Flow of Revenues – Part 1 of 2
Flow of Revenues – Journey of the Guest Check
One of the key elements in financial analysis for non-financial managers is how the flow of revenues takes place from guest check to the financial statements. This is where, most times, a lack of understanding of this fundamental concept baffles non-financial managers.
If you arrived at this post directly, you may want to visit Repeat Guest Ratio, Average Length of Stay – 2 Paths to Revenue Growth Nirvana, Table Turnover, Meal Period Analysis – 2 Paths to Restaurant Revenue Growth Nirvana, Market Segmentation Reports – Road Map to Revenue Results and 5 Myths about Financial Analysis, to catch the thread of related posts.
Understanding Flow of Revenues
Non-financial managers for the most part come into contact with financial statements once a month when the profit and loss statement and related reports are circulated to them. In a way, they are at the tail end of the process which actually originated in the operation.
Financial Statements reflect the performance of the hotel operation during a particular month and are the index of business results. Revenues drive business results as the top line. Without this top line there would be no bottom line. Hence an understanding of how the flow of revenues takes place resulting in the generation of financial statements goes a long way in cementing fundamental concepts of accounting and financial analysis without splitting hairs.
Example of a Food and Beverage Operation
Taking the example of a food and beverage operation, the financial statements related to this operation actually originate in the humble guest check which is created in a food and beverage outlet.
For an in-depth look at how the flow of revenues begins with the guest check and ends up in the financial statements, watch the below video. It will be an eye-opener.
Flow of Revenues – Part 1 of 2
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The Flow of Revenues is a unique perspective on a journey which is central to understanding, interpreting financial statements and taking key decisions based on that.
