Improving Finance: Hospitality Consolidation
(9 Minute Read Time)
Accounting has long been viewed as custodian and curator of hospitality finance data. However, whether it’s bringing the data together or distributing the financial results broadly, the hospitality consolidation process has long been an onerous task of information assembly, validation, and reporting.
The pace and challenge of today’s business environment for hospitality businesses is driving financial executives to shift their financial focus to a system of intelligence, rather than a system of record. And a key part of which is access to continuous, accurate, consolidated financial reporting.
This has set the stage for discussing an approach for improving not only the hospitality consolidation process but also increasing the analytical and real-time reporting capabilities of the finance function.
The industry challenge
Hospitality companies across hotels, restaurants, gyms and other service businesses often consist of many separate multiple-entities for legal, tax and location purposes. These organisations face complexities such as decentralised accounts, inter-entity transactions, multiple currencies, local, regional or even global consolidations and more. And as a hospitality company grows and adds more entities, they often face increased complexity that can ultimately handicap business growth.
The technology challenge
In addition, the tech deployed to manage the individual entities means that when it comes to financial consolidation and reporting, the business has to maintain and juggle multiple systems and different processes. This results in a lack of control, as well as inefficient workflows for the Finance function. Then the reporting itself, results in hospitality consolidation occuring manually through Excel, making it prone to errors and being extremely time-consuming, complex and certainly not scalable.
Industry demands mean tightening reporting deadlines and the desire to improve the timeliness of reporting with financial stakeholders. Plus the transparency of information about the business to the financial stakeholders drives the need for a well documented and well controlled consolidation process that both preserves & enhances financial reporting integrity.
Additional challenges can arise when late entries or other adjustments get posted and the process is repeated. Updating the consolidated results for a late adjustment is often a significant undertaking, with consolidated results often unknown until the very end of the close process.
These factors conspire to make the hospitality consolidation process ever more challenging for many accounting/finance functions. There is a better way to design and architect the process.
Next Generation Hospitlaity Consolidation
The better way comes from leveraging technology, such as leading cloud financial management systems. The characteristics of this type of system and the possible configuration include four critical differences.
- A scalable accounting foundation - Businesses today are often adding virtual and physical entities to their corporate structures. Cloud financial management systems alleviate this as a challenge.
By enabling the seamless addition of new business units without any additional investments in hardware, software, or configuration. One integrated system gets leveraged, whilst training and user resources are readily available to support business growth.
So when all business entities – regardless of location, old and new – use the same system, you achieve significant productivity gains. Plus automation from cloud technology means you can redeploy corporate accounting staff to more strategic activities. With finance’s role changing from a mere preparer, to the analyser and reviewer. This creates a shift in mindset and positions finance to add value to information and move beyond simply reporting it.
- Supporting flexible, faster growth - Businesses move quickly these days to capitalise on both international and M&A opportunities. Cloud financial management systems are ideal for ramping up new entities.
The finance function must be nimble enough to keep up with the corporate strategy by establishing books and records that align with the rest of the company, and fast.
They also need a turnkey solution to get systems and processes up and running to generate valuable information to support the myriad of decisions that happen at the beginning of a new entity.
At the same time, those in the corporate accounting group want and need to roll-up a new entity without missing a beat. So a centralisation of core finance functions, such as accounts receivable or accounts payable, represent an efficiency opportunity to leverage one database of customers and vendors across the whole organisation.
- Managing hospitality consolidation - A cloud financial management system allows for consolidation information to be fully integrated at any point in time. This quickly and easily puts all the data of subsidiaries at the fingertips of the corporate accounting staff, whilst completely avoiding the manual processing overhead.
This also virtually eliminates the need for the copious emails and other forms of communication back and forth between those working in corporate accounting and those working in the various business units, to gather the necessary information needed for preparing the whole hospitality organisation's consolidated accounts. The corporate accounting staff also have the ability to bypass manual consolidation work whilst being able to drill down into the data of the various business units.
Leading cloud management systems also bring greater visibility to inter-company transactions because the data is self-contained all within a single system.
- Improved insight - Traditional hospitality consolidation processes often result in a gap between the originating data and the data inside of whatever system or spreadsheet is used to perform the consolidation.
A cloud financial management system eliminates the gaps between the consolidation and the data. The configuration has a profound outcome. Real-time consolidated financial information is now available to decisions makers at the push of a button. This eliminates the lag of accounting that often arises where executives must wait several weeks to find out the consolidated financial results.
Addressing the challenges of hospitality consolidation using a cloud financial management system can propel the finance function and organisation forward. The benefits of which are wide-reaching and as an executive in hospitality, you need to ask yourself, is the consolidation process a source of value or a barrier inhibiting greater strategic contribution?
Sage Intacct is the innovation and customer satisfaction leader in Cloud Financial Management, already used to improve hospitality consolidation.