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Controlling Operations

9. Controlling Operations. Useful Tips on Budget Interpretation Housekeeping Operating Budget Consolidated Room Sales Rooms Division Budget Section Housekeepers’ Man-Hour Justification Useful Tips on P&L ( P&L ) Statement Interpretation The Profit and Loss and Variance Analysis

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Controlling Operations

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  1. 9 Controlling Operations • Useful Tips on Budget Interpretation • Housekeeping Operating Budget • Consolidated Room Sales • Rooms Division Budget • Section Housekeepers’ Man-Hour Justification • Useful Tips on P&L (P&L) Statement Interpretation • The Profit and Loss and Variance Analysis • Productivity Control • Weekly Labor Forecast • Computerized Housekeeping Management

  2. Useful Tips on Budget Interpretation (I) • Revenue is the amount of dollars generated from selling rooms. • Expenses are the costs of the items required to operate the rooms division. • Profit is the amount of dollars that remain after all expenses have been paid. Revenue - Expenses = Profit

  3. Useful Tips on Budget Interpretation (II) Revenue - Expenses = Profit The following terms are synonymous: • revenue and sales • expenses and costs

  4. Useful Tips on Budget Interpretation (III) • Labor Costs • Cost of all employees, including taxes. • Other Expenses • All expenses not associated with payroll.

  5. Useful Tips on Budget Interpretation (IV) • Percent (%) means “out of each hundred.” • There are three ways to write a percent: • Percentage Form • “%” sign is used, as in 10% • Fraction Form • the part, or a portion of 100, as in 10/100 • Decimal Form • the decimal point (.), as in 0.10

  6. Useful Tips on Budget Interpretation (V) • Percentage of revenue that a particular expense costs: • Expense • Revenue = Expense %

  7. The Housekeeping Operating Budget • The purpose of the operating budget is twofold: • To allocate funds for expenditures for a determined period of time, generally one year. • To measure and control the department’s performance. • The housekeeping operating budget is part of the rooms division budget, which also includes the front office.

  8. Consolidated Rooms Sales • The projected revenue of the rooms division consists of the dollars to be generated by the sales of rooms at a certain unit price. • Sales = Number of rooms sold X Average daily rate (ADR)

  9. SECTION HOUSEKEEPERS’ MAN-HOUR JUSTIFICATION • Used to ascertain the wages of section housekeepers and laundry workers, as these employees report to work based on number of rooms that need to be serviced daily. • Purpose of this statement is to warrant the amount that must be obtained in the upcoming budget.

  10. Useful Tips on P&L Statement Interpretation • The P&L lists actual revenue, payroll costs, other expenses, and profit for a certain period of time, usually monthly. • The P&L is important because it indicates the financial performance of the rooms division operation.

  11. Sample Percentages Used in a Rooms Division P&L Statement • Labor Cost Revenue = Labor Cost % • Other Expense Revenue = Other Expense % • Total Expense Revenue = Total Expense % • Profit Revenue = Profit %

  12. Variance Analysis • The variance analysis is a report indicating the changes in revenue and expenses from each budget category. • The purpose of the variance analysis is to alert department heads of percentage changes from budget.

  13. COST PER OCCUPIED ROOM • The cost per occupied room is a good determinant of expenses per room sold. • The cost is obtained by dividing each expense category for a certain period of time by the rooms sold during that period of time. • For example, if rooms sold = 9,672 and expense = $17,830, the cost per room would be $1.84

  14. Productivity Control • Productivity is a measure of output compared to input. • A useful ratio to control productivity is: • Revenue : Hours of work = dollars per labor hour. • Another indicator of productivity is: • Hours of works : rooms cleaned = mean hours per room serviced

  15. Weekly Labor Forecast • The weekly labor forecast projects the section housekeeper hours needed to service the forecasted occupied rooms for a particular week. • By dividing the estimated revenue for the week by the section housekeeper hours, the revenue generated per hour worked is obtained. • The result is compared to the amount stated in the yearly budget.

  16. Payroll Control • If significant variations with planned results occur, management must: • Determine if there is too much overtime or overscheduling of workers • Take corrective action

  17. Computerized Housekeeping Management • Executive housekeepers use technology to perform tasks such as controlling inventory supplies, scheduling operational routines, tracking departmental man-hours and costs. • Software packages exist that perform personnel management tasks, track inventory supplies, establish quality assurance programs, schedule guestroom maintenance, or print daily work schedules.

  18. Computerized Housekeeping Management (Cont.) • Steps in selecting a computerized housekeeping management software system are: • Determine the needs of the department • Select a system that will fulfill the requirements to have the job done • Ensure that the vendor will provide technical support and employee training

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