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Managing And Monitoring Finance In Hospitality

INTRODUCTION

Hospitality industry is mainly associated with the activities or function related to providing high quality and luxury services to customers. Main motive of organisations operating in hospitality industry is to provide customer satisfaction by applying improvement and innovation in services. As all industries are regulated by relevant authorities, this industry is also governed and administrated by government through regulations and it is necessary for organisation to follow these rules and regulations (Ervin, 2016). In order to understand various aspects of hospitality industry, in this report a newly formed restaurant Royale Restaurant is being opened in Bishops gate, London; is taken. Which is specialised in inventive, health salads and juices and smoothies. This report also describes  performance management plan, specific legislations, link between different functions and roles within hospitality sector and ways of communication, ordination and monitoring within departments of an org

TASK 1

1. Principles of managing and monitoring financial performance:

Principles refers to guidelines to conduct any activity or imp0rove the activities or functions. Financial performance refers to efficiencies and abilities to accomplish any task or activity in order to achieve their objectives and goals. In this context following are the principles of managing and monitoring financial performance of Royale Restaurant, as follows:    

  • Composition of finance:It is very vital for Royale to structure their finance sources and to achieve appropriate composition of finance because sources of funding and finance are directly linked with an organisation's performance. Excessive financing through debts may reduce financial performance so in order to manage and monitor financial performance systematic composition of finance is act as principle (Gnanapala, 2017).  
  • Manage expenditure and optimise costs:Financial performance mainly concerned with profitability condition of an entity and to achieve profitability systematic management of expenditure and optimisation of various costs though techniques like budget and cost analysis is required. So for Royale being a newly formed company minimising their cost is required to survive in initial period.
  • Identification of risky factors: In order to achieve stable growth in identification of potential and existing risk factors that can affect organisation's financial performance adversely, is necessary. Royale should identify such factors to avoid any difficulty in future.

In order to manage and monitor financial performance these principles assist Royale and ensures future sustainable growth.

  1. During an accounting period incomes and expenditures of business organisation are as follows:

Incomings

Outgoings

Benefits

Drinks

Allowances

Lunch purchases

Wages

Household utility bills

Gifts

Weekly food shopping

 

Clothes

 

Gifts

  1. Explanation of some specific terms:

Types of cost: In day to day working, an organisation incurs different different costs and expenditure which are necessary to operate business functions and activities. These costs helps to determine profitability and performance of organisation (Charterina and Barrutia, 2014). These are the major costs in Royale Restaurant related to its different operations as follows:

  • Variable cost:A variable cost refers to those expenses that fluctuate in proportion to number of output or costumers as the case may be. This costs are increase or decrease as per change in level of output or scale of operations. It includes beverages, sales commissions,utility costs etc.
  • Fixed cost:These type of costs includes those expenses that does not fluctuate with the number of customers served or numbers of food items offered by Royale such as Adversing expenses, fixed administration cost, premises rent, depreciation etc.
  • Semi variable cost:These are those cost which are fixed for a set level of or consumption in Royale and become variable after an extent.

Sales: Sales refers to total amount of revenue and income earned by business organisation during a particular period. In Royale monies received by serving customers or delivering foods through online sites are considered as total revenue and income. Sales also includes item as other income which includes other ancillary incomes.   

Purchase: It includes amount paid by a business organisation to purchase raw material or other items to operate its main activity. In Royale money spent towards purchase of raw food items by organisation to prepare food and beverages are considered as purchase.    

2. Application of double entry book keeping system of debits and credits and Analysis of sales and purchase transactions to compile trial balance:

Double entry book keeping system: As per this system of accounting transactions are recorded in way that every entry affects two accounts simultaneously. Every organisation like Royale Restaurant adopts double entry system to record their transactions and for better reporting. This is a Trial balance based on double entry system.

Particulars

Debit

Credit

Cash in hand (Negative Figure)

 

10700

Petty cash expenses

750

 

Cash sales

 

3350

Credit card sales

 

14795

Free issues

575

 

New kitchen equipments

6540

 

Food purchase

7900

 

Beverage purchases

12970

 

Purchase return

 

200

Discount received

 

2300

Credit notes

 

190

Rent

2850

 

Utilities

475

 

Functions and events (Income)

 

5967

Wages

4590

 

Debtors

700

 

Till shortage

152

 

Total

37502

37502

Analysis of Sales and Purchase transactions to compile a Trial balance suing Double entry system:

Sales: It refers to cash and credit figures related to items sold or services provided. In Royale, sales includes incomings like wages and other monetary benefits related to core business of entity.

Purchase: it refers to cash or credit figures related to items purchased by entity. In Royale, purchase incudes Weekly food shopping, Clothes, Drinks, Lunch purchases etc.  Following is a trail balance based on Table 1 based on double entry bookkeeping system to reflect all the incomings and outgoings for a particular month:

Particulars

Debit

Credit

Transaction amount

Wages

 

16500

16500

Gifts

 

23000

23000

Benefits

 

24000

24000

Allowances

 

19200

19200

Weekly food shopping

25200

 

25200

Clothes

16820

 

16820

Gifts

14100

 

14100

Household utility bills

3900

 

3900

Drinks

9980

 

9980

Lunch purchases

12700

 

12700

Total

82700

82700

165400

3. Formulation of basic trial balance by applying balance off rule:

Balance off rule: This is basically a process by which amount remain in ledgers are brought forward to next year to find the balance on each ledger account in order that a trial balance can be extracted as part of the accounting cycle (Schwager, Decker and Kaltenegger, 2016). In Royale balance off all ledgers at year end is significant to identify any misappropriation and preparation of financial statement.

Trial Balance

Particulars

Debit

Credit

Bank loan

 

12000

Cash in hand

11700

 

Capital

 

13000

Rates

1880

 

Trade creditors

 

11200

Purchases

12400

 

Sales

 

14600

Sundry creditors

 

1620

Debtors

12000

 

bank loan interest

1400

 

Other expenses

11020

 

Vehicles

2020

 

Total

52420

52420

The above trial balance describes that transactions are correctly recorded because account balance are properly recorded in trial balance and tallied. Trail balance contains sum of different expense and income account ledgers which are appropriately classified as per matching principle of accounting. Also matching of trial balance exhibits that all other generally accepted accounting principles are followed.     

Steps involved in drawing up trial balance:

After summarising and posting, trial balance is prepared by business organisation. Main motive of trial balance to identify arithmetical or other errors like omission, commission etc. Following are the steps required to be followed by Royale to prepare trail balance, as follows:

  1. Prepare a formate showing three columns: First is Particulars which contains account titles, second is debit balance of different accounts and third is credit balance of all accounts (Chung and Chung, 2018).
  2. Fill all accounts names along with their amount of balances as per their nature in debit or credit columns.
  3. Then calculate sum of  debit and credit columns.
  4. Evaluate reason if there is any mismatch in amounts.

TASK 2

1. Reviewing the different stages of the HR life cycle applied to Royale Restaurant:

Importance of HR Life cycle in relation to strategic talent management and overcoming issues of staff rotation:

In HR cycle strategic talent management is important in order to hire people, manage them, develop their skills which are necessary for organisation, and retain most appropriate qualified and expert employees in business organisation. Under HR cycle talent management plays significant role in formulation of strategy because it helps to manages its key employees. So organisation in hospitality industry like Royale should efforts to effectively manage employees in order to develop their skills, efficiency and capabilities in order to retain them. Following are the importance of HR Life cycle in relation to strategic talent management and overcoming issues of staff rotation:

Assists in Increase of employee performance: Using talent management helps to identify which employees are best and appropriate for respective job that results in decrease in issues related to performance management and staff rotation. It also ensures that best talent within organisation can be retain (Bowie et.al., 2016).

Employee motivation to attain goals: An organisation by strategic talent management  retain their employees by motivating them to achieve goals and provides reasons for them to stay in org

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