If you keep the accounts in order when running a small hotel it has a positive impact on all other areas of the business. Staff get paid, beds get made, the tax man is happy. What do you need to consider as the owner of a small hotel, inn or B&B to make sure you manage your accounts as efficiently as possible?
Depending on the type of property you run, you will have different things to bear in mind when it comes to managing the accounts.
Scenario 1. Let’s say your boutique hotel in the Cotswolds has been booked out for a whole weekend by a wedding party. Everything is happening in your venue, from the ceremony to the reception.
After preparing the initial estimate, you will have to account for:
- upfront costs, like catering, and general supplies like toilet roll and toiletries for the rooms
- costs for laundry and cleaning after the event
- salaries for waiting staff and receptionists
- the room rate for each guest (don’t forget that group booking discount)
- any extras your guests have put on the room – like that last round of drinks in the early hours!
Scenario 2. You have an attractive Georgian B&B in Edinburgh which appeals to business travellers who tend to stay just one or two nights. When managing your accounts you will need to keep on top of:
- rolling costs like laundry, cleaning, repairs and maintenance, along with costs for gas, electricity and fire safety checks to make sure you comply with regulations
- staff salaries
- stocks of toiletries, light bulbs and beverages in the hotel bar
- your business website plus marketing on Google AdWords and local business websites
- your guests’ hotel bills when they check out
Two types of hotel; lots of common ground. If you run a similar business, what should you consider when setting up your accounts?
Get HMRC compliant
Whether you’re a country guesthouse or luxury city hotel you will need to register your business for Corporation Tax.
You will need to pay this tax within nine months of the end of your financial year. So if your year end is 31 March, you will need to pay your Corporation Tax before 1 January of the following year.
If your expected turnover goes over a certain threshold, you will need to register for VAT too. This is typically due each quarter – although this will be different for much larger businesses using the Annual Accounting Scheme
You will need to keep clear records of all your income and expenditure for six years. This will help your accountant when preparing your annual Corporation Tax return, and help reduce your VAT bill too because you can claim back against products and services for which you have paid VAT.
Getting online accountancy software like Sage One in place will help keep all your tax affairs in order from the earliest stages. You will want to reconcile the bank regularly, for example weekly or monthly depending on how many transactions you have each month.
You can then run your VAT return, check the details and submit to HMRC in a matter of minutes – then connect to the bank so the money is deducted automatically on the right date.
Set up payroll for your staff
The more automation you can build into your payroll processes the better, as it is something you will need to do every month and you might have a high turnover of staff or temporary workers in busy periods.
It’s essential that you stay up to date and fully compliant with the latest payroll and pension legislation, including workplace pensions – Auto Enrolment and RTI. Using an HMRC-compliant system like Sage Payroll means you don’t have to worry about doing right by the tax man.
You will have to run PAYE as part of your payroll to collect income tax and National Insurance. This will need to be deducted from your own income and the wages of your staff and paid to HMRC by the 22nd of the month after payday.
Once your employees are in the system, with their full name, date of birth, address and National Insurance number, plus details of student loans and pensions, you’ll be able to calculate wages accurately and send out payslips. If you can manage holidays and other absences in the same system, even better.
Make it easy to book
To run a successful small hotel, you need bookings. And to get lots of bookings you need to make sure every step of the process works.
When visitors come to your website, can they see lots of quality pictures and testimonials? Do you state prices clearly? Is the online booking system easy to use? Can you take payments easily?
Sage Pay integrates easily with Sage One, allowing you to take payments online, over the phone and face to face when your guests check out. Making this process more efficient leads to better returns. Your guests are more likely to return too, if everything has gone smoothly for them.
Keep a close eye on cashflow
This is so important for every business. For small hotels it can be a problem – for our boutique hotel, a lot of the costs are up front but the guests won’t pay until after the event. The Georgian B&B might have a rush of visitors for New Year and the Edinburgh Festival, but be quieter at other times of the year.
Both types of small hotel will need to stay cash rich to pay salaries and for ongoing repairs and maintenance to keep everything looking smart throughout the year. You may want to keep money aside in a separate bank account each month – 30% a month is an ideal amount to cover you for tax bills and overheads.
Online accounting software allows you to run cashflow forecasts quickly and easily so you can plan ahead. You can keep track of when invoices are due to be paid and of any recurring income or expenses due in the coming months.
Your cashflow forecast will cover:
Cashflow in: The total value of your customer receipts, supplier refunds, other income, and bank transfers and deposits
Cashflow out: The total value of your supplier payments, customer refunds, other expenses and bank transfers
Closing balance: The total cashflow in, less the total cash flow out
Liability to offset: Any VAT liability for this period
Net balance: The closing balance less any VAT due
Streamline your processes
As well as the suggestions mentioned above, there are other ways of streamlining your processes. The idea is to spend less time repeating admin tasks and more time keeping your guests happy.
- Set up automatic bank feeds, linking your online bank account directly to your software so your transactions are automatically imported into your accounts
- Secure, cloud-based software like Sage One means you can access the accounts from wherever you are, keep the data backed up and collaborate with your accountant, saving time on lengthy face-to-face meetings
- Automated invoices for your guests, means less manually entered information. These can be emailed direct to your guests if they need to be billed in advance or need to show the business expense
- You can also opt for a free trial of Sage One so you can see what difference it makes to managing the accounts in your small hotel.