Hospitality is one of the largest industries in the UK, contributing GBP 93 billion to the economy every year. It continues to grow as tourists flock again to the UK every year — simultaneously, however, the competition among hospitality businesses has intensified. To last the long haul, these businesses need to continuously pivot and adapt to changing needs.
And a precondition for this is maintaining sound financial health through hospitality accounting services so that they can invest in innovations while complying with local laws. In this piece, we briefly discuss the benefits of accounting for the hospitality industry and the importance of hiring the right accounting partner.
What are the benefits of accounting in the hospitality business?
1. Budgeting and cost control
Hospitality can be an expensive industry, and accounting for the hotel industry helps proprietors understand what their budget looks like and what they can reasonably afford. By getting clear insights into what their financials look like, they can implement cost control measures to cut back on expenditure or invest strategically in ventures that are likely to bring in more money. This serves to boost profitability and enhance business financial health while allowing proprietors to focus on running their hotel or restaurant.
2. Regulatory compliance
The UK hospitality industry has a highly complex tax structure, with multiple regulations on what businesses can and cannot do. Hospitality business accounting helps to keep track of all transactions and generate complete and accurate financial statements in accordance with HMRC and Company House laws, thereby avoiding the risk of hefty fees due to non-compliance.
This is also one of the key benefits of using accounting software, as it comes pre-loaded with all relevant taxes and allowances and automatically applies them to the hospitality books of accounts.
3. Cash flow management
Cash flow is particularly critical for the hospitality industry, as proprietors need to pay their staff members and suppliers on time. Outsourced providers that specialise in accounting for hotels and restaurants can guide proprietors on how to track cash transactions and make decisions that improve liquidity, ensuring that there is always enough money to cover expenses and invest in whatever the business needs. Having control over the cash flow also helps to forecast what the cash flow might look like in the next year or next five years, making for strategic financial management.
4. Financial management
Beyond cash flow, accounting for the hospitality industry is key to making informed decisions about investments, loans, product launches, or market expansion. With hospitality accounting services, this becomes much easier, as there is a team of experts to examine the books of accounts and offer granular insights into the business’s current financial health.
Typically, they will use automated accounting software to pinpoint patterns or anomalies in the financial data. They will then couple that with their own perspectives on how the proprietor can invest smartly and make improvements. This is invaluable for hospitality proprietors looking to take charge of their business’s financial health and potentially attract interest from investors.
5. Building trust and attracting investment
One of the major benefits of accounting for hospitality businesses is the credibility that it brings to the brand. By investing in hospitality accounting services, proprietors build greater trust with stakeholders and investors, as they are confident that the business’s financial reports reflect an accurate picture of how the business is doing.
And by demonstrating improvements like higher cash flow or lower costs, hospitality businesses present themselves as credible parties, making it easier to attract loans, credit, and investment funds.
6. Cost optimisation
Having a reliable partner for hospitality business accounting helps uncover important insights about cost savings from the accounting data. With the help of automated software, accounting partners can study expenses like labour, utilities, or materials to identify any wasteful patterns or opportunities to bring down costs, and thus help the business enhance its profitability.
They can also help with insights on how to set menu prices or room rates, optimising profitability. Plus, outsourced hospitality accounting services are highly cost-effective, as you only pay a fee for the services you avail of.
7. Tax planning
Hospitality businesses in the UK have to contend with labyrinthine tax laws around corporation tax, employers’ national insurance, VAT, alcohol duties, and more. Rather than take on the burden of understanding hospitality accounting themselves, proprietors can outsource to a qualified accountant who will help them navigate the laws and maximise their deductions. Plus, with suitable planning and an awareness of applicable tax credits for the hospitality sector, businesses can lower their tax bills by significant amounts.
8. Informed decision making
The financial statements of any business contain valuable insights about which business decisions will impact growth and profit the most. Hospitality accounting services help you uncover those insights and make sound decisions about pricing strategies, inventory management, marketing investments, R&D outlays, and more.
For instance, if you are planning to open a new branch of your hotel or upgrade your restaurant menu, your accounting partner can examine the data and give you clear insights on how financially viable that will be. With regular strategic planning, you can change course as needed to keep up with the demands of the industry and keep your costs lean in the process.
Conclusion
With the UK hospitality industry as complex as it is, investing in sound accounting practices is key to ensuring that businesses stay profitable long-term. By choosing the right hospitality accounting services, you can set yourself up for long-term success while saving time, money, and effort. At Lyel Accountants, we’ve worked extensively with UK hospitality brands of all sizes and would be delighted to help you make the most of yours. Book a call with us today to learn what we can do for you.
