4 Ways Your Hotel Can Avoid EOFY Stress
The end of the financial year always comes at the same time—yet for many hotel managers, the timing is never good. A couple of months before EOFY, your to-do list suddenly balloons with financial reporting and budgeting tasks. Maybe there’s a little cash left over from last year’s budget, and you need to spend it in a hurry. What’s more, the sales figures are not as robust as you’d hoped. You’re worried about how upper management will view your performance, so you engineer a big promotion to improve the numbers. This doesn’t quite work as you thought and as a result of all this, you go through twice as much coffee and get half your normal quota of sleep. Eventually the whole thing blows over, and it went just well enough to repeat itself next June. (Or not, and you are now looking for another job, but that’s for another article….)
Ok, maybe your situation isn’t quite that bad—but most hospitality managers will recognise bits and pieces of this story.
On the other hand, I’ve also seen a lot of managers who navigate EOFY with grace and poise. Their financial planning is on-track, their budgets for the coming year are well advanced, and they aren’t rushing to spend cash or use blowout promotions to lift the numbers.
So what are these managers doing differently? Of course everyone has their own little eccentricities but I have distilled it into four simple things.
First, they start from zero. In traditional hotel budgeting, the previous year forms a “baseline” against which the new budget is justified. Lazy managers just look at how they did in the current year and make allowances for cost of living increases, give or take a few new initiatives. But ask yourself: If the budget is a mess at the end of the year, why use it as a template for the future? In my experience, zero-based budgeting is a hallmark of good hotel management. A fresh fiscal year means a fresh budget, carefully-planned with an accountable business plan and re-evaluated line-by-line. A little more work today? Perhaps—but when next June rolls around, and it will, you’ll be much better off.
Second, they don’t just react to what’s happening now, they plan ahead. Successful managers have established a rolling 12-month plan. This means they don’t just set up the dominos and watch them fall. Time and again I am seeing budgets that don’t appear to have been thought through. Last year’s plan is dusted off, maybe some data updated but not much thought.
On the other hand, effective managers plan ahead. They start keeping track of where and how they are spending, they pay careful attention to the market and are updating well into the future. They evaluate the hotel’s performance continuously, adapting their policies and promotions in a timely and appropriate manner. Making adjustments along the way is a huge step toward a stress-free June. To paraphrase the army’s 5 Ps: “Proper planning prevents poor performance”. (Actually I think they had a 6th P in front of Poor but I can’t remember what it was).
Third, they don’t scramble for sales. The best managers know that nothing is guaranteed, so they strike for strong figures early in the year. In fact there is a hotel truism that says if you reach budget for the first three months you have an 80% chance of making it for the year. A car dealer I know described his own situation in similar terms: “It’s easier to run promotions throughout the year and make sales when we can, rather than waiting until EOFY” he said. “In fact, I’d rather top up sales with solid margins when I already have a good base, rather than scrambling for dollars at the end.” The principle in hotel management is the same: hoping for a miracle down the stretch is never as effective as a strong and steady race.
Fourth, they keep their bosses in the know. The feeling that upper management is in for a rude awakening at EOFY never helps a manager’s stress levels. From both a financial and general business point of view, it’s more prudent to keep upper management informed throughout the year. Maybe there were unforeseen expenses or a drastic change in the market. Maybe it’s the opposite and things are going well. Either way, a prudent manager boosts his or her own stock by keeping upper management in the loop. There should never be any surprises at the end of the year. Shocking twists may be great in the movies, but when it comes to year-end reviews, they’re just not a very effective plot device!
None of these are silver bullets, but they are all things I’ve seen managers do, time and again, to smoothly navigate from one fiscal year to the next. It may be too late to implement each one of them for the 2014-2015 fiscal year, but taking them on board will certainly set a smoother course for the coming year.
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