The role of finance is very important in all sectors and industries, for all kind of organisations, such as businesses, non-profit organisations, and government organisations. Financial decisions and proper financial management of the business activities could lead the organisation to success and prosperity. Being the student of hostel management we have been taught a specialised subject of finance to learn the basic concepts and techniques. I this course we learned various accounting and financial techniques. Which are worthy and would help me in future in my career as a manager at hospitality industry. We learned these techniques during this course and applied to the hotel industry, transportation industry, food and restaurant industry of Australia. The course outline was useful and concrete, fully loaded with the practical applications of this concept in the hospitality industry.
Moreover, these are the basic concepts, and I believe that these are important for all professionals to learn. Because these concepts help the manager to take a proper decision and formulate an effective strategy for the organisation. These concepts are equally important for large corporations, and small and medium size organisations. During this course, I learned about financial management topics, performance appraisal, Economics related concepts, and basic accounting techniques. In this essay, I will discuss all these concepts in concisely, due to the limitations of this assignment. This subject will help me a lot during my career, and I want to pursue my career in a multinational tourism brand, where I could polish my skills, and implement the theories I learned during my academic career.
First, I will discuss the accounting principles and its application in the business. Accounting is a very technical subject, It demands strong numerical skills, and continuous practice to remember these formulas. During this semester I learned and enjoyed this subject, and especially the accounting and calculations portion of this subject. According to Shkurkin (2016, p.105), the balance sheet gives the worth of the business, on one side we have all the assets of the business from cash and receivables to the land and buildings while the other side balances these assets according to the modes of financing, such as the stakeholders equity, and the short and long term liabilities (Arnelo et al., 2017, p. 1060).
Moreover, I learned about the income statement, and how the final profit is measured from the overall revenue. The profit earnings create values for the shareholders. The objective of a business is to create value for the stakeholders, in the form of dividend and the share price maximisation.
It is also the responsibility of a manager to analyse the performance of all the employees. There are various approaches broadly used for the assessment of the performance of employees and the overall performance of the departments, and organisation. The most effective and broadly used technique for the strategic audit of the company is the Balanced Scorecard method(Masruroh, 2015, p.552). It analyses four various factors of the organisation, which provide complete information of the performance of the organisation.
Responsibility accounting is the important concept which allows the processes of the business to take certain decisions such as, the investment centre is accountable for assets maximisation and the revenue maximisation (Arif et al., 2016, p. 180). While the profit centre is responsible for the cost control and the revenue maximisation. The profit enter has two sub-centre which are assigned the responsibilities. The main objective which I learned from this approach is to assign the right job to the right person. The tasks are classified and then assigned to different employees to reduce the ambiguity of the employees, and properly assign jobs to the concerned departments, units, and employees.
Inventory management is the most important topic of this subject especially for those who are working in the manufacturing industry and control the inventory. Even the sales distribution businesses also need to apply these formulas and techniques to utilise their inventory properly. Inventory management consists of the number of techniques, inventory ratios for analysis, LIFO, FIFO, and Average method (Puig et al., 2017, p.246). Other topics include the Economic order quantity which deals with the number of materials you have to order to exercise lower cost. Safety stock level gives the information about the lowest level of the quantity that the business must keep in hand, to avoid the chances of losing their potential customers. To me, it was an interesting and useful topic, which I could implement and relate to the food products of the hotels.
Budgeting is the process of planning the profitability of the company, through the invested capital for a specific period (Haddad, 2015, p.1793). I learned all the five techniques of budgeting during this semester, and I perceive that NPV and PI are the most reliable methods. That gives us a clear picture of the future outcomes of the present investment, with the discounting of the value of money. This approach is called the time value of money, where the value of money decreases with time. It provides the action plan of a project and allocated funds to each activity within the project. Budgeting includes information on every big and tiny activity during the project. The budgetary role includes certain steps, from that a company set their budget, and allocate funds. The first step of the budgetary role is forecasting, then making a plan for the implementation of the project. The third step is communication which includes both horizontal and vertical communication. The coordinate them with other departments and record their concerns if required make changes in the budgeting. Once the project starts, motivate the staff to gain the goals of the project. The fifth step is performance evaluation, to find either the project is on the right track or certain bottlenecks are needed to rectify. My learning outcomes from this topic are that before investment I will consider the internal rate of return and the time value of money. I will calculate the NPV or PI of the project to know the actual benefit of the project. I will work on my finance related skills properly and will learn about the latest software to implement my theoretical knowledge into practical experience.
Furthermore, I learned about the concept of variance, as its name denotes, it is the difference between the forecasted results and the actual results. The variance depends upon our cognitive abilities during budgeting it, and our management skills during the implementation. The variance may occur in labour cost, overhead cost, direct material cost, and the sales forecasts. The labour rate variance is also a major issue, as we allocated a certain amount to the labour cost of the project but most of the time, there are certain issues, when there is a shortage in labour market. So the demand for labours increases and the wages rate also raise. Moreover, there is a fluctuation between the supply and demand of the products and services. This is purely the economics terms. The demand is inversely related to the price of the commodity. When we reduce the price of the rooms of the hotel, there are high chances of rising in demand. This phenomenon is known as the price elasticity of demand. However, in certain conditions with the reduced price the demand slightly changes. This condition is called inelastic demand. From this topic, I learned that price is not the only factor that could raise in demand, many other factors influence the demand.
List of terms used
Assets Possession of the business
Balance Sheet A statement shows the worth of the business.
Balanced Scorecard A process of measuring the performance of the business.
Budgeting The process of forecasting the profit and loss of the business
Cash Flow The inward and outward flow of the cash due to business activities
Income statement The statement shows the revenue minus all expenses and the net income.
Liabilities All the loans and payables
Stakeholder The owner of the shares of the business
Arbelo, A., Prez-Gmez, P. and Arbelo-Prez, M., 2017. Cost efficiency and its determinants in the hotel industry.Tourism Economics,23(5), pp.1056-1068.
Arif, T.M.H., Noor-E-Jannat, K. and Anwar, S.R., 2016. Financial Statement and Competitiveness Analysis A Study on Tourism Hospitality Industry in Bangladesh.International Journal of Financial Research,7(4), p.180.
El Haddad, R., 2015. Exploration of revenue management practicesa case of an upscale budget hotel chain. International Journal of Contemporary Hospitality Management,27(8), pp.1791-1813.
Masruroh, N.A., 2015. Combining Balanced Scorecard and Data Envelopment Analysis to Design Performance Measurement for Supply Chain Actor and Regulator A Case Study in Innovative Product in Indonesia. InIndustrial Engineering, Management Science and Applications 2015(pp. 551-562). Springer, Berlin, Heidelberg.
Puig, R., Kili, E., Navarro, A., Albert, J., Chacn, L. and Fullana-i-Palmer, P., 2017. Inventory analysis and carbon footprint of coastland-hotel services A Spanish case study.The science of the total environment,595, pp.244-254.
Shkurkin, D.V., Sogacheva, O.V., Logvencheva, E.S. and Khramova, M.N., 2016. Modernisation of the sphere of tourism and hospitality industry of the south of Russia as a growth factor of socio-economic stability of the region. International Journal of Economics and Financial Issues,6(1S), pp.101-106.
HOSPITALITY AND TOURISM FINANCE MANAGEMENT PAGE 7
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