Flying-by-The-Seat-of-Your-Pants – AKA - No Hospitality Financial Leadership

In most hotels, the system for forward looking financial management is nonexistent. We rely on the top line coming in and if it does, we expect a certain profit picture to emerge. When revenues are good this works, sometimes. When revenues do not materialize because of an event or something that produces headwinds in our business, we almost always fall flat on our face of the desired profitability. That is flying-by-the-seat-of-your-pants.

We seemingly have no way of knowing what is really going to happen financially in our business. We roll the dice every month. When we are in a fly-by-the-seat-of-your-pants hotel and we have a good month, things are great, but we really do not know why. For example, why were expenses so low this month? Or, perhaps payroll seems too good to be true. When we have a bad month, the sins are obvious: missed invoices from prior periods, over forecast in payroll and revenues below forecast. Didn’t anyone see this coming? Well, actually, no. No one saw this coming because we do not have a financial communication process to ensure we are on top of the business.

When we are in a fly-by-the-seat-of-your-pants hotel and we have a bad result the GM points fingers at the controller. The controller blames the department heads who didn’t submit their forecast on time. The department heads blame the controller because he/she created the forecast anyway! You see, it just goes around and around. No accountability, no ownership, lousy results and no financial leadership!

This is a dangerous and irresponsible practice that almost always leads to financial failure. It is common practice in our industry and one that has led to many financial meltdowns. For some, the argument would be that the finance department is responsible for managing the numbers. That might sound like the right idea to the layman but in practice it is short sighted. It rarely works because the finance department has no real way of knowing what is going on in the various and numerous departments within the hotel.

The fact is the accounting department’s job is to record what happened, capture the data in the month for the month, report the results and ensure the assets and liabilities are properly recorded and safeguarded. It is not to know what each area in the hotel will do next month, next quarter, next year. If we want that kind of forward-looking intelligence in our hotel, we need to create a system to generate it. What can we do to create this system?

If we want to have a system in our hotel that allows us to manage the financial picture properly, we need to give our managers and leaders the responsibility for their results which means they need to create their budgets and forecasts. They need to know what is in the middle of their statements.

Budgets and forecasts must be zero-based and each area leader needs to own them. There is no other way to create this. If we try and manufacture numbers and give them to our leaders to deliver on, we are going to fail. Your department leaders and managers want to be fully and completely responsible for their departments’ finances. And what they need to accomplish this is training, support and your guiding hand

So, there you have it.

Stop flying-by-the-seat-of-your-pants and get your financial leadership on!

Visit my website today for a copy of my guidebook
The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel

Call or write today and arrange for a complimentary discussion
on how you can create a financially engaged leadership team in your hotel.

Contact David at (415) 696-9593.

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