Budgeting Process In Hotel

A “budget” is a “financial plan reflecting the business strategy and represents a more structured way of communicating it to the team”. The process by which a budget is built and agreed within an organisation is called “budgeting process” or “budgeting cycle”, that represents one of the most important financial planning tools. “This cycle always starts with a vision or a goal, based on which the approach to be used is chosen. The next step is the elaboration of the budget itself by allocating the right resources into the right place. It is very important to keep track of it (the sooner a variance is spotted, the better, as more time is available to understand it). The last stage is the evaluation process which should lead to future improvements”.

Walther, the above steps require a debate to determine the direction of the business. Reason why a budgeting committee is created that includes senior level personnel of each unit of the organisation. The members of this committee are involved throughout the budgeting process. They provide the information relative to their own unit. The information is then compiled together and passed through the organisation till an overall budget is obtained. The budgeting construction and agreement normally follows the organisational chart. However, different organisations use different approaches. The two basic ones are: Top-down (Mandated budgets) or Bottom-up (Participative

Our Budgeting process starts in May of the previous year and uses a Bottom-Up approach and an Incremental method (never Top down & zero based budgeting).

Firstly, a meeting takes place and it is attended by all the personnel (usually Head of Departments) that is involved with the budgeting process in which the plans for the following year are presented and guidelines given by our Corporate Office are shared and discussed. Afterwards, the Finance Department provides each Head of Department with Excel worksheets and instructions in order to assist with the preparation of the Departmental budget.

The Head of Departments (with the support of these worksheets) build their figures for the following year. By using the incremental method, they will consider the previous years result figures and adjust them accordingly based on different factors such as changes in strategy/objectives, changes in the economic environment. For example, to project the cost of Lobby Decorations for 2018, it was necessary to look at their cost in 2017 as a starting point, but at the same time it was very important considering that the Florist was about to be changed and the flowers’ price was going to increase