Financial Management for the Hotel Industry

This document provides an overview of financial management in the hotel industry, with a focus on zero-based budgeting. It explains the process of zero-based budgeting and discusses its advantages over traditional budgeting. The document also provides insights into effective ways to implement zero-based budgeting in organizations. The document includes a sample budget and discusses the importance of budgeting in making business decisions.

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
Budget is the one of the most important tool that is used by the firms to make business decisions. Detail discussion is carried out
on preparing a budget. Main focus is on zero based budgeting and its advantages relative to traditional budget is discussed in detail. In
the present research study, ways in which zero based budget can be implemented at the workplace is explained and cash budget is also
prepared in the report. In this way, entire research work is carried out.
TASK 1
Table 1Budget
Jan Feb March Apr May June July Aug Sept Oct Nov Dec Total
£ £ £ £ £ £ £ £ £ £ £ £ £
Receipts :
Cash at beginning of year 318,000
Credit sales 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
Sales revenue 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
Overall revenue 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
Furniture and fixtures 50,000 50,000 50,000 50,000 50,000 300,000
Real estate 28,000 52,000 109,200 109,200 109,200 109,200 626,000
Washing 18,750 18,750 18,750 18,750 75,000
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Electricity 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
Automobiles 30,000 30,000
Zero hour contract 17,050 17,050 16,500 16,500 67,100
Maintenance 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
Fuel expenses 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
Pantry accessories 7,150 7,150
Branded beddings 2,560 2,560 5,120
Advertising 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
Toiletries 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)ZBB definition and its implementation process
Zero based budgeting is the accounting method under which budget is prepared and its each element value is justified by
considering new year expected business conditions. Means that past year budget in no way is considered to prepare zero based budget.
Detailed process in respect to ZBB is given below. Start: It is the first phase of the ZBB and in this stage it is prepared from scratch. Past year conditions and values are note
taken into account while preparing budget. In this stage finance manager carry out brief discussion with its peer managers like
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marketing manager, production manager and material manger etc. After doing consultation with them briefly finance manager
prepare zero based budget for the company. Evaluate: After preparation of the ZBB same is forward to the department heads (Miller, 2018). These department heads check
each relevant expenditure elements and decide whether values are actually projected. They also find out unnecessary expenses
and remove them from the budget. Justify: In this stage after making changes in the budget department heads communicate their assumptions to the finance
manager so that it can be taken into confidence about amendments made in the budget (Surianti. and Dalimunthe., 2015.). Streamline: It is the fourth stage wherein activity which will be done in particular manner is determined. Attempt is made to
make all expenses within the set limit so that variance can be avoided in the business.
 Execute: In this stage finally, budget is implemented at the workplace and its tracking is done time to time.
(B) Merit of ZBB relative to traditional budget
There are number of merits of zero based budget over traditional budget. Main advantage of preparing ZBB is that previous
years values and conditions are not considered while preparing budget for the company. On other hands, traditional budget takes in to
account past year value and make slight changes in it (Gansemer-Topf and Englin,, 2015). On comparison of both it can be said that
ZBB is following right approach. It is not necessary that previous years condition will still remain in existence. Hence, due to this
reason traditional budget is not preferred by most of firms. Other main merit of ZBB is that its components values are justified but
values of the traditional but is not justified. Hence, ZBB is more realistic in nature. Clarity and responsiveness is high in case of zero
based budgeting but same is low at traditional budgeting. Thus, it can be said that zero based budget have lots of positive points for the
people.
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©Ways to implement ZBB
Zero based budget can be implemented in effective manner at the workplace. In this regard, finance manager can issue
instructions to the departments heads to prepare their own department budget by taking in to account sector outlook. This process
must be followed because department heads between know their domain area and can make prediction more accurately then finance
manager (Ibrahim and et.al., 2017). After preparing budget detail argument must be done with the department head and accordingly
must alter budget values. By doing it can be ensured that budget prepared is not superficial in nature. After finance manager pass the
budget it must be implemented at the workplace in a systematic manner.
CONCLUSION
It is deduced on basis of entire research study that there is significant importance of the ZBB for the business firm because by
preparing it company can utilize its resources’ in better way and can determine targets for upcoming year in proper manner.
Department heads must estimate future conditions accurately and accordingly must make decisions in respect to budget.
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REFERENCE
Books and journals
Gansemer-Topf, A.M. and Englin, P.D., 2015. Contemporary challenges in student affairs budgeting and finance. New Directions for
Student Services. 151(2015). pp.63-78.
Ibrahim, M. and et.al., 2017. Zero-Based Budgeting is a Panacea to Fiscal Distress: Do the Perceived Benefits Significantly Influence
its Adoption in Borno State?. Saudi Journal of Business and Management Studies. 2(10). pp.943-950.
Miller, G., 2018. Performance based budgeting. Routledge.
Surianti, M. and Dalimunthe, A.R., 2015. The implementation of performance based budgeting in public sector (Indonesia case: A
literature review). Research Journal of Finance and Accounting. 6(12). pp.198-210.
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