Understanding Management Reports

In this chapter we’ll look at the main type of report that you will need to help you manage your area better – the profit and loss report. For different departments you’ll see reports that include not only monetary figures but also percentages for the actual amounts, the amounts that were budgeted, and the difference between them. Later in the chapter we’ll see how to use these. There are also statements used by the general manager – a summary profit and loss (P

Introduction to Hospitality Controls

In this first chapter we will introduce the concept of ‘control’ and hospitality in general. We’ll also look at the function of the financial control office where some of the control processes take place. As you’ll see as we work through further chapters, much of control happens in the operating departments – so control is a business-wide function, not just an accounting one. By the end of this chapter you should be able to: - Understand the basic approach of this book - Define what a business is and the main reason for control - Describe the main features of the different sectors of the industry - Describe the various activities of the financial control office.

Using Spreadsheets for Management Tasks

In this chapter we will see how using spreadsheets can help you with many of the control tasks that we have discussed in the different chapters. We’ll also see how you can use graphs and charts (hand-drawn and by spreadsheet) to help in decision-making and presenting results. We will look at some of the simple techniques that can make spreadsheets easier to use on a frequent basis and at some of the shortcuts you can take. Incorporating some basic design features can help with ongoing usage, and with enabling others to use spreadsheets that you have designed. The use of charts and how they can help with presenting complex information in a simpler way will also be considered. It’s assumed that you have a basic knowledge of spreadsheets. If some of this is boring because you’re at a higher level of competence, then please move on. There’s a refresher exercise to revise skills and perhaps practise some new ones, and some suggestions about using spreadsheets for personal tasks. By the end of this chapter, therefore, you should be able to: - Comprehend the basic principles of spreadsheet design - Practise a range of techniques to improve speed and efficiency - Comprehend the variety of areas where spreadsheets can be used - Draw a chart to scale by hand - Create a chart using a spreadsheet.

Pricing to Achieve Profit

One of the most important techniques for managers to understand is how to price a product to attract customers – and also to achieve a profit (or at least cover all the costs). If you can be aware of all the different factors that influence a price (and not just what the customer is prepared to pay) then you will be able to generate both revenue and profit from your products and services. Another helpful technique is to know how many you need to sell of a product or service at a given price to cover all the costs – this is called the ‘break-even point’. By the end of this chapter you will be able to: - Describe the factors that influence pricing decisions - Identify the most appropriate pricing method for a product or service - Calculate a price to achieve a profit - Calculate how many products or services you need to sell to reach the break-even point.

Being Part of a Company

Some of you may work in a very small business, where you know the owner and everybody else in the organisation. The majority of the businesses in hospitality are small – pubs, restaurants, cafes, visitor attractions and so on. But for others, you may feel that you are a very small part of a very large organisation. Some hospitality companies are enormous – and may well be part of an even larger conglomerate (a multi-industry, multinational corporation). Businesses change ownership frequently – some of the big names of five years ago are no longer around in the same way, and other previously small names are now big ones. Whatever the size of the business, you do count, and in this chapter we want to show you how you fit into the larger organisation – whether for now or for the future. We will look at the types of ownership and then the structure of companies and the type of accounts that they do. Later on we will consider two other ways that businesses can operate – under franchise and by management contract – where the building is owned by one entity but run by another. By the end of this chapter, therefore, you should be able to: - Distinguish between the different types of company ownership - Describe the basic format of a company report - Describe the differences between a franchise and a management contract.

Managing Costs

In the previous chapter we discussed revenue and identified a range of areas where it can be improved by either sales or control techniques. However, in reality there may be only limited opportunities for you to improve revenues, or you may not have them at all. You then need to look at the other side of the P

Planning and Monitoring Usage

This chapter aims to show how costs can be planned and their usage controlled through ‘standard costing’. In Chapter 4 we looked at the monitoring of costs and in Chapter 5 at pricing. Here we will consider how to plan spending the correct amount on raw materials. This can be fairly complex in terms of recipes, and a loss of standards can easily cause significant cost variances. We will then look at identifying deviations from these standards – what is due to variances in price, and what is due to variances in quantity used. We will also consider the specific problems of food and beverage materials, which can cause them to be so difficult to manage. Standard costing techniques can also be used in other areas. We discussed the management of labour cost earlier, but you can also use the technique to monitor labour cost where a flexible workforce is employed and where productivity is important to the profitability of the business. A further use for the technique is in identifying variations in revenue and considering whether these differences are due to volume or price (or both). By the end of this chapter you will, therefore, be able to: - Identify the features of food and beverage raw materials that affect their controllability - Discuss briefly the process for costing recipes - Calculate variances according to volume and price - Use the procedure for labour and other cost variances - Identify differences in revenues, also due to volume and price.

Managing Cash and Stocks

This chapter considers the two main physical items that have potential for control problems – cash and stocks. They are part of what’s known as the ‘cycle of working capital’. We’ve seen in earlier chapters some of the ways in which these can be managed effectively but we will now concentrate on specific areas for control. First we will look at cash being both received and paid. Second, we will consider the flow of stock and the various stages at which problems can occur. By the end of this chapter you will, therefore, be able to: - Describe the cycle of working capital - Identify the various stages at which cash moves in and out of the business - Identify the various stages through which stock moves around the business - Discuss methods of control appropriate to the operation - Calculate ratios relevant to cash and stock control.

Managing Revenue

Maximising revenues is as important as minimising costs to achieve profits. The usual (sales and marketing or revenue management) approach is to try and gain additional business – and we will cover some of this here. However, since this is a book about control we’ll be looking more at ways of ensuring that you get all your revenue from existing customers. If you work in a section where only costs occur, much of this chapter may seem irrelevant, but you may have ‘revenue’ from a subsidy or allowance and you certainly still have customers. I hope you will gain an insight into practices in other sectors that may help you in the future, if not just now. You have to ensure that everything a customer consumes is actually paid for and that you aren’t giving it away, wasting it or losing it to fraud. This applies to a take-away, a drink, a package holiday or a five-star meal – all can lose revenues by inadequate control. In some sectors this may be more obvious as they have much stronger control mechanisms – in others it may be difficult to see easily where problems might occur. We look at pricing in Chapter 5 but it’s important to recognise now that there shouldn’t be a conflict between marketing and control – the stakeholder approach means that everybody is interested in the business doing well. The controller wants good revenues as well as the marketing or revenue manager because this should result in good profits, which means good employment for them (in all its aspects). By the end of this chapter you should be able to: - Identify the features which may impact on revenue maximisation - Understand the differences between revenue management and revenue control - Identify where shortfalls can occur, using ratios - Calculate ratios for a range of revenue areas - Utilise methods of improving revenues.