To succeed at running your business – or even to know if you're succeeding – you need to analyze your financial data.
Hotel accounting software is one of the indispensable tools that is specially designed for hotels of all sizes to be more efficient and accurate when it comes to financial planning. And yet, every year, accommodation businesses lose money and waste hours of productivity on manual data entry, ineffective reporting, and time-consuming night audits.
This guide is for you if:
- Your business is running on decades-old technology and you need a modern solution
- You're spending hours every day manually processing invoices
- You want to automate your night audit process
- Your current setup won't allow you to efficiently integrate with property management software like RoomRaccoon
- Your employees/accountant/night auditor tells you that your current system isn't user-friendly
- You want better insights into your business with financial reports
Let's dive in!
What is Accounting Software?
In modern hotel management, many companies use cloud-based software to manage finances, keep track of expenses, reconcile payments, and generate reports on the performance of the business.
Cloud hotel management software (HMS) is used to manage hotel front-end operations . It collects data like tax invoices, occupancy rates, and revenue per available room (RevPAR). Accounting software is used for hotel back-end operations like cash flow statements, profit and loss statements, and more.
The two programs communicate data with one another using API technology and work in tandem to provide you with real-time reporting and analytics on your business. These automated processes save accountants hours of manual work and free up their time to focus on more pressing tasks like reviewing various aspects of your business performance to make important decisions based on it.
For instance, the RoomRaccoon HMS integrates with a variety of popular accounting solutions on the market like Xero, Twinfield, Quickbooks, and more. Hotels can set up general ledger accounts for taxes, add-ons, room rates, etc in RoomRaccoon. All essential data is automatically communicated to the integrated accounting software on a daily basis.
The Unique Aspects of Hotel Accounting
Hotel accounting is different from accounting for other businesses because of the special nature of hotel operations. Most businesses have relatively predictable revenue streams, but hotels have multiple revenue streams that aren't always in sync with their service levels.
Here are 5 unique aspects that hotels should take into consideration:
- night auditing
- Fluctuating room rates
- Vendor contracts
- Multiple revenue streams
- Tourist city tax
1. Night auditing
As a 24/7 business, night auditing is essential for a smooth day-to-day transition. A night audit helps in summarising the cash flow that occurred at the hotel front desk in one business day.
So, what does a night auditor do? A night auditor does a number of administrative and financial tasks to ensure the accuracy of hotel accounting at the end of each business day.
- Updates guest billing records for room charges, food service, taxes, and any other expenses that were not recorded during the day.
- Processes credit cards, and cash receipts.
- Prepares accounting reports for the management team. These reports show occupancy percentage, revenue per room, and the effectiveness of any promotional specials.
- Flags monetary discrepancy if any.
- Verifies check-ins and no-shows, updates pending check-ins.
- Updates housekeeping status for the next shift.
A look at modern hotel auditing
The fantastic news is that the tedious night audit process can be completely automated with a hotel management system like RoomRaccoon. Every night at midnight, the RoomRaccoon system automatically moves over to the next day. There is no downtime and you don’t have to push a button to say “perform night audit”.
That’s because all the necessary information is processed instantly and stays in the cloud. If a guest check-in after midnight, you can still make changes as usual.
2. Fluctuating room rates
Modern hotels with revenue management tools dabble with dynamic pricing strategies to ensure they generate the maximum amount of revenue from each room sold. This means that room rates will vary on weekends, holidays, certain seasons, and at times the hotel is near capacity. Hotel occupancy rates impact room rates significantly as busier periods will drive up costs.
Room rates also depend on the hotel and the extra amenities and services they offer. For example, hotels upsell in-room extras and special packages to guests during check-in.
3. Vendor contracts
Hotels have vendors to repair elevators, deliver food and wire the lights in the guest rooms. Vendor contracts are typically based on special agreements and rates with the hotel. For example, contractors performing work should have insurance that protects against damage to the hotel’s building and even the loss of revenues if they cause significant problems.
4. Multiple revenue streams
Typically, hotels that offer on-premise facilities and amenities have multiple revenue streams. Think about a hotel that has a restaurant, wedding venue and spa. Each department can bring a significant amount of revenue to the hotel. Multiple income streams allow the hotels to make more money and are better for the business's health — since they can offer more than just rooms.
To keep track, businesses often separate the profit and loss (P&Ls) for each different department (for example, room service has its own P&L and the front desk has its own P&L). Moreover, it's common for expenses to be shared or split among departments.
5. Tourist city tax
On top of the standard business tax, accommodation businesses in Europe must also pay a special tourist city tax. As a result, international travelers are charged an extra fee if they stay in hotels, motels, and tourist residences. In Rome, for example, the tax changes according to the type of accommodation. A 3-star hotel will charge €2 per person, per night. However, a 4-or 5-star hotel will charge €3 per person, per night.
3 Common Hotel Accounting Problems
While there are various kinds of obstacles for hotel accountants, we’re going to stick with some of the biggest pain points we see.
1. Spending too much time processing invoices
According to data from Plate IQ, manually processing invoices can cost between $12 and $30 each. To make matters worse, hotels deal with a lot of invoices across the various departments.
For example, there are paid reservations during check-out, food and drinks charged to the guests’ room from the restaurant, upsold amenities that need to be placed in the rooms, and all utilities.
Having to manually enter each and every item on the invoice and cross-checking them with the relevant departments is a time-consuming task that keeps front desk receptionists far too busy focusing on administration and less on the guest experience.
According to a report, a manual invoice process can sometimes exceed 15 steps before the final posting is done.
2. Manual audits are expensive and time-consuming
Hiring a full-time auditor is not feasible for most smaller hotels and other accomodation properties. Auditors are specialized professionals that rightly charge a lot to put in numerous man-hours. Even when hotels do have full-time auditors, a manual night audit is a taxing task that involves tracking down vital documents (that are often in paper format) going through every entry in the ledger, every room service bill, every check-in and, no-show details; without guaranteeing error-free reports.
3. Losing profits and data due to human error
Mistakes do happen, especially after a long and busy day. In fact, reports have shown that 3.6% of manual invoices have errors. This means that the numbers manually entered into the accounting software are also inaccurate.
Many hotel operating systems (OPs) don't communicate with each other or with the accounting system — and that’s where important data goes missing and manual entry comes in, causing errors in turn.
A typical hotel has 3 or more systems: one for the front-of-the-house operation, one for the concierge services, one for restaurant sales, and one for housekeeping, etc.
And when a hotel’s tech stack doesn’t work together and there is a huge reliance on manual labor, mistakes can be costly.
Which Handy Software Solutions Can Integrate With Your Hotel Accounting Software?
The number one benefit of cloud hotel software solutions is that data integrations can be established between systems. This means that data from one system is automatically shared with the other to make manual entry a thing of the past. This saves time, and costs plus it practically eliminates errors.
Which three essential operating systems can you connect with your hotel accounting software?
1. Cloud Hotel Management Software
The most common tool that hotels use for their daily management is a reservation or property management system (PMS). Connecting it to their accounting software is an obvious choice since a PMS manages reservations, invoices, folios, amenities, and guest payment data.
With a PMS, charges are posted at the time a reservation or a service is created. This information is processed instantly and doesn’t need a dedicated night audit to do so. In fact, the RoomRaccoon PMS can be configured so that all the necessary information (invoices) is automatically processed to your accounting software at midnight.
Good to know: To avoid complicated tech stacks, look for a cloud-native HMS platform that comes complete with core systems like a booking engine, revenue management system, channel manager, and payments solution.
2. Point Of Sale (POS) Software
Hotels with on-premise cafés and restaurants process thousands of invoices a year, and no manager or owner has time to do that data entry twice. By integrating accounting software with the POS, you now have one powerful tool to draw reports from, and only one place to enter data into.
Good to know: Make sure to look for a point of sale (POS) system that can integrate with your property management system (PMS). This will allow you to easily charge restaurant, bar, or spa bills to the guest room.
3. Customer Relationship Management (CRM)
It is vital for hotels to turn every lead into an actual sale. A dedicated function to handle relationships with both current and future customers will empower hotels to offer more tailored services.
The customer's information stored in the CRM feature and their spending recorded in the accounting software is also useful for future marketing campaigns.
The Benefits of Integrated Accounting Software for Your Hotel
1. Save time with complete automation
Traditionally it was the Night Auditor’s job to match every single payment terminal receipt to the hotel’s day-end closure, often by using Excel or a calculator. By integrating a tokenized payment solution into the PMS, all receipts will sit directly in the PMS and will be transferred to the linked accounting software to avoid the need for several hours of manual reconciliation.
2. Get in-depth financial reports whenever you want
Hotels need to keep an eye on occupancy, ADR, RevPAR, revenue numbers and profitability to make informed business choices.
As you run your business, your hotel accounting software collects a lot of data through integrations with your PMS, POS, and other software applications. This gives you deep insight into your business. Necessary financial reports can be generated whenever you want - you won’t have to wait until a set date to be able to check your financial statements.
3. Maintain data integrity
When quality data goes into your accounting system, you get quality data out of it. Integrating your hotel accounting software with your PMS makes it possible to automate all of the input and ensure that the data across all of your systems are consistent. The added depth in accuracy keeps your reports more reliable.
4. Free up tasks to focus more on growing your business
Cloud accounting and integrated systems are dramatically changing the way accountants work for the benefit of the business. Say, for example, that you need to record sales tax on all of your transactions.
Accounting software could be configured to do that for each general ledger account automatically, rather than having your accountant work out the tax longhand. Computers can do most of the manual work and accountants can focus on reporting, trends and advisory work.
5. Access your figures from anywhere
If your cloud-based hotel PMS is connected with accounting software, you can view all your accounting data from absolutely anywhere at any time and on any smart device. You may quickly evaluate real-time information like accounts receivable and account payable on the go.
What are the Best Solutions for Hotels?
Businesses of all sizes make use of accounting software. For this reason, there is no shortage of software vendors on the market. Choosing the right accounting package entirely depends on the complexity of your operations. For instance, a small boutique hotel will require basic functionality compared to a hotel chain that may benefit more from a solution with integrated workflow management, business intelligence and project planning.
The most important factor to take into consideration when choosing an accounting software solution for your hotel or property is whether it can integrate with the existing tools you use such as a property management system, booking engine, point-of-sale, etc.
Types of accounting software
Commercial accounting software such as QuickBooks, Sage Intacct or FreshBooks can handle most, if not all, of a small- to mid-size hotel’s accounting needs. These packages often include graphs that summarise data, as well as financial reports that provide a picture of a business's health and the forms needed for taxes.
Large hotels with many staff members and high revenue targets typically select enterprise software such as Oracle, SAP or Microsoft Dynamics GP. Rather than using two-dimensional spreadsheets, enterprise software is often based on relational databases that can show the relationships between diverse sets of information, like showing sales volume from all guests compared to their regions.
How Does the Set-Up Work?
A common concern about implementing hotel accounting software is the level of difficulty. But fortunately, the great thing about cloud-based accounting software is that you don’t need any IT support to install it, and most vendors offer support to migrate your existing data onto the new quicker and more efficient systems.
At RoomRaccoon, we take care of the entire set up including inventory of all relevant general ledger accounts, the activation link and of course consistent maintenance of the system.
The bottom line
Bookkeeping remains the most outdated department in most hotels. While the front office may have integrated channel managers years ago, accounting teams can still be found manually inputting data into expensive legacy systems and spreadsheets.
New technology allows hotels to keep up with the demand of the new age. Particularly, it empowers accountants to focus on growing the hotel's revenue and competitiveness instead of losing hours on manual tasks that are as unnecessary as they are mundane.