Significance of Management Accounting Tools in the Hospitality Industry

Management Accounting

INTRODUCTION
In the present era, business organizations are facing high level high level of
competition which in turn places direct impact on their profitability aspect. Hence, it is highly
required for the firm to employ management accounting tools and techniques. Moreover,
managerial accounting and reporting provide manager with the valuable framework for
decision making. In this, by making thorough analysis of reports business entity can make
suitable changes in the existing framework and thereby aid in the growth of firm. The present
report is based on Barry house hotel that offers accommodation services to the customers at
suitable prices. Thus, the major focus of such report is to present the significance of
management accounting tools in the context of hospitability business unit. Further, it will also
shed light on the different types of budgeting system which in turn helps in making effective
use of financial resources.
P1 Explaining management accounting and its different types
Management accounting lays high level of emphasis on making use of financial data
and preparation of suitable reports. Hence, such reports provide high level of assistance to the
manager of firm in taking suitable decision that make contribution in the organizational
growth and development. For making accurate and timely day to day business decisions
manager of Barry House requires enough financial as well as statistical information. Hence,
the main objective of management accounting is to assists manager in devising and
evaluating goals. Thus, information that contains in the managerial report helps both higher
management and employees in taking strategic action (Kaplan and Atkinson, 2015). Along
with this, such accounting focuses on present performance and helps in making proper
forecast about the near future. It furnishes monetary and company goal driven information.
By considering all the above aspects it can be stated that Barry House hotel should employ
management accounting tactics which in turn helps in making competent framework.
There are several types of management accounting system that Barry House hotel
needs to undertake for making effectual use of finance is enumerated below:
 Inventory management system: Barry House hotel can ensure effectual use of
financial resources by using the inventory management system. In the present time,
business units which are operating in the hospitality sector has to offer more services
along with the accommodation (Wijaya and et.al., 2015). In this, managers of the

hotel unit has requirement to maintain proper inventory records. Moreover, holding
and ordering cost has greater influence on the profit margin of firm. Thus, by using
the inventory management system and software hotel unit can assess the stock level
which it needs to maintain within the firm. By undertaking such system manager can
avoid the situation of excessive inventory to a great extent. Further, manager of Barry
House hotel can also identify the level of inventory for which it needs to place order
by using economic order quantity method. This method of inventory management and
control is highly significant which in turn helps in tracking or maintaining the cost
level.
 Job costing system: This costing method involves the money which is incurred by the
firm on material, labor and overhead in relation to the specific job. By using such
costing method manager of Barry House can track the cost level. This in turn enables
business unit to take suitable action so cost can be reduced in later jobs. Such costing
method places high focus on maintaining the record of both direct and indirect cost
level. Example of direct cost includes pick and drop expenses, other material for the
welcome of guests etc (Fullerton, Kennedy and Widener, 2014).
On the other side, indirect expenses which hotel unit incurs include promotional,
electricity and other utility, miscellaneous expenses etc. In this, by making continuous
monitoring of expenses that is associated with specific job manager of Barry House can find
out most effectual ways to perform. For instance : By making assessment it has been assessed
that promotional expenses of hotel unit are increased significantly as compared to the
previous aspect. In this, by making in-depth investigation manager of the hotel unit can assess
the effectual mode of advertisement. In this way, by developing awareness among the people
regarding accommodation services hotel unit can enhances customer base and there by
profitability aspect.
 Price optimization system: This system is highly significant which in turn assists in
evaluating the responses of individual on varied price level. Now, people takes
decision about accommodation after conducting evaluation of price and services
offered. Along with this, such system also helps in getting information about the price
which customers are ready to pay for accommodation services (Fullerton, Kennedy
and Widener, 2013). In this way, price optimization system assists in evaluating the
demand and setting suitable price for the services offered. Thus, price optimization