Financial Management for Hotel Industry

This document provides a cash budget and profit budget forecast for a hotel in the hotel industry. It includes calculations for cash collection and payments to suppliers, as well as an analysis of the cash flow and profit projections. The document also explains the importance of cash and profit budgets in financial management.

FINANCIAL MANAGEMENT
FOR HOTEL INDUSTRY

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
TASK 1............................................................................................................................................1
Cash Budget of Hotel for January to December 2020.................................................................1
TASK 2............................................................................................................................................5
Profit Budget Forecast for January to June 2020.........................................................................5

TASK 1
Cash Budget of Hotel for January to December 2020
Jan February March April May June
£ £ £ £ £ £
Receipts :
Collection
from Room
Sales 1,22,625 1,26,925 1,34,750 1,43,575 1,47,125 1,67,500
Food &
Beverage 44,500 40,100 43,300 42,600 40,200 36,500
Rent 950 950 950 950 950 950
Commision 25 55 20 15 10 40
Total Receipts 1,68,100 1,68,030 1,79,020 1,87,140 1,88,285 2,04,990
Payments :
Laundry 6,250 6,250 6,250 6,250 6,250 6,250
Printing and
stationary 2,000 2,000 2,000 2,000 2,900 2,000
Toiletries 46,000
Salaries 1,10,000
Wages 11,667 11,667 11,667 11,667 11,667 11,667
Marketing cost 60,000
Payment to
suppliers 0 2,000 12,300 2,000 16,400 2,000
Van 28,000
Petrol and
diesel 1,000 1,000 1,000 1,000 1,000 1,000
Restaurant
Improvements 8,800 22,000
General
Maintenance 5,000 5,000 5,000 5,000 5,000 5,000
Lighting &
heating 27,500 27,500
Rates 21,668 5,417 5,417
Total
payments 25,917 73,917 1,02,517 49,584 48,634 2,52,834
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Balance b / f 2,65,000 4,07,183 5,01,297 5,77,800 7,15,356 8,55,007
Net cashflow
in month 1,42,183 94,113 76,503 1,37,556 1,39,651 -47,844
Balance c / f 4,07,183 5,01,297 5,77,800 7,15,356 8,55,007 8,07,163
July August Sept Oct Nov Dec
£ £ £ £ £ £
Receipts :
Collection
from Room
Sales 2,18,560 2,44,040 2,19,415 1,94,830 1,48,155 1,16,055
Food &
Beverage 45,300 44,800 37,700 28,900 38,000 51,000
Rent 950 950 950 950 950 950
Commision 25 35 30 45 50 35
Total Receipts 2,64,835 2,89,825 2,58,095 2,24,725 1,87,155 1,68,040
Payments :
Laundry 6,250 6,250 6,250 6,250 6,250 6,250
Printing and
stationary 2,000 2,000 2,000 2,000 2,900 2,000
Toileteries
Salaries 1,10,000
Wages 11,667 11,667 11,667 11,667 11,667 11,667
Marketing cost
Payment to
suppliers 2,750 2,000 2,000 3,500 2,000 2,000
Van
Petrol and
diesel 1,000 1,000 1,000 1,000 1,000 1,000
Restaurant
Improvements 13,200
General 5,000 5,000 5,000 5,000 5,000 5,000
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Maintenance
Lighting &
heating 27,500 27,500
Rates 5,417 5,417 5,417 5,417 5,417 5,417
Total
payments 34,084 46,534 60,834 34,834 34,234 1,70,834
Balance b / f 8,07,163 10,37,915 12,81,206 14,78,467 16,68,359 18,21,280
Net cashflow in
month 2,30,751 2,43,291 1,97,261 1,89,891 1,52,921 -2,794
Balance c / f 10,37,915 12,81,206 14,78,467 16,68,359 18,21,280 18,18,486
Working Notes
Calculation for cash collection for the year from January to December
Jan
Februar
y March April May June
Room sales 1,30,500 1,25,000 1,40,000 1,45,500 1,48,000 1,78,000
Food & beverage 44,500 40,100 43,300 42,600 40,200 36,500
Rent 950 950 950 950 950 950
Commission 25 55 20 15 10 40
Room Sales
Business concerns
35% 37800 45675 43750 49000 50925 51800
Individuals 84825 81250 91000 94575 96200 115700
Collection from
sales 122625 126925 134750 143575 147125 167500
July August Sept Oct Nov Dec
Room sales 2,40,400 2,46,000 2,05,100 1,89,300 1,26,000 1,10,700
Food & beverage 45,300 44,800 37,700 28,900 38,000 51,000
Rent 950 950 950 950 950 950
Commission 25 35 30 45 50 35
3

Room Sales
Business concerns
35% 62300 84140 86100 71785 66255 44100
Individuals 156260 159900 133315 123045 81900 71955
Collection from
sales 218560 244040 219415 194830 148155 116055
Calculation for computing the payments made to suppliers of business necessities
Payment to
Suppliers Jan
Februar
y March April May June
In room beverages 2000 2000 2000 2000 2000
Bedding bundles 700
Kettle trays
Complimentary
items
9600 14400
Total 0 2000 12300 2000 16400 2000
Payment to
Suppliers July August Sept Oct Nov Dec
In room
beverages 2000 2000 2000 2000 2000 2000
Bedding bundles 750
Kettle trays 1500
Complimentary
items
Total 2750 2000 2000 3500 2000 2000
Analysis
Cash budgets are prepared by the organisation for projecting the inflows and outflows of
cash during the year. Projections on sales and expenses is based on previous estimates and also
additions are made in the budget for making current year budget. it enables the management to
identify whether the company will be having adequate cash levels for running the business and
operations effectively.
From the above cash budget it could be evaluated that the company is having enough cash
throughout the year to run its operations smoothly with the cash. It makes sales on credit from
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firms and on cash from its other customers. It is having bar sales made on cash basis and are
received in the same month. It also has revenues from rent and commissions for the extra space
and hair dressing and beauty salon.
Expenses for the year are occurring evenly over some of the areas and irregular payments
are made some of the areas. It is making payments for bedding bundles complimentary items
evenly as they are essential. Other operating costs are included in the budget that will be
undertaken during the year. It will also be purchasing new van for the business which will be
delivered in March and payments will also be done in same month.
As per the above company is not required to borrow funds from other places for running
the business operations as there are sufficient funds available with the business throughout the
year.
TASK 2
Profit Budget Forecast for January to June 2020.
Jan Feb Mar Apr May Jun
Room sales
1,30,50
0 1,25,000 1,40,000 1,45,500 1,48,000 1,78,000
F & B sales 44,500 40,100 43,300 42,600 40,200 36,500
Total sales
revenues
1,75,00
0 1,65,100 1,83,300 1,88,100 1,88,200 2,14,500
Rental Income 950 950 950 950 950 950
Commission Income 25 55 20 15 10 40
Total Revenues
1,75,97
5 1,66,105 1,84,270 1,89,065 1,89,160 2,15,490
Expenses
In room beverages 2000 2000 2000 2000 2000 2000
Bedding bundles 700
Complimentary
items 2000 2000 2000 2000 2000 2000
Laundry 6,250 6,250 6,250 6,250 6,250 6,250
Printing and
stationary 2,000 2,000 2,000 2,000 2,900 2,000
Toileteries 3,833 3,833 3,833 3,833 3,833 3,833
5

Salaries 18,333 18,333 18,333 18,333 18,333 18,333
Wages 11,667 11,667 11,667 11,667 11,667 11,667
Marketing cost 5000 5000 5000 5000 5000 5000
Petrol and diesel 1,000 1,000 1,000 1,000 1,000 1,000
General
Maintenance 5,000 5,000 5,000 5,000 5,000 5,000
Lighting & heating 9166.7 9166.7 9166.7 9166.7 9166.7 9166.7
Rates 5416.7 5416.7 5416.7 5416.7 5416.7 5416.7
Depreciation van 416.7 416.7 416.7 416.7
Depreciation
minibus 333.3 333.3 333.3 333.3 333.3 333.3
Total Expenses 72000 72000 73116.67 72416.67 73316.67 72416.67
Profit
1,03,97
5 94,105 1,11,153 1,16,648 1,15,843 1,43,073
Interpretation
Profit budget is prepared by the organisation for assessing whether the company will earn
sufficient profits or not during the specified period of time. The budget is made on the sales
forecast for the year. it provides the sales made and not the cash collected from the sales. It has
revenues income from room sales and bar where other income from rent and commission.
The operating expenses are related to running the operations of hotel. All the expenses are
recorded when they are accrued and not on cash basis. Capital costs are not included in the
profit budget. Depreciation for the van is provided for 7 months as it is purchased and delivered
in March and over minibus is provided even throughout the year. It could be analysed from the
above budget that hotel will be having adequate profits for the year after carrying all its
expenses for the year. Company is required to maintain stability by ensuring that the cost
efficient strategies are implemented for running the business and keeping adequate control and
monitoring over the processes.
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