Financial Management for the Hotel Industry

This document provides an overview of financial management in the hotel industry, with a focus on the process of zero-based budgeting. It discusses the advantages of zero-based budgeting over traditional budgeting and provides ways in which organizations can effectively implement it. The document also includes a sample budget for reference.

M5X01922 - FINANCIAL
MANAGEMENT FOR THE HOTEL
INDUSTRY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2............................................................................................................................................2
(a)Defining and evaluating process of zero based budgeting.....................................................2
(B) Advantage of zero base budget over traditional budget.......................................................3
©Ways in which organization can effectively implement zero based budget............................4
CONCLUSION................................................................................................................................4
REFERENCE..................................................................................................................................................5
Table 1Budget..................................................................................................................................1

INTRODUCTION
Zero based budget is commonly used now a day by the business firms. In the present research study cash budget is prepared and
then detail discussion is carried out on the ZBB. In middle section of the report budget preparation process is discussed and then its
advantage over traditional budget are explained in detail. At end of the report, best ways are identified by following which budget can
be implemented at the workplace. In this way entire research work is carried out.
TASK 1
Table 1Budget
Jan February March April May June July August Sept Oct Nov Dec Total
£ £ £ £ £ £ £ £ £ £ £ £ £
Receipts :
Opening cash flows 318,000
Payment on business accounts 79,542 133,923 116,594 114,012 121,326 140,346 154,849 175,309 252,677 230,057 141,422 1,813,425
Cash sales 229,448 178,931 174,603 171,067 195,360 228,270 240,360 288,450 208,072 240,480 204,540 2,584,629
Interest Received 8,268 8,268 8,268 8,268 8,268 8,268 8,268 8,268 8,268 8,268 8,268 99,216
Total Receipts 317,259 321,122 299,465 293,347 324,954 376,884 403,477 472,027 469,017 478,805 354,230 4,497,270
Payments :
Freehold 10,000
Fixtures and fittings 50,000 50,000 50,000 50,000 50,000 300,000
Property expenses 28,000 52,000 109,200 109,200 109,200 109,200 626,000
Laundry 18,750 18,750 18,750 18,750 75,000
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Energy costs 30,000 30,000 30,000 30,000 120,000
Payments to suppliers 0
Wages 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 480,000
Salaries 26,667 26,667 26,667 26,667 26,667 26,667 26,667 26,667 26,667 26,667 26,667 320,000
Vehicles 30,000 30,000
Zero hour contract 17,050 17,050 16,500 16,500 67,100
Maintinance cost 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000
Petrol and diesel 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200
Corporation tax 779,000 779,000
Rates 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 675,000
Kitchen accessories 7,150 7,150
Branded beddings 2,560 2,560 5,120
Marketing 25,000 25,000 75,000
Overdraft Interest 0
In room beverage 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 4,100 3,000 3,000 37,100
Toiletaries 24,500 24,500 24,500 18,000 24,500 116,000
Printing cost 5,800 4,000 4,000 4,000 5,800 4,000 4,000 5,800 4,000 4,000 4,000 55,200
Total payments 163,127 130,767 1,008,017 185,767 209,567 229,017 197,817 293,527 355,817 349,467 388,217
TASK 2
(a)Defining and evaluating process of zero based budgeting
There are number of budgeting approaches that are used by the firms to control expenditure’s in the business. Out of all budgeting
methods zero based budgeting is the one of the most popular technique that is used to make expenditure related decisions. Important
characteristic of the zero-based budgeting is that while preparing it managers estimate likely future business conditions and
accordingly do allocation of resources in the business. Thus, it can be said that zero based budgeting assist managers in making wise
business decisions. Process of preparing zero based budget is given below.
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 Start: It is the one of the most important phase of zero based budget process and under this finance manager prepare zero
based budget at its own level. As it is well known fact that while preparing mentioned budget previous years values and
performance as well as business conditions are not taken into account (Walsh, 2016). In zero based budget technique from start
estimation is made. In order to make estimate finance manager conduct brief meeting with the department heads and
accordingly prepare budget. Evaluate: In this next stage of zero based budget prepared budget is send to department heads for evaluation purpose.
Department managers according to their knowledge and estimation alter budget. They remove unnecessary expenses from the
budget and make changes in the values and send budget to the finance manager. Justify: In this stage discussion is carried out between managers and finance manager about amendments made on the budget
and values of the budget are justified. Thus, it is important stage of budget preparation process (Hijal-Moghrabi, 2017). Streamline: In this stage way in which varied task will be performed is determined so that expenses remain in control.
 Execute: Finally, budget is implemented in the business.
(B) Advantage of zero base budget over traditional budget
One of main advantage of the zero-based budget is that it is realistic in nature and consider current conditions not previous one.
Thus, zero based budget is more realistic and practical then traditional budget. Other main advantage is that managers can be made
responsible if any variance observed under ZBB (Wolf, 2015). On other hand, in case of traditional budget no one can be made
responsible because always slight changes are made on previous year budget. Other main advantage of the zero-based budget is that
its values are justified while preparing budget but in case of traditional budget no justification is made and simply small percentage
change is made on previous year budget.
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©Ways in which organization can effectively implement zero based budget
In order to effectively implement zero based budget managers must time to time evaluate actual performance and budgeted values
and must identify whether current business conditions are same as estimated (Segun and Olamide, 2015). If not they accordingly
changes must be made in the budget and then it must be implemented at ground level. By doing so organization can effectively
implement zero based budget in its business.
CONCLUSION
On the basis of above discussion, it is concluded that each firm must prepare ZBB so that in better way business performance can
be evaluated and steps can be taken on time to improve business conditions. If require budget values can be alter so that more
effectively performance can be measured in the business.
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REFERENCE
Books and journals
Hijal-Moghrabi, I., 2017. The current practice of performance-based budgeting in the largest US cities: An innovation theory
perspective. Public Performance & Management Review. 40(4). pp.652-675.
Segun, A. and Olamide, F.T., 2015. The global debate on budgeting: Empirical evidence from Nigeria. Business Management
Review. 13(1).
Walsh, K., 2016. Managing a budget in healthcare professional education. Annals of medical and health sciences research. 6(2). p.71.
Wolf, R., 2015. Broken budgets?. Strategic Finance. 96(12). p.22.
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