Hotel Finance: What Do They Do

Why is it useful for you to know about the different jobs in the finance department of a hotel? If you chose to invest 3-4 years of your life studying hospitality, the art of hosting people, you are probably not planning to work in finance.

Well, finance is big and you should not be prejudice against it.

Why should you care about finance?

The finance department in a hotel has the role of tracking the cost of running the hotel and making sure that the revenue makes a profit.

The finance department has many jobs that are just pure finance and are not hospitality-specific, that’s inevitable.

However, the hotel has several jobs that require front line and operational understanding, of food and beverage outlets and rooms. Many roles require working with people and being able to lead challenging conversations, such as negotiations.

Not yet convinced that this is something you should care about?

If you are not willing to at least understand it, you will not be able to grow. If you don’t understand the basics of operational finance, you will not be able to have a successful career in hospitality.

If you want career growth, success, and recognition in hospitality, you cannot ignore the financial side of it. The finances are at the center of any business, it is a profit-driven business after all.

A Manager that understands the cost drivers and how different variables affect that, is that much more valuable to the company than one who is ignorant “because it is not his/her job”.

Interested now? Let’s get started.

Finance jobs in a hotel

In a hotel, like in any organisation, the finance department is always trying to spend less money.

However, in a hotel, the finance department has a few interesting roles that your usual corporate offices do not have.

Disclaimer:

The jobs described next, are jobs/tasks, not one person’s job roles. Several of these tasks are typically performed by one person.

Every hotel will have its own organisational structure and number of people, but it is safe to say that even if the department has 3 or 15 people, someone is doing the jobs from this list.

From the top-down, here are the finance jobs in a hotel.

Director of Finance

The boss, they oversee the whole department and make sure that the critical tasks are being performed on time and correctly. The Director of Finance report to the General Manager, the owner and the brand corporate office if there is one.

As a member of the hotel’s leadership team, the DOF’s job is to make sure that everyone is doing their job and that the team has the support they need in day today as well as unexpected challenges.

One of the key tasks is budget planning. Budget planning is annual, quarterly and monthly. The task is to review previous performance and plan based on that and what the differences vs similarities are.

So take a month of July for example. In 2018, the city hosted a festival and so the demand was high, the occupancy was high, the type of guest was reflective of the festival rather than the hotel itself, as well as the hotels spend some extra money on marketing for the festival.

In 2019, the festival did not take place and was not replaced by another one, so the planning for the budget must reflect these changes in the demand.

Budget is all about the cost to run the hotel vs the money that comes into the hotel.

Monthly, they review the Profit and Loss account and manage the relationship with the hotel’s bank to maintain cash flow.

Assistant Director of Finance

An Assistant Director of Finance is basically the right hand of the Director of Finance and knows everything that the DOF does and acts as a support and a link between the team and the hotel’s leadership team.

Purchasing Manager

Works with the Director of Finance, Cost Controller, other departments in the hotel, and external suppliers.

The Purchasing manager ensures:

  • that the contracts between the hotel and the external suppliers are in place,
  • that the goods are of good quality,
  • that we get preferred price deals and rebates,
  • they would solve the arising supplier issues,
  • they would source any new goods for the food and beverage outlets,
  • negotiate partnership deals with brands for long standing offers or short term promotions,
  • and as part of the above tasks, they negotiate the prices with the suppliers.

This is role can also be called Procurement Manager, but this nuance is only related to the food and drinks in a hotel.

Income Auditor

An auditor, employed by the hotel, that checks that the hotel is recording their income correctly.

This means that they go through the transactions of each revenue generating outlet and coordinate bank, cash, and point of sale (POS) system details. They then also compare it to the card reader machine, to ensure that correct MasterCard and VISA fees are paid.

The income auditor checks that the sales operations are done correctly through the POS system and correctly allocate the finances. A debit card payment is not the same as a credit card payment and is not the same as a cash payment essentially.

Cost Controller

The clue is in the name – the Cost Controller controls the costs. What does that mean?

Controlling the hotel’s cost is about ensuring that the prices of goods bought are correct – as per the agreed contract and on par with or below the market prices.

The Cost Controller does not look after ALL hotel’s cost, the main task is the Food & Beverage cost. They review the cost of sales per outlet, per menu, and per dish on the menu.

They will work with the chefs and bartenders in ensuring that the prices of dishes are reflective of their cost.

A dish’s cost is not just pure cost of the ingredients and the time it takes to prepare it, it also wastage and related inventory management.

Cost Controller works very closely with the Purchasing Manager.

Financial Controller

The job of the Financial Controller is managing the day to day operations of the department. This includes preparation and management of the hotels financial budgets, ensuring that the hotel is in compliance with the local tax laws and any other operating procedures.

This role is one responsible for all the CAPEX cost at the hotel – all the one-off investment costs such as a few coffee machines or refurbishment of all rooms. They also track the company’s fixed assets and record their depreciation accordingly.

Accounts Payable

This is a straightforward job, this job is responsible for paying the invoices due to companies. These companies could be any one of these examples (not limited to): goods suppliers, services suppliers like PR and recruitment agencies, any bills and taxes owed to the government or another company.

Ideally, the AP tries to negotiate favorable payment terms. The longer the better from the time you get the goods until the moment you pay for them.

Accounts Receivable

Also pretty straightforward and essentially the opposite of Accounts Payable. Accounts Receivable send invoices from the hotel to other companies and makes sure that they are paid.

The main goal is to shorten collection period so the hotel gets paid as early as possible.

Payroll

This job is focused on paying the individuals hired by the hotel their salaries and wages. This person is responsible for putting together the individual payslips, counting their taxes, benefits, other deductions from the wages, and establishing the final payment amount.

This will, of course, varies depending on the country you are based in, but the principle is the same: pay people their wages on time.

General Ledger

The job of a General Ledger is effectively the job of a Finance Assistant. It is about the review of the budget on a day to day basis and compilation of regular and ad hoc reporting.

This also often ensure that the costs of the hotel (that the Accounts Payable looks after) are allocated towards the correct category, by communicating with the hotel's outlets.

There are two standard budget categories in a hotel, CAPEX and OPEX. This is effectively the difference between a cost that is a one-off investment (CAPEX) or a regular cost of the hotel that is required for the daily operational running of the hotel (OPEX). (Do you want to know more about that? Let me know!)

The General Ledger also ensures that P&L and Balance Sheets are up to date on a daily basis.

Take a moment to celebrate that you got this far in this really long and, I admit, rather boring article. Despite this, you got this far and now you know more than most about finance in hotels, so take a moment to appreciate that!

Back to the good stuff.

Finance in Hospitality Management Degree

As part of your degree, you should learn about a P&L statement, balance sheets, and have a general understanding of hotels costs and revenue channels.

This is what is typically called “high level” – that means it is not detailed and only involves the information from a top view, there are no details.

What you need to understand is the day to day details of how it actually works in real life and how it may impact your work not how it works in a completely made-up scenario. The day to day tends to have challenges and issues that could not anticipate theoretically.

Budget related terminology and its meaning, like some I mentioned above, is really important to understand and apply in your daily work. You are going to need to compile reports from your department for finance.

Revenue is not finance

Revenue management is not part of finance, it is a separate department in itself. That’s right.

The Revenue Managers in a hotel do not belong to the Finance Department, they are often a separate department. Their job is to make sure that the hotel rooms and other sales packages are sold at the highest price possible.

They also track hotel’s market performance against competitors locally and against aspiring brands and properties.

In conclusion: why you need to understand hotel finance

Having started this with reasons why it is important for you to know this information as a hospitality management student, I will not repeat myself.

With regards to the application of your degree in the hotel finance jobs, for most of them, you don’t need it. But you are also not planning a career in finance so half of these roles are not relevant to you.

You need to understand how finance in hospitality works and who your Cost Controller and Income Auditors are. If you are able and willing, they will help you and support you when faced with challenges.

Trust me, you don’t want those guys to not be on your side.

An example

Let me give you an example of how involved the financial department is in the planning and execution of an event at a hotel.

Booking the event

The sales department have signed a contract for an event at the hotel, for 250 people and 100 rooms.

This means that the client has agreed to the food menu price, if there is a bar and if it is open or paid for by the attendees, what the bar would include, how much it would cost per drink, and the price of the rooms as well.

To get to an agreed contract with the client, the Sales Representative had worked with the Revenue Manager, Purchasing Manager, and Cost Controller.

The Revenue Manager ensured that the rooms were priced at a point that profited the hotel, competed with local business at that time of the year, and yet provided the client with a discount for a large reservation attached to an event.

The Purchasing Manager would review the available suppliers and suggest quantities of food and beverage to order, to maximize the benefit of bulk orders and rebates offered by these suppliers.

The Cost Controller would work out various food menu pricing options together with the chefs so that the Sales Representative can offer them to the client.

Then it is the Events Manager’s job to organize this event for the client.

During the event

In the case that the bar is not open and individual attendees would be asked to pay for the bar drinks, the Events Manager would work with the Purchasing Manager and the Cost Controller to create and price the menu available.

If the bar is open, the client would agree in advance what kind of drinks would be offered, their cost, and what is the open bar’s limit, so to control their own costs.

After the event.

If the event attendees had to pay for anything individually, the Events Manager works with the Income Auditor to run checks.

If the event was totally paid by the client, the Accounts Receivable and the Events Manager need to finalize the financials of the event with the client and any other third parties involved.

The Income Auditor would check that all individual sales were correctly recorded via the card readers, POS systems, and the cashier.

The Accounts Receivable would ensure to invoice the client correctly and timely and follow up on that invoice to be paid as per agreed terms.

Any other third parties could be entertainment that the hotel arranged for the client on their behalf. The hotel would pay the entertainer (Accounts Payable) and charge the client for the services (Accounts Receivable).

The final step is to provide a report to the Food and Beverage Director on the cost and profits of the event, as well as any issues that may have happened during the event.

Author: Maria

Leave a Comment

Share This
Scroll to Top