In today’s modern business environment, accounting is not solely about getting the numbers right anymore. It is how the data generated from accounting can contribute to decision-making, and thus drive growth. The same applies to accounting for hotels.
Therefore, the best hotel financial management practices should be the ones that generate the most useful financial information, which must possess the following qualitative qualities: relevance, reliability, comparability, and consistency.
Accounting information has relevance if it has a critical impact on decision-making. Relevant information has either predictive or feedback value or both:
- Predictive quality helps users forecast future events
- Feedback quality confirms or corrects prior expectations
Also, accounting information is relevant if it is timely, i.e. it must be available to decision makers before it loses its ability to make a difference in decisions.
Reliability of information means that the information is free of error and bias. It must be:
- Verifiable: accountants must be able to prove that it is free of error and bias
- Factual: a faithful representation of what it claims to be
- Neutral: it cannot favour one group of interested users over another
Comparability results when different hotels use the same accounting principles. Then, accounting information about a hotel can be compared with accounting information about others.
Consistency is when a hotel uses the same accounting principles and methods year in, year out. When financial information has been reported on a consistent basis, it enables meaningful trend analyses. If a change in accounting method must occur, management should:
- Justify the change
- Announce the change
How do hotels make sure that their accounting information has the above characteristics? Effective accounting software for hotels can be the solution.
With technology, financial data is collected and reported using pre-defined structures, hence improving consistency and comparability. Moreover, hotel accounting software can create audit trails and help conform to industry regulations, increasing data’s reliability. Lastly, actionable insights can be generated and delivered to decision makers quickly. Management can also be alerted if there are urgent matters, thus relevance of information can always be maintained.
Find out about how advanced hotel accounting solution should look like now