Why GMs have such a hard time managing their financial leaderThis is not the case for all GMs, but it is definitely the case for many. The reason is simple: the GM has not been given any formal accounting training and they are intimidated by the numbers and their lack of knowledge. Because of this they tend to stay out of the way, so to speak, when it comes to digging into what is really going on with the numbers and the accounting department.
That might seem like a natural thing to do, and it needs to be this way to a certain extent. But with a few clues and cues the GM can have a great handle on the numbers person and what they are up to. That is what this piece is all about, spelling out what the GM can do to help guide the financial path for the hotel and manage the financial leader. If you can do this, you go a great distance to help avoid a financial meltdown under your watch.
An old boss of mine, the controller, was fond of saying this about our GM at the time, “I could do his job, but he could never do mine, he doesn’t even know where to start, he doesn’t know anything about accounting.” He would finish his rant with, “I might not be able to do his job as well as him, but I still could manage, he would be dead in the water behind my desk.”
Now the statement he made is true to a certain degree, but the GM still has the ability to manage the financial wizard as long as he or she engages.
Most GMs are fond of saying something like this, “I am the No. 1 salesperson for my hotel,” or, “I am the face of service in my hotel,” and maybe even, “I’m the No. 1 public relations asset for my hotel.”It is a little or a lot of bravado but it goes with the territory and the responsibilities of the job. However, you will rarely hear the GM say, “I’m the No. 1 finance or numbers person for my hotel,” or, another way of saying it would be, “The buck starts and stops right here.”
What GMs typically do when asked about money is they defer to the financial person, at least at first because they do not want to make any financial missteps. Especially when it comes to questions from the owner or head office about the budget, the cash flow or, heaven forbid, the balance sheet means a deflection straight into the wizard’s hands. This puts the GM in a difficult position. How can they manage the news when someone else is creating it?
Here is a step-by-step guide the GM can follow from day one or even day 701 to gain a much greater understanding and create more influence with their financial manager:
Insist on the following: The department head is responsible for their results and it is the financial person’s responsibility to deliver accurate numbers. This might look like cosmic surgery, but it is not. This is your chance to reel everyone in. The cue here is to look for inconsistencies and errors that repeat themselves. Are invoices missing or showing up from prior months? Does the department manager stay on top of their accruals? Is the financial person and department staying on top of the data? You will quickly see if things are working smoothly or not.
This is a great place to gauge each month just how well the financial communication system is working. When there are errors or inconsistencies insist that they both get to the bottom of it and make sure it does not happen again. Many times, the department head will be frustrated by the accounting department and vice versa. This is typically but also easily fixed if you make sure they work together. Many unseasoned GMs will let them sort it out and it goes nowhere fast.
It is the GM’s job as the No. 1 financial person to ensure each department manager has their financial landscape properly covered. It is also the GM’s job to ensure the financial person delivers on their responsibility to provide accurate reporting, and on schedule.
In the beginning or in a new position this might seem like mission impossible, but remember this: The DH reports to you – not the financial person. You insist the DH knows his or her numbers (payroll and expenses) and do not let him or her off the hook. At the same time the financial person reports to you and the same applies. Do not take your foot off the gas until everything is running smoothly. Each month is your opportunity to make sure people are working together and getting it right.
For example, look at the bank reconciliation. What is the book amount vs. the bank statements, what are the outstanding items and where is the backup that ties to these items? If the financial person cannot explain this to you and show you, there is something wrong. It should be logical and clean. Look for outstanding items that do not clear from one month to the next.
Another example is the guest ledger. The balance on the general ledger should be exactly the same as the PMS report, to the penny. OK, so let’s review the detailed report, and what are these “checked out with balances” and what these “house accounts?” are
Every single account on the balance sheet should tell a story and the story should have clear evidence and make sense. If it lacks either, then dig further. The truth is many hotels have a rat’s nest of surprises waiting to be uncovered in their balance sheets. Do not be the GM that has to put his or her head in the sand when the S*!$ hits. This can be avoided by taking an interest in the reconciliations. It is your hotel and that includes the books.
Here are the other things you can do to ensure your on top of your numbers person and not have it be the other way around.
You can do this!
David Lund – The Hotel Financial Coach Contact David at (415) 696-9593
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