Hospitality management accounting phần 10 doc

Even though companies may not have clear-cut financial goals to rely onfor decision making, this should not preclude them from operating toward theother two objectives of financial manag

maximization of profit or stockholders’ wealth are not relevant in their decisionmaking Internal operating decisions may be made without reference to finan-cial objectives For example, a hotel sales department might be convinced thataccommodating bus tour groups could considerably increase sales The roomsdepartment manager might think this type of business is too disruptive to nor-mal operations and might cause some regular customers to be denied accom-modation when the hotel is full with tour groups If this hotel had as one of itsobjectives the maximization of sales revenue (and many companies do establishsales targets as goals), then management would side with the sales department.Management could also decide the issue on a compromise basis, however, agree-ing to accept a limited number of tours This would increase sales revenue and net income, but not necessarily maximize them It would keep regular customers—and the two departments involved—happy Management and thestockholders (who in many cases will be one and the same) will still be satis-fied with the net income In fact, this method of operating a business is fre-

quently known as satisficing.

Even though companies may not have clear-cut financial goals to rely onfor decision making, this should not preclude them from operating toward theother two objectives of financial management: deciding on the sources of fundsrequired by the company and allocating those funds effectively to the variousassets of the company to provide a satisfactory net income

S O C I A L G O A L S Even though the goals discussed so far have been of a financial nature, social goals cannot be ignored Social responsibility embraces such things as protect-

ing the consumer who buys the hotel’s or restaurant’s goods or services, taining equitable hiring practices, and paying fair wages, supporting furthereducation and training of employees, and being concerned about environmen-tal factors

main-A resort hotel that owns beachfront property would act in a socially matureway by giving access to the beach to persons other than registered hotel guests

A take-out fast-food restaurant that uses disposable paper or plastic supplieswould be socially responsible if it were to hire someone to ensure that the neigh-boring streets were kept free of litter discarded by customers Obviously, sincethey have a cost, many social goals conflict with financial goals On the otherhand, some social goals, even with a cost attached, may improve financial re-sults For example, in the restaurant situation just cited, the restaurant might findthat its business improves considerably as a result of its litter-cleaning decision.More customers might patronize the restaurant because they appreciate its so-cially responsible action or because they want to visit a restaurant that is in aclean neighborhood To the extent that the increased net income exceeds the cost

of clearing litter, a benefit will accrue

554 C H A P T E R 1 4 F I N A N C I A L G O A L S A N D I N F O R M A T I O N S Y S T E M S

D E V E L O P A N A C T I O N P L A N

After an organization has developed a suitable mission statement and tablished financial objectives to conform to that, it must prepare an action plan

es-An organization’s overall mission statement and objectives define what the

or-ganization wants to achieve The action plan shows how it is going to get there.

Normally, this plan covers all functional areas of an organization, such as

man-agerial, financial, operational, and marketing It includes matters such as the

way the premises are furnished, the theme it wishes to establish, and the types

of customers it wishes to attract At the same time, it requires an understanding

of the limitations that any business has These limitations include the physical

size and condition of the property, competition, funding available, economic

en-vironment, and many similar factors

S T R AT E G I E S

An action plan first requires the establishment of strategies to achieve

objec-tives Objectives and strategies should not be confused Objectives are simply

generally fixed statements that, by themselves, cause no changes Strategies are

stated plans of action that will cause changes in order to meet objectives

Strate-gies can also be flexible, whereas objectives are often not, at least in the short

run For example, a restaurant might have as an objective to increase sales by a

certain percentage over the next 12 months Strategies to achieve this might

in-clude increasing menu prices, increasing seat turnover, selling more wine with

meals, or using any combination of these and other approaches If the chosen

strategy or strategies do not work, then they can be replaced or combined in

some other way

It is also important to ensure that a strategy is not implemented while noring other strategic alternatives For example, it is possible for a strategy to

ig-be based on an inappropriate or biased management style that has too narrow a

focus Note also that strategies have a life cycle, just as products and mission

statements have And even where a mission statement may still be appropriate

for a particular organization, strategies that were appropriate to that mission

statement in early years may no longer be practical for achieving that mission

TA C T I C S

Tactics to supplement strategies may need to be developed Strategies are often

long-term (a year or more) in nature, whereas tactics (of which there may be

sev-eral for each strategy) are short-run because they often have to be adjusted to

cir-cumstances that are constantly changing This does not imply that strategies do

D E V E L O P A N A C T I O N P L A N 555

not also need to be changed in the short run Extraordinary, unanticipated eventsthat require both altered strategies and altered tactics may occur.

I N F O R M A T I O N S Y S T E M S

To achieve the objectives established for a company, it is necessary for agers to make decisions constantly To make rational decisions, they must haveinformation and a system that provides this information

man-For example, consider a hotel that is contemplating offering its roomguests a “free” continental breakfast as a new marketing tactic This seemslike a relatively simple matter What information is needed? First, the deci-sion maker must have information about the type of guest that is the hotel’smarket Is it the vacationer or the businessperson? Predominantly male or fe-male? If the hotel is an international one, is the nationality of the guest im-portant? Is age relevant? What about average length of stay? Obviously, guestregistration cards must be designed to provide these data, and someone must

be delegated to sort through these cards to summarize the data into ingful information

mean-However, the manager needs further data from suppliers concerning the type

of bakery products available, types of packages and their sizes, and informationabout costs as well as availability of any quantity purchase discounts Finally,the manager must have information about the added costs of storage and distri-bution of the food without a kitchen

For many day-to-day decisions, much of the necessary information alreadyexists in most hospitality enterprises Some of it is a requirement of the law (forexample, the requirement to keep accounting records for income tax filing pur-poses) Other information exists as a byproduct of carrying out normal businesstransactions (such as purchasing records and sales invoices) Further informa-tion exists as a result of transactions between departments (e.g., requisitionsgiven to the storeroom for needed supplies) But quite a lot of information isavailable that is not formalized (such as the chef’s knowledge about the bestway to tackle each day’s production of food requirements)

F O U R L E V E L S O F D E C I S I O N M A K I N G

Four levels can be identified in the decision-making process, and these can beviewed as a pyramid These four are data production, data sorting, informationproduction, and decision making

556 C H A P T E R 1 4 F I N A N C I A L G O A L S A N D I N F O R M A T I O N S Y S T E M S

L e v e l 1 : D a t a P ro d u c t i o n

The base of the pyramid is the production of data These data are often abyproduct of a regular business activity (cash register tapes, sales checks, guest

registration cards) It is important to establish what is to be stored and for how

long, and what is to be discarded immediately For example, are dining room

sales checks to be kept for a week, a month, a year, or for five years? While

some of these decisions are management’s responsibility, the government will

have requirements on how long some of these documents must be kept

L e v e l 2 : D a t a S o r t i n g

The second level of the pyramid is the management of the data where theyare sorted, converted, combined, or manipulated into more useful sets of data

In other words, the data need to be classified so specific items can be recalled

or retrieved without processing the entire batch For example, while registration

cards can be stored by day and then by month, you may need a system that

seg-regates registration cards for all VIPs so that they can be accessed without

hav-ing to go through all registration cards for an entire month

L e v e l 3 : I n f o r m a t i o n P ro d u c t i o n

These converted sets of data in turn provide the information for the third level

in the pyramid, the information level Data are converted into information when

they acquire meaning For example, Exhibit 7.7 in Chapter 7 is a columnar table

of two sets of data, one column showing rooms sold month by month and thesecond showing wage cost month by month In Exhibit 7.9, these data have beenplotted on a graph and have taken on meaning, since the graph indicates infor-mation concerning the fixed wage cost.

Normally, the collection and conversion of data to provide information is aroutine process that can often be done by mechanical or computerized means

It is not the manager’s job to do this The manager’s task is the interpretation

of the information and the actual decision making Nevertheless, it is the ager’s task to be involved in establishing the information-gathering system so itwill provide the information that he or she needs to make the kinds of decisionsnecessary so the company can meet its goals

man-As organizations grow, the information system becomes more structured.For example, in a small restaurant, the one and only cook may have the recipesstored in his or her head, but in a large restaurant, recipes need to be formal-ized so that all cooks follow the same food preparation formulas and procedures

In other words, which system is most desirable really depends on the specificorganization of the business and its needs As the organization changes overtime, so will the information system What is good today might not be of value

in five years

Computerized information systems more readily allow the linking of datafrom different areas of an operation For example, a room service departmentmanager could constantly access forecasts of guest room occupancies in order

to staff the department more adequately from day to day

Some sets of data can be compared to provide information (e.g., relating lastyear’s sales to this year’s, or this year’s sales to a budget) At the very elemen-tary level, such comparisons are not too helpful, since they do not allow for con-ditions that have changed between last year and this year, or this year and itsbudget Also, if, for example, August last year had five Sundays and this yearonly four, comparisons can be distorted Comparisons made based on indices orpercentages are an improvement over nominal dollars, as is a comparison based

on a standard, such as the standard food cost system described in Chapter 5.Further improvement in information occurs when variances between actualand standard are broken down into differences in quantity, sales volume, andcost or price (see Chapter 9 for a discussion of variance analysis) This break-down indicates how much of the variance is the fault of poor planning (salesvolume variances) and how much is a failure to achieve standards (for exam-ple, quantity and cost or price variances in a food cost control system) At thispoint, the information system has reached the stage of providing a guide to solv-ing problems and making decisions

What prevents many managers from producing more sophisticated mation, and in particular to implementing a computerized system, is that costs

infor-of implementing a system are infor-often considered, but no price tag is put on thebenefits In fact, some managers consider that there is, and should be, no costfor information gathering; in other words, there is no cost to compiling a daily

558 C H A P T E R 1 4 F I N A N C I A L G O A L S A N D I N F O R M A T I O N S Y S T E M S

food cost or for producing a manager’s daily report These are simply

byprod-ucts of the accounting and/or control system, and to spend money to provide

more and better information makes no sense For many managers the concept

that information is not free creates a dilemma that is difficult to resolve

An information system should be judged by how well it facilitates theachievement of a given goal or set of goals The main criterion for judging one

system against another is costs versus benefits Systems cost money and

bene-fit an organization by helping decision making If two systems cost the same,

that which provides the most desirable operating decisions is preferable For

ex-ample, when choosing between two computerized accounting systems and they

both cost approximately the same, this might be the deciding factor

L e v e l 4 : D e c i s i o n M a k i n g

The information that is provided by the system is used to identify and helpsolve problems that are resolved at the top of the pyramid, or the fourth level

(which is the decision-making level) The types of decisions that have to be made

dictate the information that needs to be collected; the information indicates the

data that are needed, and this, in turn, regulates the data collection system

Any manager is constantly faced with decisions These can be routine andsimple, often requiring no action, or more complex and important Most deci-

sions do require the use of information and frequently the use of judgment

In problem solving, four decision-making steps can be identified:

1 Define the problem Without doing this, information cannot be properly

an-alyzed and alternatives cannot be identified If the problem is not defined,

or is incorrectly defined, time and effort will be wasted

2 List alternative solutions Creativity is a requirement for this, but that

cre-ativity should not be limited to the decision maker’s bias or prior experience

3 Gather all necessary information about the problem and its alternative

so-lutions The information gathered must be relevant, since that increases

knowledge, reduces uncertainty, and minimizes the risk of making the wrongdecision It must also be presented in a format that is understood and must

be received in good time to affect any decisions made Note, also, that cision making is often a matter of judgment based on the best informationavailable

de-Obviously, the more accurate the information available, the more value

it has for planning, control, and decision making Speed of information andthe risk of incomplete information are also factors to be considered It is some-times better to have a rough idea of the daily food cost without taking in-ventory than to have a more accurate food cost 24 hours after taking inventory

On the other hand, in a feasibility study for expanding the business, risk is sohigh that the extra time involved in preparing an informative study is wellspent In any decision-making situation, the manager, given the constraints of

I N F O R M A T I O N S Y S T E M S 559

time and data availability, must have enough important information to sider alternative decisions or solutions Obviously, however, the more timethat is spent on collecting data and information, the greater the cost.

con-For many decisions, accounting records, forms, and reports are a majorsource of information This type of information is verifiable, objective, andquantitative and can provide specific data about an activity, event, or prob-lem The three most important aspects of accounting information are that it

is relevant and appropriate for the problem at hand, that it is current, and that

it is accurate within the measurement standards imposed by the needs of theproblem

4 Make the decision Even though the foregoing three steps may be followed,

decision making may still be difficult, since important variables of the lem may affect one another

prob-In some situations, the information can provide its own solution For ample, perpetual inventory cards as an aid to inventory control were described

ex-in Chapter 2 These perpetual ex-inventory cards can show, for each storeroom item,the minimum and maximum inventory levels If the minimum stock level for aspecific product is 5, and inventory has dropped to that point, and maximum is

15, then 10 more of that item need to be ordered However, in such a situation,

no attempt is made to relate the purchase to current conditions What if the sumption for that product is no longer as high as it used to be? Perhaps the max-imum inventory of 15 should be reduced to 10 and the reorder point to 2 untilconditions change again

con-To make such decisions from manual information might be difficult, butcomputerized inventory systems can be programmed to provide information con-cerning such matters as rate of consumption of inventory products as well asquantity discounts and inventory holding costs In a really intelligent comput-erized system, the idea of fixed reorder points for any items might be completelyabandoned, and the computer will consider all the relevant factors item by itemand only print a list of items to be ordered and in what quantities

One type of decision making is known as management by exception With

management by exception, small deviations from normal, which do not requireany management action, are not drawn to its attention For example, the stan-dard food cost is established at 40 percent As long as the food cost variance isonly 1 percentage point above or below 40 percent (i.e., from 39 to 41 percent),

it is considered acceptable Only if food cost is below 39 percent or above

41 percent is the change drawn to management’s attention

The question of establishing an item’s exception level has to be established

on a situation-by-situation basis and company by company There are no rules,

or even guidelines, because of the many variables that differ from business tobusiness

Although management by exception has the advantage of relieving level management of wasting a lot of time on information when there is no

higher-560 C H A P T E R 1 4 F I N A N C I A L G O A L S A N D I N F O R M A T I O N S Y S T E M S

problem, it can also prevent management from noticing worsening trends (for

example, a cost item that is slowly increasing) until that item of information

has reached or exceeded its exception level In other words, if the manager had

been made aware of the worsening trend, some corrective action could have

been taken before the exception level was reached

A further refinement in decision making is to examine the assumptions thatwere made when earlier plans were formulated and then compare not only ac-

tual and planned results, but also actual with possible results Those possible

re-sults are opportunity costs Earlier in this chapter the possibility of a hotel

increasing its sales by accommodating bus tour groups was discussed If bus

tour groups are not accommodated, or only a limited number of them are

ac-cepted, the revenue from those not accommodated is an opportunity cost, and

this opportunity cost (lost sales revenue) could be built into the information

sys-tem for management comparison with actual results One difficulty with

build-ing opportunity costs into the information/decision-makbuild-ing system is that some

bus tour groups who were turned down may have eventually canceled their

reser-vations anyway, even if they had been accepted But, if effective decisions are

to be made, a well-designed information system must be able to respond to some

incompleteness of information and possibly suggest where additional data might

be collected to make the information more complete Obviously, at this level of

sophistication, information manipulation would be exceedingly complex

with-out the aid of a computerized system

The way in which an information system is designed and integrated into ahospitality enterprise is a challenge for any manager The more appropriately it

is designed to support decision making, the more effectively will the enterprise

be able to compete in the marketplace and achieve its already established

fi-nancial objectives

M I S S Y S T E M E F F E C T I V E N E S S

A management information system (MIS) must have stated objectives so that

its effectiveness can be measured by how it meets those objectives

Manage-ment should also be concerned with whether the system is doing everything it

could to be effective There are three ways of determining this

One way is to review the reports provided by the system to see if any ployees using them have made notations or calculations on them If any of the

em-information had to be recalculated or redrafted in some way to make it

mean-ingful to the user, or if information has had to be added from some other source,

this could indicate that the system is not doing everything it could

A second method is to use test observations to see whether the informationsystem is used for decision making If information is required for a decision be-

fore the formal MIS can provide it or if the formal MIS has to be supported by

information from informal sources, then perhaps the MIS is not doing the job

it was designed to do For example, suppose a hotel has a computerized guest

I N F O R M A T I O N S Y S T E M S 561

room system that is intended to provide housekeeping and front-office nel with information about the status of each guest room at any time If the com-puter system is so slow that housekeeping and front-office employees pass thisinformation back and forth by telephone, then the formal computer informationsystem is not performing effectively.

person-The third method is to have those who review system reports list or statewhich items on a report are relevant and which are irrelevant If there is con-sensus that there is a great deal of irrelevant information that is of no use in decision making, then the system is not doing its job A dramatic test is to tem-porarily stop producing a report for a while If there is no protest from thosewho are supposed to use the report, its permanent discontinuance will simplifybut not reduce the effectiveness of the information system However, removal

of a report can have unexpected repercussions For example, department headsmight be receiving the same report as the general manager, even though theymake little direct use of it If the report is discontinued, department heads mightfeel they have lost status because they are no longer deemed important enough

562 C H A P T E R 1 4 F I N A N C I A L G O A L S A N D I N F O R M A T I O N S Y S T E M S

S U M M A R Y

Before developing financial goals, some large hospitality operations prepare amission statement Regardless of the type and size of enterprise in the hospi-tality industry, financial management will be an ongoing part of the business.Generally, financial management has three objectives:

1 To establish certain goals, such as how large the company will be, how

rap-idly it will expand, and how it will measure its success in meeting thesegoals

2 To decide on the sources of needed capital and to obtain the funds required

by the firm to meet its goals

3 To allocate these funds effectively to the various assets of the company,

again with the company’s goals in mind

Profit maximization is one type of goal This means making the most amount

of money in the shortest possible time Profit maximization emphasizes the short

run over the long run and ignores any risks involved

Maximization of return on investment is a goal that allows no investmentthat does not yield at least a minimum return on investment The disadvantages

of this goal are similar to those for the profit maximization goal

The goal most commonly used by business is that of maximization of holder wealth Under this goal, management plans to ensure that wise invest-

stock-ments are made, that they are sensibly financed, and that an appropriate dividend

policy is established

Secondary goals are also often established These could be for individualoperations within a chain and/or for individual departments within an operation

With secondary goals, management by objectives (MBO) is a useful

manage-rial technique With MBO, managers are involved in establishing their own goals

and standards against which their performance is subsequently measured Goal

congruence is an alignment of organizational goals with the personal and group

goals of subordinates and superiors

With any form of goal setting, social goals must not be ignored

An organization’s overall mission statement and objectives define what theorganization wants to achieve The action plan, through strategies and tactics,

shows how it is going to get there

To achieve its financial goals, an organization must have a reliable mation system that allows the best decisions to be made Four levels can be

infor-identified in an information system: data production, data sorting, information

production, and decision making The larger the organization, the more

struc-tured is this information system

A well-defined information system is also invaluable in problem solving Foursteps can be identified in problem solving: Defining the problem, listing alterna-

tive solutions, gathering all necessary relevant information, and making decisions

Information is a resource that costs money When comparing different formation systems, a cost/benefit analysis is required An information system

in-should be judged by how well it facilitates the achievement of a given goal or

set of goals

The way an information system is designed and integrated into a ity enterprise is a challenge for any manager The more appropriately it is de-

hospital-signed to support decision making, the more effectively will the enterprise be

able to compete and achieve its already established financial objectives

Finally, management also needs to be sure (and determine from time to time)that its information system is effective and be aware that there is a difference

between efficiency and effectiveness

S U M M A R Y 563

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D I S C U S S I O N Q U E S T I O N S

1 Explain your understanding of a mission statement and state four purposes

that it can serve

2 Briefly describe your understanding of the meaning of financial management.

3 Explain how you think a small restaurant operation can practice good

fi-nancial management

4 What is your understanding of the term satisficing?

5 In what way might a policy to pay no dividends affect a hotel corporation’s

market price of shares? If the policy were to pay out all net income in idends, how might this affect the company’s future net income? How mightthis affect the future share price?

div-6 Explain why wealth maximization, as indicated by market price of shares,

may not be achieved by profit maximization

7 Would the objective of no net income for a certain period (e.g., three years)

be consistent with the goal of wealth maximization? Explain

8 What is a secondary goal? Give an example that might be appropriate for

the housekeeping department of a hotel

9 Define MBO and explain how it is used in an organization What is goal

congruence, and how does it fit in with MBO?

10 Explain why a resort hotel that is the only one in the area would or would

not be likely to practice social responsibility Do you think such a resorthotel might act differently if it were only one of a number of competitivehotels in that area? Explain

11 Discuss the need for an action plan to achieve goals and differentiate

be-tween strategies and tactics

12 What are the four steps in the decision-making process?

13 Discuss how you think an information system should be judged for quality.

14 What are the main criteria for information so it is useful in the

decision-making process?

15 Define management by exception and give an example of a circumstance

where it might be used

16 Briefly discuss two ways in which the effectiveness of a management

in-formation system can be determined

P R O B L E M S 565

P R O B L E M S

P14.1 Some hospitality enterprise entrepreneurs, even with limited education,

have been successfully operating their businesses for many years Theyhave probably never heard of management by objectives (MBO) Theironly goal is to work hard and make an adequate profit In your opinion,and given examples from your own experience and/or observations wherethis might be helpful, why are they successful? If they are successful,why should they bother using managerial techniques such as MBO?

P14.2 The following paragraph appeared in a chain motel’s monthly in-house

newsletter announcing the creation of a trophy that will be awarded tothe motel with the most outstanding performance each year:

The trophy will be given to the motel with the best combination ofsales percentage increase and net income percentage increase The ac-tual calculation will be to take the sales percentage increase, add thenet income percentage increase, and to divide that total by 2, with equalweight given to both sales and net income growth Only motels achiev-ing a minimum 15% sales increase will be eligible

What is your evaluation of the way performance is to be measured inthis motel chain? Use 2 or 3 examples to demonstrate your opinion

P14.3 Following are performance objectives for three different organizations:

a A restaurant’s manager: “To establish a position in the market by

pro-viding top-quality menu items created from the freshest locally grownproduce.”

b Year-round recreational resort hotel’s marketing manager: “To

estab-lish an image for the resort as an exclusive one providing a ous atmosphere and environment.”

luxuri-c A hotel’s nightclub manager: “To considerably increase visits to the

nightclub by residents of the area living within driving distance.”

Evaluate each of these objectives Comment about how each of themdoes, or does not, satisfy the criteria for a good objective Rewrite eachobjective in your own words in such a way that it meets the criteria for

a well-stated objective

P14.4 You are the manager of the maintenance department of a hotel You are

paid a basic salary, plus a bonus The bonus consists of another $1,000each time your expenses are under budget, plus 2 percent of the amountyou are able to save For the past six budget periods, the following are

the results Note that U stands for unfavorable, or over budget, and F for

favorable, or under budget

Period Budget Actual Variance

a Using this information, as a rational person what would you do if you

were the department manager running the maintenance departmentover again from period one? Use a numerical example to prove yourpoint

b If you were the hotel’s general manager, what would you recommend

be done, if anything, to this hotel’s maintenance department’s bonussystem?

P14.5 A small resort hotel that caters primarily to the family trade set as an

objective an increase of 5 percent in its rooms occupancy over the next

12 months Its strategy for achieving this was to convert some unusedground-floor storage space into a conference room that could seat about

30 people It then marketed the resort property to businesses and nizations that agreed to hold two- or three-day meetings and use the guestrooms overnight During the first conference that the hotel booked, theconference organizer complained severely about noise from children using the outdoor swimming pool and recreation facilities immediatelyoutside the window area of the conference room Furthermore, the con-ference room delegates found there was no provision to have an eveningmeal served to them in the meeting room so that they could continuetheir discussions in private Conference delegates were obliged to use theresort’s regular dining room, where other residents were also seated.When subsequent conference groups arrived, they made the same com-plaints, and the resort found that negative word-of-mouth publicity hadcreated difficulties for them in booking further conference groups As aresult, they did not achieve the desired increase in occupancy Discussthe resort’s problem with specific reference to the strategy it used toachieve its objective

orga-P14.6 The concierge’s department of a large hotel normally has a head

concierge and nine concierges on duty during the day shift for the peaktourist months During the past peak month, there have been far morethan the normal number of guest complaints about the slow service re-ceived, creating a problem for the rooms department manager

The following are descriptions of several situations or events taining to the concierge service department For each separate item, state

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in which of the four areas of the problem-solving process the item longs The four areas are defining the problem, identifying alternatives,gathering information, and making the decision.

be-a Several guests have complained to the front office manager that they

are experiencing a longer than usual wait for service or that they havebeen receiving poor service

b The bell service department has priorities for jobs The check-out

baggage of guests is handled first Second is guest check-in baggage

Third is delivery of other items to guest rooms Fourth is the sale ofairport limousine, bus tour, and theater tickets Fifth is other requestsfor service

c. One guest complained that their theater tickets were for the wrongnight

d One guest suggested replacing the head concierge with a better

to repair

g One of the desk clerks suggests that the sale of theater and bus tour

tickets be handled by a new person who will operate strictly on acommission basis

h The rooms department manager will consider having a commission

arrangement for next summer, since it is too late to do anything about

it this year

i. The head concierge suggests hiring one more concierge

j. One concierge has been away sick for the past two weeks

k A sick concierge was replaced by a temporary employee who was

not familiar with the hotel and its operating procedures The placement’s work was marginal

re-l. Guests who complain are advised of the concierge desk’s order ofpriorities

m During the past month, the hotel’s occupancy has been 10

percent-age points above normal for that month, creating extra demands byguests for service

n The rooms department manager has approved the hiring of one extra

temporary concierge for as long as occupancy stays above normal

o A new paging system will be purchased with a maintenance contract

guaranteeing instant service

P R O B L E M S 567

P14.7 In late January 2006, George Ray, president of Restoration Resort Ltd.,

is concerned about how he could finance the more than $200,000 he timates he needs to convert, improve, and expand the company’s resortfacilities The resort has very little cash, and George and his wife haveabout $20,000 in savings The land on which the resort is located hasbeen in the Ray family for 40 years The 12-unit motel was constructed

es-25 years ago The motel is open year-round Occupancy of rooms in thepeak summer months (mid-June to mid-September) is 100 percent, but

a lower occupancy during the shoulder and winter months reduces all annual occupancy to 60 percent In the winter months, the rooms arerented on a monthly basis

over-About 20 years ago, a swimming pool was added along with a changehouse, snack bar/souvenir shop, and a 20-space trailer park The trailerpark is only open during the summer months (approximately 150 days),and, during that period, spaces are 90 percent occupied

Although losses occurred in earlier years, the resort is now ably profitable However, the resort has not until now been consideredthe main business of the Ray family, since both George (who inheritedthe resort from his parents 10 years ago) and his wife work at other jobsand look at the resort as a part-time business It has become increasinglyapparent to them that, because of the economic times, they will have tomake changes to the resort and work at it full time if it is to remain successful

reason-After considerable thought and discussion, the Rays decided that thefollowing changes would have to be made to bring the resort up to astandard acceptable to today’s traveling public:

a Add eight fully furnished 400-square foot cabins with a potential of

32 additional overnight guests

b Fill in the pool, which has become badly corroded from minerals in

the water This pool has been fully depreciated

c Construct a new 3,300-square-foot swimming pool.

d Renovate and modernize the combined frame change house and snack

bar

e Add an extension to the change house that includes shower rooms for

trailer park guests and houses the resort’s office

f Expand the trailer park area from 20 to 50 stalls and provide

electri-cal and sewer hookup to all stalls

In addition to the Restoration Resort land, George personally owns landthat includes a hill at the back of the property, which has potential forskiing This piece of land is estimated to be worth about $50,000 at to-day’s prices However, George thinks that the investment required to de-velop it for skiing would not make the project currently feasible, eventhough it might considerably improve the winter rooms occupancy

568 C H A P T E R 1 4 F I N A N C I A L G O A L S A N D I N F O R M A T I O N S Y S T E M S

The investment costs for the proposed changes to the property areestimated as follows:

Construction/renovation of buildings $128,000

Furniture, equipment and fixtures 16,000Trailer park site improvements 21,000Contingency

ᎏᎏ1ᎏ0ᎏ,ᎏ0ᎏ0ᎏ0ᎏ

ᎏᎏ2ᎏᎏ0ᎏᎏ2ᎏᎏ,ᎏᎏ0ᎏᎏ0ᎏᎏ0ᎏᎏ

A balance sheet for the year ending December 31, 2005, follows, as

do income statements for the years 2004 and 2005

Restoration Resort Balance Sheet as of December 31, 2005 Assets

Restoration Resort income statements:

Dec 31, 2004 Dec 31, 2005

Sales RevenueRooms and trailer rentals $65,100 $74,400Snack bar/souvenir shop

ᎏ2ᎏ3ᎏ,ᎏ9ᎏ0ᎏ0ᎏ $89,000 ᎏ2ᎏ6ᎏ,ᎏ7ᎏ0ᎏ0ᎏ $101,100Expenses

Supplies and other expenses 9,000 9,900

Year Ending Year Ending Dec 31, 2004 Dec 31, 2005

Retained earnings beginning of year $10,900 $25,200Add: net income for year

ᎏ1ᎏ4ᎏ,ᎏ3ᎏ0ᎏ0ᎏ ᎏ1ᎏ9ᎏ,ᎏ4ᎏ0ᎏ0ᎏRetained earnings, end of year $

ᎏᎏ2ᎏᎏ5ᎏᎏ,ᎏᎏ2ᎏᎏ0ᎏᎏ0ᎏᎏ $ᎏᎏ4ᎏᎏ4ᎏᎏ,ᎏᎏ6ᎏᎏ0ᎏᎏ0ᎏᎏRevenue for the year 2006 is estimated to be about 5 percent aboveyear 2005, primarily as a result of a price increase, rather than an in-crease in occupancy Expenses are estimated in total to be about 5 per-cent higher than in 2005

a Given the balance sheet and income statements, calculate whatever

financial ratios (see Chapter 4) you think are appropriate that will dicate the financial health of the Restoration Resort

in-b List the information that you would like to have that is not shown on

the financial statements, but would make it easier to carry out somefinancial projections as a preliminary step before going ahead with acomplete feasibility study (see Chapter 13) for expansion

570 C H A P T E R 1 4 F I N A N C I A L G O A L S A N D I N F O R M A T I O N S Y S T E M S

C A S E 1 4 571

C A S E 1 4

With the possibility of branching out into a second restaurant, Charlie is

con-cerned that he does not have any formal financial objectives, although he does

understand that most successful companies do need to have financial, as well

as other, objectives Write a report to Charlie summarizing possible financial

objectives that he might wish to consider Include an explanation of MBO and

how it differs from conventional management (where the employee is judged

by personal traits such as initiative and integrity) typically used by small

busi-nesses What specific recommendations do you have for Charlie? Support these

recommendations with reasons

C O M P U T E R S I N

H O S P I T A L I T Y

M A N A G E M E N T

A P P E N D I X

Throughout most of this text, manual systems of financial control have been

dis-cussed and demonstrated The materials within the text are not intended to

im-part financial accounting expertise, but to make the reader familiar with certain

basic accounting procedures and managerial applications to assist management

in the decision-making process

Today, most hospitality businesses in hotels, motels, food service, and erage operations are using computers to record, report, and analyze the effec-

bev-tiveness of internal operations One must learn basic accounting concepts to

understand not only the necessary information needed as input to a computer

system, but also the output of information the computer is capable of

provid-ing Knowing what an average check is for a food service operation is one thing,

but knowing how it is determined gives a greater insight as to how it can be

changed This simple analogy rings true for the great majority of developed ratios, percentages, units, and dollar values that can be generated through computer analysis

In the three decades or so since computers have been commercially able, they have become a major factor in business operations as well as our in-

avail-dividual lives Computers have had a dynamic impact in all forms of business

enterprise, including the hospitality industry Initially, computer use was limited

due to their high-cost specialized operator technical expertise and rather large

requirement for floor space Computers have evolved to the point that their cost,

need of a specially trained operator, and space requirements are no longer

ma-jor obstacles to their acquisition Microcomputers are used extensively in all aspects of business operations rather than being limited to only chain operations

or very large independent operations

574 A P P E N D I X C O M P U T E R S I N H O S P I T A L I T Y M A N A G E M E N T

A majority of hotels now use computers in the areas of reservations, tration, guest history, guest accounting audit, and back office accounting Sim-ilarly, most restaurants are using computerized point-of-sale terminals andregisters that control guest checks, kitchen orders, and guest payments In ad-dition, such a system stores a great amount of data, which can provide a range

regis-of averages, and ratios that can be used to evaluate such items as menu-mixanalysis, average guest check, seat turnover, cost of sales analysis, and inven-tory control, to name a few possibilities

Computers have, in effect, successfully removed much of the consuming drudgery present in a manual accounting system The analysis andevaluation of labor productivity, cost control, inventory control, menu costing,budgeting, and so on can be obtained quickly and accurately from a computer,using software designed for a restaurant operation Needless to say, softwareprograms are available for specific business operations within the hospitality industry, which can assist in the safeguarding of assets, controlling cost, maxi-mizing profit, and providing information to measure the efficiency and produc-tivity of an operation

time-Today, small, low-cost, yet powerful microcomputers are available to almostany business operation or an individual Even a small, independent entrepreneurwould be remiss by not taking advantage of computer availability These micro-computers are so low in price that many operations provide a separate computerthat can be used cost-effectively by a single department within a large opera-tion An example of this might be for maintaining storeroom inventory records

C O M P U T E R A D V A N T A G E S

The main advantages of a computerized system over a manual one are speedand accuracy Computerized systems, however, don’t do anything that cannot bedone manually, nor do they relieve management of the responsibility of deci-sion making once the information is produced In reality, computers allowquicker access to all forms of information necessary to allow a quicker mana-gerial response to changes in the business environment

Computers are no longer expensive, space-consuming units that require ahighly skilled technical person to operate them No longer do they have to beoperated by computer departments that are remote from day-to-day operations,producing voluminous reports long after the need for the information they pro-vide is past

The new, low-cost computers may dictate a change in the way that tality managers behave on the job Competitive survival may require managers

hospi-to learn how hospi-to use computer resources in order hospi-to understand and effectivelyuse the wealth of information computers can provide

T Y P E S O F C O M P U T E R S

Generally, computers can be categorized into three types: mainframe puters, minicomputers, and microcomputers

com-M A I N F R A com-M E C O com-M P U T E R S

In the early days, computers were very large, requiring dedicated, air-conditioned

rooms, and specialized personnel to operate them Most often, mainframe

com-puters were often remote from the departments that needed the information that

they could provide In some cases, a terminal located in an individual department

could access the mainframe computer, or access could be made by an individual

operation that was part of a chain This type of computer is generally referred to

today as a mainframe.

M I N I C O M P U T E R S

With the introduction of minicomputers, this situation changed A minicomputer

was smaller, cheaper, and occupied less space than its mainframe predecessors

A chain organization could now afford to have a minicomputer in each separate

operation and still be linked to the head office mainframe Also, a number of

users could be connected through terminals to the minicomputer at the same time

This type of connection is known as computer time-sharing As a time-share user

accesses the minicomputer, the computer locates that user’s information, receives

instructions from the user to manipulate information or create changes, provide

reports, and then becomes a storage host until it is accessed again by a user For

a computer to do this for several users, it needs to be programmed so that

infor-mation from different users is not mixed up and so that each user is treated in

turn as if several were using the computer at the same time

The result is that time-shared computers—either mainframe or minicomputers—

operate at only about 50 percent efficiency As the computer gets busier as more

users access it, it slows down Its response time also becomes irregular, and a user

might not know, if the computer does not respond promptly, whether the machine

has slowed down because of heavy use or because the user has supplied

infor-mation that the computer does not understand and cannot process

A minicomputer might also need a complicated set of instructions and anexpensive communication system, as well as extra levels of security with pass-

words and protected security levels, to link it with all its users and prevent

unau-thorized access to confidential information

Finally, with a large time-shared mainframe or minicomputer, access plays

a valuable and important role in maintaining and sharing common information

with a number of different users This might be the case in a hotel where guest

T Y P E S O F C O M P U T E R S 575

reservation, registration, and accounting information can be accessed not only

by front-office personnel but also by accounting office, housekeeping, and keting employees

mar-M I C R O C O mar-M P U T E R S

The heart of a microcomputer is the microprocessor, sometimes referred to as a

microcomputer on a chip Actually it’s a processing and controlling subsystem

on an electronic chip (a very small part of the actual microcomputer) Computerchips are so small that 20,000 or more of them can fit into a briefcase Whenthe microprocessor was introduced, it dramatically changed the accessibility ofcomputer power and prompted a major reduction in the cost of this power tomanipulate, process, report, and store information

Today, a stand-alone microcomputer or personal computer (or PC, as it isusually referred to) can cost as little as $1,000 (or less) and can be easily placed

on a manager’s desk or small table No technical or specialist expertise is quired to operate these computers Indeed, it is no more necessary to know how

re-a computer works internre-ally to use it thre-an it is to know how re-a cre-ar works to drive

it However, it is generally important to understand what it is doing to knowwhat information to give the computer, which is necessary for the software pro-gram to return to the user the output requested

The terms microprocessor and microcomputer are sometimes used

inter-changeably, even though they do not mean the same thing A microprocessor isthe physical design and structure of a system engraved on the chips that are the

“brain cells” that make a microcomputer function Microcomputers are called

so because their systems are miniaturized A microcomputer could therefore besimply described as a small computer, although that can be misleading becausetoday’s microcomputers, as small as they are, are also independently versatile

In fact, it has often become better and in many ways cheaper to buy an tional microcomputer to handle a specific type of job than it is to create a spe-cial mainframe or minicomputer time-sharing or networking program thatseveral users can access

addi-The major disadvantage of microcomputers in their early years was theirsomewhat limited storage capacity; however, the small microcomputer of todaycan store more data than many of the older mainframe computers The averagestorage capacity of a microcomputer today is approximately 13 gigabytes (GB),and that capacity grows larger each year

Microcomputers can be operated independently but can also be linked gether through a network to access the same information or specific programsthat all their users may need from time to time (such as reservation information

to-in a hotel) Networkto-ing is the lto-inkto-ing of a number of to-independent computers.

Networking capabilities have grown rapidly, and continue to evolve and prove It is now possible for a hospitality operation to have its purchasing needstransmitted by its microcomputer to a network of supplier’s computers

im-576 A P P E N D I X C O M P U T E R S I N H O S P I T A L I T Y M A N A G E M E N T

This operation is often handled in a new Internet technology-based network

solution called an extranet Such a network allows companies and suppliers to

create a secure shared network configuration between the organizations and their

suppliers This network also allows individuals to utilize user-friendly computer

applications such as Web browsers to directly enter and track orders with

sup-pliers Other technologies, such as intranets, have also entered the computer

arena These intranet configurations also work on Internet-based technologies

(Web browsers, Internet protocols) Intranets allow companies to link all of their

remote locations to a central secure network of Web pages, which helps to

sim-plify access to personnel, accounting, inventory, and other corporate records,

and allows for easier submission of local data to the corporate office Internet

technologies are ever advancing in their capabilities and continually change the

work environment

Also in use today and continuously expanding is the electronic transfer offunds, in which point-of-sale terminals in a hotel or restaurant are connected di-

rectly to a computer at a local bank, which is, in turn, networked to terminals

at other banks If hospitality customers pay their bills by use of a national credit

card, a bank credit card, or personal check, the card or check can be verified

and approved by the local bank’s computer The bank will then issue

instruc-tions that are transmitted to the customer’s bank so that the funds are

immedi-ately transferred to the hospitality operation’s local bank account

The advantage of this to the hospitality operation is the reduction of the lection period, thereby saving one or more days and potentially resulting in a

col-near-cash transaction This procedure significantly decreases potential losses

from dishonored credit cards and checks, which would not clear due to

insuffi-cient funds (NSF) In addition, with the rapid inflow of cash, interest income

on the hospitality operations bank account may increase

L O C A L A R E A N E T W O R K S

Local area networks (LANs) are systems that connect microcomputers and

al-low authorized users to share common files LANs alal-low computers to be used

in ways that previously could be handled only by much larger mini- and

fol-are developed by programmers Once a program (or set of instructions) is placed

in the hardware, the computer can carry out those instructions without any

H A R D W A R E V E R S U S S O F T W A R E 577

operator intervention Any “intelligence” that a computer has must perform avariety of tasks, which must be programmed into it, and any weaknesses in thatintelligence are the fault of the program.

Once stored on the hard drive, information can be used with other ers of the same general type Information on the hard drive (disk) is read whenthe computer scans the magnetic surface of the hard drive, copying encoded pro-gram data into the computer’s temporary RAM memory Once the data is in thecomputer, it can be amended, added to, manipulated, or removed if no longerwanted before being stored again on the hard drive or other storage media.Good hardware is not hard to find, but a good software program is the key

comput-to a computer system’s performance Software can be written in a programminglanguage to create industry- or company-specific software However, many hos-pitality organizations buy existing software programs from vendors that spe-cialize in industry software

H A R D WA R E S Y S T E M S

Computer hardware systems normally have a number of components Even amicrocomputer cannot do much without the aid of supporting hardware or pe-ripheral equipment The main part of the computer, where all the work or ma-nipulation is carried out, is referred to as the central processing unit (CPU) The

CPU is often referred to as the brain of a hardware system because it controls

all other hardware and peripheral equipment or devices

The CPU has its own set of instructions built in its memory chips that not be altered by the user These instructions are known as read-only memory(ROM), which the user can access and “read” but cannot change To load userprograms or instructions into the CPU, another hardware device is required Formicrocomputers, that device is known as a hard disk drive

can-Input devices are also needed before the user can interact with the computer.These input devices include such things as a keyboard, mouse, scanner, bar codereader, and a stylus writing device A monitor, also known as a screen, cathoderay tube (CRT), or video display unit (VDU), is another output device The mon-itor displays information and prompts to the user from the CPU; what is inputfrom the keyboard by the user; and the result of the work that is being done.Another output device is a printer, invariably a separate piece of equipmentattached by cable to the computer When work performed by the user is printed

578 A P P E N D I X C O M P U T E R S I N H O S P I T A L I T Y M A N A G E M E N T

out, the printed material is often referred to as hard copy to differentiate it from

soft copy, or work that is viewed only on the monitor and might still have

fur-ther work needed before a hard copy is output For example, when a guest is

dining in a restaurant that has a computerized sales system, the server can view

the soft copy of the guest’s check on the monitor during the course of the meal,

and add items to it as the meal progresses The guest check can be reviewed on

a monitor before printing a hard copy for presentation to the guest

Obviously, with all these various pieces of hardware in a computer system,there has to be a high degree of compatibility among them In addition to com-

patibility of hardware, the software used must be compatible with the hardware

C A N N E D S O F T WA R E

The question sometimes arises whether it is better to have software specifically

written for an individual hospitality operation’s needs or to buy an

already-written software package (known as canned software) Specifically, custom

soft-ware is far more expensive than canned programs Also, most hospitality

busi-nesses are generally small operations that do not have the resources necessary

to carry out a system analysis and undertake the design work necessary to

de-velop their own computer software

Canned programs normally have been widely tested, and any errors (bugs

or glitches) in the program have been detected and corrected Demonstrations

of canned software can usually be viewed before the purchase decision is made

because a number of vendors may carry comparable packages The cost to buy,

install, and train employees can also vary between an operation, depending on

its needs and the software’s capabilities to adjust for those needs

A successful canned software package represents a proven product that isobtainable at a cost much lower than that for a custom-designed software pack-

age In addition, specialized canned software packages are readily available for

a hospitality operation in such areas as food and beverage cost control, payroll,

and generation of financial reports and ratio analysis Obviously, the benefits of

using off-the-shelf software have to be considered against the disadvantages A

software package written for broad hospitality requirements may not be as easy

to use, or as fast, as one that is custom-designed

I N T E R A C T I V E P R O G R A M S

Software programs can be either interactive or noninteractive An interactive

program prompts the user sequentially step by step and is generally considered

user-friendly Such a program is normally easier to use because it helps ensure

that no information that should be entered by the user is omitted

A noninteractive program provides no prompts to the user, which means theuser must know exactly what information to enter in correct sequence, line by

line, following a predetermined sequential format This requires a higher user

H A R D W A R E V E R S U S S O F T W A R E 579

skill that also adds to training cost and normally requires a higher employee payrate; however, the advantage is that the program is a lot faster.

I N T E G R AT E D S O F T WA R E S Y S T E M S

In a hospitality operation, some information is used for more than one purpose.The name of a guest registering in a hotel is an example of information thatmight be used for room reservation, registration, guest history, housekeeping,and accounting purposes Similarly, the name of a food item might be used forreceiving, storing, issuing, recipes, production, inventory, and sales control.With a computer system it is feasible, sensible, and advantageous to usesoftware that is integrated In integrated software systems, the objective is torecord an item of data only once and then use it in every possible way to pro-vide information for planning and control purposes If the item of data had to

be entered into the computer each time it was wanted, errors could be made.Correcting errors costs time and money

One could consider a hospitality operation as an entire system and have acompletely integrated package of computer software to control and plan everyaspect of its operation However, a completely integrated software package tohandle all this would be costly and complex, would probably incur higher train-ing costs because of its complexity, and would create severe maintenance anddata security problems Further, if one part of the system failed, it would createdifficulties in all departments or areas For these reasons, a small operation mightfind it difficult to justify a completely integrated system financially

A P P L I C AT I O N - O R I E N T E D S O F T WA R E S Y S T E M S

At the other extreme is a software system that is oriented to a single tion If software is application-oriented, it is generally designed to handle onespecific type of job and does not allow much integration An example is a pay-roll system that is not integrated with labor cost budgeting or a food invento-ries control system that is not integrated with purchasing and food costing.Due to their relative simplicity, application-oriented software systems can

applica-be easily evaluated to determine whether they will perform precisely the jobsthat they were designed to carry out These systems are cheaper to buy and in-stall and can be introduced into an operation over time as finances allow Anideal situation is to move from a piecemeal stand-alone set of application sys-tems to an integrated system over time, as long as each part can be made com-patible with others In this type of in-house network, each computer system iscapable of operating on a stand-alone basis, but retains the ability to integratewith all others for transmission of certain data

Obviously, the narrower an application-oriented system is, the easier it is todevelop—hence, the lower its cost will be It will also be more efficient and re-liable because it controls fewer functions However, the narrower an application

580 A P P E N D I X C O M P U T E R S I N H O S P I T A L I T Y M A N A G E M E N T

system becomes, the less effective it may be as far as overall control is

con-cerned For example, if a food inventory control system has to be supported by

a separate food cost control system, then two packages of software will be

re-quired, two different computer hardware systems may be needed, and two sets

of user-operator systems will have to be learned

Initially, most microcomputer applications in the hospitality industry werestand-alone applications, but as the power and memory capacity of microcom-

puters increased, available software packages rapidly became more integrated

and their use as stand-alone applications quickly diminished Three of the

com-mon application-oriented software packages are word processing, databases, and

spreadsheets

Wo rd P ro c e s s i n g

Word processing refers to software that is programmed to manipulate words

(text) Almost all microcomputers have a word-processing program installed,

as it is quite versatile in the creation of written communications in a business

environment

The purchase of a low-cost microcomputer to be used primarily for wordprocessing is a good way to introduce computers into a business Word proces-

sors can be very useful when a large amount of standard correspondence is

han-dled, as in a hotel reservation department where a form letter is used to confirm

reservations, or in a catering operation where a standard banquet contract is

used Only certain information, such as the number of expected guests, the menu

selected, and the price of the meal, has to be inserted

The main purpose of a word processor is to facilitate text creation and iting, and the ease with which this may be done is a major factor in selection

ed-of word processing sed-oftware One ed-of the major advantages ed-of using computers

rather than typewriters for word processing is that documents can be printed

more attractively For example, some computer printers have a variety of type

styles that can be used in the same document, as well as allowing text editing;

most word processing software contains spelling and grammar checkers

D a t a b a s e A p p l i c a t i o n s

A database is a collection of records such as addresses of regular customers,

a food or beverage inventory listing, personnel data, or a file of recipes These

are all records that form a database A database application allows quick access

to, and ready manipulation of, the records that are in that database In other

words, it is much like an office filing system where records (files) can be

ran-domly accessed, used as required, and then restored in the same order or

re-arranged in some other order before storing For example, for one query, a

database of recipes can be stored in alphabetic sequence according to the main

recipe ingredient, and only recipes containing that ingredient can be printed out

H A R D W A R E V E R S U S S O F T W A R E 581

For another query, all recipes could be stored alphabetically, regardless of gredients, before printing them.

in-It may be useful to purchase a software package that includes both wordprocessing and a database For example, it may be necessary for a hotel to send

a standard form letter to all the travel agencies it regularly does business with,advising them of a change in room prices or commission rates The computercan be programmed to take each travel agency’s address in turn from the data-base, type it on the hotel’s letterhead, type in the letter from the word proces-sor, then move to the next address and letter on a new page until all addresseshave been gone through All of this can be completed without any user inter-vention once the process has been started This process is known as a mail merge

A database application can be particularly useful in yield management (see ter 6) because it can be used to store guest history information and reservationpatterns

Chap-S p re a d s h e e t A p p l i c a t i o n s

Spreadsheet software is basically a large electronic sheet with rows downthe side and columns across the top, much like a worksheet for preparing a bud-get Most managers have struggled with budgets using pencils and column pads,and have become frustrated when they wish to see results For example, if thefood cost-to-sales ratio is altered over a 12-month annual budget, the changesthat have to be made to food cost, gross margin, and net income require some

36 alterations, considerable erasing and correcting, and a risk that one or moreerrors will occur

A properly programmed computerized spreadsheet will allow a manager toanswer a what-if question in seconds and print out the results Indeed, multiplewhat-if changes can be made at the same time at rapid speed Spreadsheets lendthemselves not only to budgeting but also to forecasting For example, a spread-sheet can store in its memory all the various menu items a restaurant offers, in-cluding how many of each is sold on average by meal periods and day of theweek for each specific month The availability of information on the basis ofpast performance could show how many portions of each menu item the kitchenshould produce for each meal period each day of the current month Spread-sheets also lend themselves well to the following applications:

Scheduling employees for improved labor cost controlPreparing depreciation schedules

Calculating percentages given the dollar amounts, for common-size tical financial statement analysis

ver-Calculating the sales mix and gross profit figures, given menu items soldand their cost and selling prices

Converting budgeted income statements (given appropriate ratios) to cashbudgets forecasting cash inflows and outflows

582 A P P E N D I X C O M P U T E R S I N H O S P I T A L I T Y M A N A G E M E N T