Importance of Accounting in the Hospitality Industry
Accounting plays a vital role in every sector; it is a process through which every individual can analyze his expenses, revenue, profit, loss, assets or liabilities. Every institution which deals with cash needs a systematic accounting facility to record all the transactions. The hospitality industry also needs to maintain all the records of the services rendered and the cost incurred.
Why does the hospitality industry need accounting?
The word hospitality stands for a friendly and personalized way of providing services to guests, tourists, or strangers. Travel and tourism are also part of hospitality. The major services which come under the hospitality industry are lodging, travel, restaurant services, assembly, and managed services.
Accounting is very important in every hospitality service, not only for the institution but also for other interested parties such as banks and stakeholders, etc. if the institution wants any financial assistance from the bank or stakeholders it must provide all the records of the company's asset and liabilities, cost and expenses. This will be possible only if it maintains a proper accounting system.
There may be more than one person who may be interested in knowing the information regarding the profitability, financial soundness and performance of the institution and also many of them may enquire about the previous month sales, the average price of the services rendered, information which department is more profitable, etc. thus accounting provides the answers for these questions.
Effect of the pandemic on the hospitality industry
COVID-19 is a major blow to the hospitality industry due to which many restrictions were laid down by the authorities to avoid the spreading of the virus. Many protocols and rules were introduced and many countries went under a lockdown which made it difficult to travel, which resulted in a sharp decline in occupancies of restaurants and hotels etc. hence it affected the revenue and cash flow of the organizations. It was an unpredicted challenge that was faced by every person.
How can accounting help the hospitality industry to cope up with the current pandemic situation?
The present situation drastically affected the free mobilization of domestic as well as international tourists all over the globe as a result, the business turned to be dull. To face this challenge every organization is trying to cut down the costs and maintain an adequate cash flow. Hence, accounting assists the organization to identify all costs and eliminate unnecessary expenses. Automated accounting software will help to take over the job of an accountant to record the transaction in a professionalized manner with minimum errors. There are still many countries where social distancing is mandatory, so to follow the protocol many organizations are appointing less staff, with a reduction in payment. Here, accounting helps to calculate the variation in wages and salaries accurately. If the organization is not able to install appropriate accounting software then also it can outsource its accounting services to other professionalized accountants on a part-time basis which may reduce the cost and will also provide efficient service.
Hypothetically let us consider a hotel in Dubai which provides an exotic service to the tourists and the visitors who came there, but due to the pandemic, there was a steep decline in the number of customers as there are restrictions and social distancing. The hotel management had to cut off the number of staff members by keeping in mind the protocols and it had to cut off the salaries too, because of low revenue. But accounting still played an important role by making it easy to make the calculations of the reduced salaries and to keep the record of the staff who was working. There were many customers who visited them due to some emergency, they were too cautious about the pandemic and all the protocols, to make them more comfortable, the management decided to provide them with an online invoice service which helped to avoid physical contact. Here also accounting played a significant role. Similarly, to evaluate the working of the hotel, they hired a part-time accountant who assisted in formulating the strategies to face the pandemic, and hence, again accounting played its role.
The role of CDA in hospitality accounting
CDA and its dedicated team are always well prepared to face any situations which are predictable and unpredictable. Our team is ready to solve any accounting issues of the clients even though we are going under a pandemic situation. We provide our service to the clients without any delay by utilizing all means of resources available and render adequate assistance to face the negative situation and overcome it.
Hope you have a clear idea of the importance of accounting in the hospitality industry. Still, have queries regarding accounting in the hospitality industry? Contact CDA for hospitality accounting. We are well experienced in hospital sector accounting services.