of budgetary control such as budget period is identify
which is generally one year.