1. Preparing a Departmental Budget
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Preparing a Departmental Budget

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8. Why Do We Need to Prepare a Budget?
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Why Do We Need to Prepare a Budget?
To determine and clearly list our objectives
To provide us with a guide to achieving our objectives
To serve as a basis for evaluating performance
Why do we need to prepare a budget?
To determine and clearly list our objectives
To provide us with a guide to achieving our objectives
To serve as a basis for evaluating performance
Planning forces management to look ahead to set out detailed plans for achieving targets for each department. This prevents managers from relying on uncoordinated purchases which may be detrimental to the performance of the department.
As budgets are prepared in advance (quite often the year before), they should be reviewed on a monthly basis (as a minimum) as the hotel industry is dynamic and fluctuations will occur within occupancy, F&B and external factors, e.g. increased rise in cotton, etc.

9. “…. Is The Backbone Of An Organization.”
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House Keeping….
“…. Is The Backbone Of An Organization.”

10. Preparing a Budget for Housekeeping
4/6/2017
Preparing a Budget for Housekeeping
Different Types of Budgets
Zero-based budgeting
Incremental budgeting
Different Types of Budgets
Zero-based budgeting (ZBB) – this approach treats the preparation of budget for each period as an independent planning exercise. The initial budget is zero and every item of expenditure has to be justified in its entirety to be included.
Incremental budgeting (IB) – this involves adding a certain percentage from last year’s budget to allow for growth and inflation. It encourages slack and wasteful spending to creep into the budget.
Advantages of ZBB – identifies and removes inefficient and/or obsolete operations and forces employees to avoid wasteful expenditure.
Disadvantage of ZBB – it involves a lot of work, costs and benefits of different alternative can be difficult to quantify 10

11. Preparing a Budget for Housekeeping
4/6/2017
Preparing a Budget for Housekeeping
Capital Budget
Operating Budget
Fixed Cost
Variable Cost
Operating Equipment
Capital Budget – it is prepared to replace fixed assets, expand the business or for H&S reasons, not all of which may be financially beneficial.
The importance of capital budgeting is so that the organization will commit substantial sums of money, the purchase will affect a long period with potential uncertainty, it will be almost impossible to reverse and it may result in success or failure of the business.
Example: Rooms Refurbishment >>>>>>>> show excel slide
Operating Budget
This predicts the Profit and Loss results for the forthcoming period.
Advantages – commitment and motivation of managers, sets targets and standards, looks forwards and considers both internal and external factors
Disadvantages – time taken and the cost of this time, may be unexpected events (e.g. volcanic ash clouds, terrorism) that affect later result.
The main steps to achieving successful operating budgets are:
Planning for attainable goals and objectives
Comparing actual to budget and analyzing the differences
Taking corrective action if required 11

12. Fixed Costs and Variable Costs
4/6/2017
Fixed Costs and Variable Costs
Fixed cost
A cost or expense that will not change as a result of changes in revenue or level of business
Variable cost
A cost that changes in direct proportion to the revenue or volume of business
Fixed cost
A cost or expense that will not change as a result of changes in revenue or level of business
Example: Cleaning Contracts
Variable cost
A cost that changes in direct proportion to the revenue or volume of business
Examples: Cleaning and Guest Supplies
Then show excel slide to show how it all works….

13. Fixed Costs and Variable Costs Payroll
4/6/2017
Fixed Costs and Variable Costs Payroll
Payroll is an example of fixed and variable costs (the largest cost we control)
Depending on Hotel Occ % this needs to be budgeted to flex.
However this is one of the costs that needs to be monitored on a day by day basis.
Payroll costs can be a combination of fixed and variable. We won’t be focusing on payroll costs today as this could take up the whole day.

14. Operating Equipment How much you will use during a period?
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Operating Equipment
How much you will use during a period?
How much is the cost to order?
How much is the cost to carry the items in inventory?
Operating Equipment
How much you will use during a period?
How much is the cost to order?
How much is the cost to carry the items in inventory?
Then show excel slide to show how it all works….

15. The Impact of Inventory on Cash
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The Impact of Inventory on Cash
The cost of:
The item
Storing the item
Money
The impact of inventory on cash
The cost of:
The item
Storing the item
Money
This is where we need to work with Finance (that’s me!) to see if the organization can commit funds to purchase the items as we in Finance need to balance the funds for our cash budget and, occasionally, orders might have to be staggered in order to manage the company’s cash flow.

16. TEAMWORK! Financial Success is about teamwork.
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TEAMWORK!
Financial Success is about teamwork.
It is EVERYONE’S responsibility to ensure that the hotel is as profitable as possible and, therefore, meets its financial targets!

17. More Information Contact: Arletty Jooron Executive Housekeeper
4/6/2017
More Information
Templates of the Slides are available from the UK HouseKeepers Association.
Contact: Arletty Jooron
Executive Housekeeper
Cavalry & Guards Club
Templates of the Slides are available from the UK HouseKeepers Association.
Contact: Arletty Jooron
Executive Housekeeper
Cavalry & Guards Club

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Thank You