With the advent of globalization and the advancements in technology, the world has slowly shrunk in size, and it is comparatively easier to move to new places both to visit or settle. This means that there are continues changes and improvements in the hospitality sector all around the world. With an increase in the number of hotels and airlines, there has been a significant increase in the need for accounting professionals across the globe.
To understand how accounting can help in the hospitality sector, keep reading ahead.
Hospitality Sector in UAE
The hospitality sector in UAE has dramatically expanded, and the government now understands the significant impact of the hospitality and tourism sector on the economy of the country. In the last 10 years, the direct contribution of the sector increased by almost 138% and the employment in the sector grew by 119%. It is also speculated that by 2026, the direct contribution of the sector towards the GDP will increase by almost 75% which would mean an increase of 16% in the jobs in the sector amounting to a grandiose total of 659,000 jobs.
Thus, it would be safe to say that the hospitality and tourism sector will be very safe and revenue producing sectors and produce a very great opportunity to the entrepreneurs and businessmen who want to enter into this sector.
Accounting in the Hospitality Sector
Accounting can provide many great benefits to the hospitality sector as proper and professional accounting will give the accurate and updated figures as to how much of the funds were spent, what was the totals sales and what was the revenue. The comprehensive benefits of using proper accounting function in the hospitality sector are given below:
1.Total Sales Cost
If the total sales done is left unchecked, there is a very high possibility that in some time the business would eat through all its resources which would spell the demise of the business. Calculating the total sales done is necessary to set a benchmark for the next quarter and will also inform the basic trend of the business to the management. It will also act as a control mechanism for the business.
For the hospitality sector, a sale can be considered a meal in a restaurant or a stay in a hotel or any of the various services that would bring any revenue for the hospitality sector in that region. This revenue needs to be checked continuously as this revenue will form a large chunk of the funds which will be utilized for the upkeep and the expansion of the business in the next quarter.
The difference between the amount received as revenue and the amount used up in sales will be the total funds in the hands of the company which would be utilized in the various developmental activities of the business. This fund has to be appropriately allocated to the divisions to ensure the growth of the business. Accounting would help in calculating how much fund is required by what department of the company and the funds would be allocated accordingly.
4.Operating Cash Flow
Accounting keeps track of the day to day working capital of the company. Keeping a record and managing the working capital of the company is very important as it will decide the monthly allocation of funds to the various departments. Thus, the proper cash-flow management would be vital for the development of the business.
For the proper running of a business, some capital expenditure must be made. These expenditures are massive and do not comprise of the working capital. Expenditures such as necessary equipment, infrastructure, furniture and fixtures, etc. are considered as capital expenditure as they are only needed to be bought once every several years. The accounting function keeps a track of all these big expenses and the depreciation caused by them so that we can completely utilize the particular asset and replace it at the correct time.
6.Preparation of Budget
The accounting will play a huge role in the preparation of the budget for the different departments of the company. This budget would determine the total spending to be done by the various department of the business. The growth of the business will significantly depend on the preparation of the budget.
The hospitality sector consists of many employees and taking care of all the employees is very important. Without proper payroll management, there would be many disgruntled employees who would affect the business severely. Accounting and bookkeeping take care of the accuracy regarding the pay and other monetary benefits of the employees which helps them to focus correctly on the job to be done.
The above-mentioned reasons make accounting an essential function in the hospitality sector. Accounting would enable you to gain deep insights into the financial status of the business. Proper accounting will give you access to useful information which will help you in planning and forecasting for future needs. You will be able to serve clients in a better fashion and enhance your returns.
If you have a budding business in the hospitality sector and you are looking for accounting firms in UAE, then look no more as JAXA can provide you with the necessary services such as audit and assurance services, external audit services, statutory audit services, etc. Our highly qualified and experienced staffs provide the greatest level of professionalism in all areas of Auditing, Accountancy, Business Advice and Financial Planning. For details regarding our services contact us, we would be happy to help.