Finance in Hospitality Industry: Funding, Costs, and Budgeting

This report provides a financial analysis of the hospitality industry, focusing on Borne Leisure. It begins by examining various funding sources available to businesses in the sector, including sales, loans, equity, crowdfunding, and partnerships. The report then delves into cost elements, gross profit margins, and pricing strategies for hospitality products and services, such as food, beverages, and accommodation. Furthermore, it explores methods for controlling stock and cash, emphasizing the importance of inventory management and cash flow for operational efficiency. The report also assesses the structure and sources of trial balances, evaluates business accounts and budgetary control processes, and analyzes variances between budgeted and actual figures, offering recommendations for future financial management within the hospitality context. The report covers topics such as sales, commissions, sponsorships, and grants as income generating methods.

FINANCE IN
THE
HOSPITALITY INDUSTRY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P 1.1 Review sources of funding (8 sources) available to business and services industries.......1
P 1.2 Evaluate the contribution made by range of method of generating income within a given
business and services operation..................................................................................................2
TASK 2............................................................................................................................................3
P 2.1 Discuss elements of costs, gross profit percentage and selling prices for product and
services........................................................................................................................................3
P 2.2 Evaluate method of controlling stock and cash in the business and service environment.4
TASK 3............................................................................................................................................5
P 3.1 Assess the sources and structure of the trail balance.........................................................5
P 3.2 Evaluate business accounts, adjustments and notes ..........................................................6
P 3.3 Discuss the process and purpose of budgetary control......................................................7
P 3.4 Analyse variances from budgeting and actual figures, offering suggestion for
appropriate future management action........................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
In this documentation, this assignment review about to different kinds of funding sources
Borne leisure organisation presented in the industry in order to sustainable development of the
entity in the market. Moreover, this study define about elements of cost, gross profit percentages
and selling prices of different kinds of product and services in Borne leisure business.
Furthermore, this assignment define about some methods of controlling stock and cash in the
business and service environment in which they make proper development of their issues in the
business effectively. Moreover, this analysis introduce appropriate approach of budgetary
controlling in the company and some essential variance analysis which can identify the
differences between the actual performances and expected performances according to the
budgeting approach.
TASK 1
P 1.1 Review sources of funding (8 sources) available to business and services industries
Multiple numbers of sources could be seen by the business manager in order to furnish
funding by various factors who make investment in the organisation for sustainable development
in the market.
 Borne leisure company generating revenue by selling several kinds of goods and services
in more efficient form. This is the most basic source of funding within the company.
 Second kinds of sources could be, Borne leisure organisation may borrow money for
sustainable growth (Brotherton, ed., 2012). The business might borrow money from
banks and financial institutions by loan method. This loan contains specific kind of
policies in which the lender needs to pay some amount of interest according to amount
volume.
 The most effective sources of funding is, Borne leisure could generate money by selling
several kinds of its share to those persons who interested in investing in their desired
company. These share may in form of equity share and preference shares which may be
bought according to customer shareholders likes.
 Cloud finding also may be the good option to resourcing funding to Borne leisure
organisation effectively (Guillet and Mattila, 2010). In this process a group of persons
would allow you to chose your ideas and make investment in your business via internet
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method. When this kind of investing approach may successful then various investor
contribute resource funding to your company in better form.
 Taking partnership could be another option for the business to furnishing investment
towards the business in efficient manner. Borne leisure company may take on partnership
approach which might be your employee even.
 Venture capital also may be sources of finance in the organisation in which make large
investment in Borne leisure enterprise and owned large number of shares of the company
effectively.
 Crowdfunding also might be an effective approach of resourcing of funding for Borne
leisure business effectively (Boella and Goss-Turner, 2013). This is totally web based
projection and permits each one of investor in the company in order to pitch the effective
ideas and project in which multiple numbers of investor will attract you via online
platform and make investment in debt, equity and reward based funding.
 Friends and family also could be large investor of hospitality firm at effective rate. Borne
leisure enterprise owned need to approach their friends and family members in order to
make investment in your organisation in crucial time of the business environment.
P 1.2 Evaluate the contribution made by range of method of generating income within a given
business and services operation
Numbers of methods are presented here in order to appropriate contribution of generating
incomes in Borne leisure firm from the market efficiently. These are the method as following:
Sales: Sales could be the alternative option to Borne leisure organisation to generating
profitability and income in the market in effective form. In concern of the hospitality industry,
numbers of product and services selling by the companies in the industry to generate efficient
income from the market (Theodosiou and Katsikea, 2012). Borne leisure firm is associated to
furnishing prefect UK holiday experiences to the families and adult person within the country.
The company provides services such as luxurious hotel booking services, healthy food services,
beverage and other supportive services in terms of generating sufficient income for business
growth in the market.
Commission: The commission base income can generate more profitability for the
organisation. In case of Borne leisure firm, there are several kinds of travelling agents are
working in the company and bringing customers towards the business services in effective rate.
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The commission based income generated from the contribution of third part suppliers of services
to the firm in efficient form so that each of agent makes contribution to generating incomes in
the enterprise.
Sponsorship: Numbers of persons and organisations are presented here in the market
which furnishes investment to the business in order to support effective activities of the
organisation within the market by providing efficient fund to organise some necessary
hospitalities exercises effectively (Ransley and Ingram, 2012).
Grants: This is also an effective method by which Borne leisure organisation could get
sufficient income which make contribution in the growth of the company and efficient running of
business activities within the firm effectively. Grant may be provided by the government of the
UK and other big financial authorities within the country.
TASK 2
P 2.1 Discuss elements of costs, gross profit percentage and selling prices for product and
services
Various elements of the costs are presented here which is as following manner:
Materials: Material costs are those elements of product and services in Borne leisure
travelling company, which is incurred in the business while furnishing effective hospitality
product and services and the final product and services may consist of these material and make
final product of the company (Lee-Ross and Lashley, 2010).
For example: Food materials, glassware and silverware products and travelling equipment
services etc.
Labour: Several types of labours are needed in the hospitality organisation in order to
furnishing effective services in the company. Labour cost is main cost element of the business
which makes more expenses by paying salaries to labour according to delivering process of final
product and services in the company.
For example: Paying salary towards the staff and waiters of Borne leisure organisation
and also front office labour as well.
Overheads: Overheads cost is directly occurred in the business which generate in the
company indirectly such as indirect labour costa and costing of other indirect operational
activities of the business.
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For example: Paying salary to administration department of the company and electricity
bills and several other general expenses.
Selling price and Gross profit margin
Pricing in tourism: Several travelling and tourism product and services selling by Borne
leisure company and according to the peak season of the country, Borne leisure firm need to
mark up at high cost which is associated with addition of operational activities as well (Millar,
Mao and Moreo, 2010). According to peak season and peak season off, they need to make their
prices high or down of selling hospitalities services.
Absorption pricing method: In case of the techniques of absorption pricing method, the
organisational professional need to initially calculated variable cost of the company effectively
and then further, overheated cost to be absorbed in the organisational product and services of per
unit. Ultimately, mark up pricing is also to be added in the final goods and services of the firm
and according to them set up the final price of the product and services of Borne leisure
organisation.
Marginal pricing method: In this pricing method, the company professionals need to
categorise some costs which is variable and fixed cost of the company. The finance manager of
Borne leisure firm need to calculate variable cost per unit and then necessary contribution to be
added in the costing method of the company in order to proper development of their issues in
more efficient form. Fixed and overheads costs are not computed in per unit cost of the
organisation. Gross profit margin can be calculated by the company's professionals after
deducting variable cost of the sales efficiently.
P 2.2 Evaluate method of controlling stock and cash in the business and service environment
In case of the hospitality organisations, multiple numbers of services is being provided by
companies employees and after utilisation of service in the organisation, numbers of inventor
remains after utilisation of services in the firm (.Iorgulescu and Răvar, 2013). Unnecessary stock
of the company need to be managed properly and make efforts to neglect them to increase
expenses of the company. Borne leisure firm professionals need to implementation of just in time
inventory management approach at the workplace in order to appropriate management of their
services inventory and products of hospitality industry in efficient form. The organisation
majorly known as furnishing arranging the best hotel, food and travelling services to their clients
according to demand and requirements of the customers in efficient form. Jit inventory system
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could be effective for Borne leisure enterprise in terms of management of wastes and losses and
inventor cost management at the workplace in order to controlling stock of the company in
efficient form. ERP software is most popular software in the industry who furnishing program
for effective inventory management in the firm in efficient form (Hoque, 2013). Essential stock
of the company is also protected by the safeguard and some other technical equipments like
some security camera and locker system which could be used by only staff members. This
activities help the business manager to easily protect the inventory of the business and some of
essential documentation of the company.
Cash control: Cash controlling in most vital thing for each organisation and in case of
Borne leisure firm, their finance manger need to hold of sufficient cash amount which support
the business to run of their operational activities properly and also make contribution to efficient
management of their working capital in the company effectively (Henderson, 2010). They need
to avoid extra expenses of the business activities like furnishing efficient travelling and hotels
services and manage the cash balance by the avoiding manipulation of the cash at the workplace.
They need to make physical cash count at the workplace on regular bases to identify the
availability of the cash in the company and make contribution to check out the appropriate cash
figure of all expenses during the services provision of the company and effectively control the
cash on the company.
TASK 3
P 3.1 Assess the sources and structure of the trail balance
Trial balance is the list of two kinds of column which is debit and credit side. The
organisation needs to check out regular basis to identify the errors which is making entry in the
general accounts of the company (Kapiki, 2011)B0. Sources of the trail balance are consisted of
three kinds of ledgers which is normal general ledger, sales ledger and purchase ledger which is
entered into personal accounts of the organisations. Sales ledger of the company is associated
with the personal accounts of the organisation effectively. In case of generate account which is
made of impersonal accounts in the organisation which has two sections like nominal and real
accounts. In case of Borne leisure business, nominal account describe about to the process of
entering of income and expenses transactions of the business effectively. In case of real accounts
of the business, which describe about the entering transactions of assets and equity accounts of
the organisations effectively. It is essential for the business to easily recognise errors in double
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entering of bookkeeping including wrong inclusion of the amount in one account. Company can
prepare the trail balance at regular basis to identify errors in their accounts and also made impact
on the business environment of cash controlling at the workplace effectively (Deroos, 2010). It
helps the business to identify the errors which has been occurred in the business transaction at
somewhere.
Current assets- Bank/ Cash/ Debtors.
Fixed assets& contra assets- Building/Equipment/Acc. Depreciation.
Current liabilities- Creditors.
Long terms liabilities- Long term bank loan/ Debentures
Oner's capital- Ordinary share capital/Retained Profit.
Revenue- Sales
Expenses- Salaries/ Loans interest/ Energy/ Communication/ Rates & Insurance/
Purchases etc.
P 3.2 Evaluate business accounts, adjustments and notes
INCOME STATEMENTS OF BOURNE LEISURE ORGANISATION:
Borne leisure limited organisation's income statements for the year ending 20th February 2014.
Sales: 5,050
Less: Cost of Sales
Inventory (03/07/2013)
Purchases 2,456
1,506
Less: Inventory (20/6/ 2014)
Gross profit 784
Administration and operational expenses:
Business rates & insurance (86-7) 79
Wages and salaries (526 + 7) 533
Depreciation (350* 27%) 94.5
Communication expenses 55
Energy costs 37 (528.7)
Selling and Distribution expenses
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Marketing expenses 80 (80)
Finance Expenses
Debenture interest (300*7%) 21
Loan interest 5 (20)
Profit Before Taxation (PBT) 109.6.
Less: Income Tax (40)
Profit after taxation(PAT) 78.6
Less: Dividend declared (100& 0.25) 0.25
Retain profit for the period 45.6
Balance sheet
Non-current Assets
Buildings 500
Equipment 250
750.
Current Assets
Inventory (25/ 02/2013)
Debtors 97
Pre-paid insurance 5
Banks 4
Cash 1250
Equity & liability
Reserved – Retained Earning (175+ 45.5) 220.5
Current liability
Creditors 35
Wages and salary payable 6
Income tax payable 35
Dividend payable 16
P 3.3 Discuss the process and purpose of budgetary control
Budgeting control is one of the essential elements of management accounting system by
which the business can generate some of the effective controlling on the budgeting of Borne
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leisure business. In this process of budgeting control some function of the management
accounting carrying out properly in which they can generate some effective services efficiently.
Process of the budgetary control: In case of Borne leisure organisation, budgetary
control could be sued in financial figure of the company to set for the future period and set the
standard according to the financial availability within the firm and according to them make
effective budget which focus on the accomplishment of organisational goals and objectives
effectively. First of all we need to understand the areas in which actual results can be gained
properly and recorded as well. The actual figure of the budgetary control assist the company to
make use of management approaches in respect to take remedial measures at a proper time limit
of the organisation. In terms of know about to the process of budgetary control in Borne leisure
firm, they need to prepare a period of budget effectively and this might take one year and many
times it has been seen that, it gets continue from the last year to current year. Borne leisure
organisation's professionals can select one method of preparing budgeting at the workplace such
as zero base budgeting, cash budgeting etc. (Okumus, Altinay and Chathoth, 2010). after
selection of appropriate budgeting in the company, they need to take action concerning to the
implementation of budgeting in the company in effective form. Performance measurement also
require executing by the business owner in order to assess the performance of their selective
budgeting process within the industry. Implementation is necessary part which must be taken by
the manager of the company in respect to development of budgeting and approving budget for
particular time period. In case of budgeting process, the organisational manager need to prepare a
budget and according to them make forecasting towards the organisational performances in
efficient form so that manager of the company will be able to know about to the differences
between actual performances of the businesses and set up forecasting values of the firm. They
manager must need to find out the differences in effective form and according the information of
measurement of budgeting performances in the industry, manager must make decision towards
appropriate improvement in the organisational culture efficiently. In the process of budgeting
preparation, variance analysis play most important role in order to identify actual differences of
the company in efficient way (Battour, Ismail and Battor, 2010). The process of the budgeting
preparation must be in appropriate manner so that actual performance of the company could be
examined properly.
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Purpose of the budgeting control: Budgeting control has been become most essential
approach for each organisation in respect to know about to the forecasting of income and
expenditure of the business which is expected to be happened in the future. The major purpose of
the budgeting control is helping business manager to decision making process and it furnishes
some tools and techniques of management accounting approaches by which manager of Borne
leisure enterprise would be able to make proper decision towards forecasting business
performances. Moreover, the budgeting control furnish the values by which business
performances could be monitored effectively by the manager of the enterprise.
P 3.4 Analyse variances from budgeting and actual figures, offering suggestion for appropriate
future management action
Numbers of variances is needed to be analysed by manager of Borne leisure enterprise in
case of know the differences between forecasting figures and actual performances of the business
effectively.
Raw material total variance = standard cost-actual cost
= (20,000 * 10) – 175000
= 250000 F/ +
Raw material price Variance = Qty. Used (Standard price – Actual price)
= (22000* 10) – 175000
= 45000 F/+
Raw material usage variance = Std. Price (Standard Usage – Actual price)
= 10 ((10 * 2500) – 20000)
= 50,000 (A) /-
Analysis of variance: From the above analysis, it can be seen that, the above figure
shows that 25000 euro favourable for the company according to raw material from the budgeting
figure of actual performances (Mihalič, Žabkar and Cvelbar, 2012). From the above variance
analysis of the raw materials of the company, it is concluded that actual material cost is less than
budgeting showing figure effectively.
Suggestion for appropriate future management action: From the actual figure analysis
of Borne leisure company, it is stated that the company manager must take action towards
elimination of the over utilisation of raw material in the company in order to furnishing effective
services of travelling sector. Moreover, the company need to set up appropriate procedure of
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reducing waste of raw materials at the workplace which can make improvement in the future
management of the company services and increasing in the profitability and productivity of the
business efficiently.
CONCLUSION
From the above analysis, it is concluded that multiple numbers of sources of funding
presented here in order to raise investment of Borne leisure organisation effectively. Borne
leisure business must ensure that their income generating functions are running properly and
according to them make appropriate decision within the organisation effectively. Moreover, it is
also concluded about assessment of sources and structure of the trial balance and evaluation of
business accounts which can improve the performances of the business effectively.
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