Financial Management & Budgeting for Vacation Rental Companies by Ben Edwards, President Weatherby Consulting. Includes info about cash flow, income statements, reporting, revenue projections, and accounting.
2. Financial Management & Budgeting
About Ben Edwards
As a respected and innovative industry leader, Ben Edwards has been positively affecting
the real estate and vacation rental industries for over 15 years. From managing small
resorts, to financial and operational auditing, to opening large scale resort developments,
Edwards’s unique background provides a multi-level approach to consulting, transaction
and advisory services.
Edwards’s experience includes:
President, Vacation Rental Managers Association
VP Business Development, Newman-Dailey Resort Properties, Inc.
Vice President, Royal Shell Vacations, 2,000+ properties
HomeAway Advisory Board Committee
Flip Key Advisory Board Committee
President, Waterstone Resorts and Vacation Homes, 1,000+ properties
Board of Directors, Florida Vacation Rental Managers Association
GM, ResortQuest SW Florida, 2,400+ properties
Board of Directors & Treasurer, VRMA, 6 years
Advisory Board Member, Vacation Rental Expo
3. Financial Management & Budgeting
Session focus is the really designed to provide
financial policies and standards to help you get the
most out of your business and financial reporting
Proper financial management of your operation
helps to make the business more sustainable, while
managing expenses and increasing the bottom line
Before we get started….
4. Financial Management & Budgeting
One Size Doesn’t Fit All
Some of the suggestions made in this session may
not fit the size and scope of your operation or your
market.
As such, please remember that the assumptions
made throughout this session are designed to
represent an average vacation rental company.
We encourage you to speak up and share your
experience as another point of view.
5. Financial Management & Budgeting
Let’s get started….
Our discussion will take us through the following
key areas:
Financial Management 101
Key polices and standards designed to help
assimilate consistent and reliable financial
reporting…this is key.
Financial Reporting, Statistics & Budgeting
Basics
6. Financial Management & Budgeting
Financial Management 101
Financial knowledge provides information
imperative in order to make decisions and meet
your obligations
Ensure the company remains a going concern
for the benefit of owners, shareholders,
employees, guests and the community
7. Financial Management & Budgeting
First things first….
Garbage in…Garbage out…
Accounting systems and financial reports are only as reliable as the
information and processes used to create them.
Ensure proper accounting setup
Chart of accounts
Proper coding at the local level
Consistency in coding
8. Financial Management & Budgeting
Create clear, standardized policies and procedures
This consistency creates trust
Ensure policies and procedures aren’t just for accounting
employees—every employee is involved in some aspect of
financially accountability and needs to know where he or she fits
into the bigger picture
Start by reviewing the workflow of accounts receivable, accounts
payable and property management revenue to ensure your
company has a fundamental accounting foundation
9. Financial Management & Budgeting
Standardized policies and procedures cont’d
Ensure all transactions have verifiable source documents and are
properly stored
Ensure that all source documents are properly coded
Consider using electronic storage to save money and space
Ensure proper authorization of transactions, such as requiring two
manager signatures to approve a transaction over a specific
amount
By creating standard policies and procedures in you business, your
well on your way to more effective financial management
10. Financial Management & Budgeting
Accounting versus Bookkeeping
Bookkeeping is a systematic recording of every transaction,
including dates, amounts and descriptions. It is the
financial infrastructure of your business.
Accounting provides a bigger picture by tracking
bookkeeping transactions and using them to analyze
business results. Managers use the financial reports
generated by accounting to make decisions and plans for
their business.
11. Financial Management & Budgeting
Why You Should Know Some Bookkeeping and Accounting
To effectively manage your company to ensure it remains a viable
operation
To avoid being taken advantage of financially (particularly
embezzlement and fraud)
To assist in the planning and control of your business
To be able to knowledgably communicate financial information to
employees, potential lenders and investors, shareholders, and the
media.
12. Financial Management & Budgeting
Now let’s talk more specifically about getting the most
out of your Accounting Review
Financial management
Start with intensive financial review each month
Review key accounts in total and as a % of gross rental
revenue or total revenue. This helps to create benchmarking.
Reduce financial summary to writing
Establish monthly meetings/conference calls
Actual vs. Forecast/Budget should be a focus
13. Financial Management & Budgeting
Financial Management 101
Questions on Financial Management 101?
Standard procedures
Clear and consistent reporting is the key
Let’s Move on…..
14. Financial Management & Budgeting
Financial Reporting, Statistics & Budgeting Basics
Now that you’ve created consistency and reliability in you financial
reporting, your ready to move forward in your review of the
financials, now know that they are 100% ACCURATE.
As you begin to review the company’s financials, it is important to
focus on the metrics and statistics that comprise to form Gross Rental
Revenue.
Gross Rental Revenue/Occupied Nights = Average Dailey Rate
Occupied Nights/Net Available Nights = Occupancy %
As Gross Rental Revenue increases or decreases, it is being driven by
either the rate or occupancy…it is important to know which.
Sample Reporting….
15. Financial Management & Budgeting
High-level income statement review
Calculate all things a a % of Gross Rental Revenue or Total Revenue.
Establishing a % of Revenue will allow you to manage certain line items
more acutely, ensuring the finances are properly reviewed.
Work towards proper increases and decreases as a % of revenue.
As revenue increases, certain direct operating expenses should go up
As revenue decreases, certain direct operating expenses should go down
The key is to ensure increases and decreases in revenue properly
correlate to expenses
Sample Income Statement
16. Financial Management & Budgeting
Financial Reporting, Statistics & Budgeting Basics
Monitoring cash flows
Utilize you income statement to monitor your cash flows…
The bottom line results can be tallied to determine the company’s cash
flow…
Note Cash Flow Sample
17. Financial Management & Budgeting
Budgeting Basics
Start conservative
Use prior year Occupancy and Average Daily Rates to budget for
Revenue and work form there…
All accounts have a metric in which to effective budget
Housekeeping cleans (Avg clean fee * projected # of reservations)
Look at actuals and the percentage of revenue to deliver accurate
projections
As accounts are to be updated throughout the year, revised and create a
forecast to ensure projections are met.
Note Stats Budget Model
18. Financial Management & Budgeting
In conclusion, successful Vacation Rental Managers know their
statistics and financial results acutely. Spend time learning this
information and knowing what makes you business tick…
Questions?
Ben Edwards
Bedwards@NDRP.com
Ben@WeatherbyConsulting.com
(888) 304-1405