As the budget is a vital tool used by the business

As the budget is a vital tool used by the business, a lot of care and attention needs to be taken when formulating the final copy, therefore; the entire process could start as early as June. Within my hotel, the budgeting process begins in August and the final copy is presented in October, with several drafts and presentations in between this period. There are two different approaches to the budgeting process; Top down budgeting where budgets are set from the top of the business i.e. a Head Office and then distributed to the employees, or Participative budgeting. This is where all team members that impact the budget are involved in the process, mainly all the Heads of Departments and Senior Management within a company. Participative budgeting is seen as the more effective form of budgeting especially within a hotel environment; as it ensures that the Heads of Departments have an input into their department’s budget and that there is a clear understanding of what is achievable and what is overambitious. For instance, at the beginning of August all the Heads of Departments within the Food and Beverage team in my hotel gathered round a table and discussed our plans for next year, along with what we feel didn’t go so well this year, this is then taken into consideration. Expenses are a big part of the budget and ensuring that these are estimated correctly could mean the difference between a successful business and one that will be at a loss. Within my hotel, the equipment within Food and Beverage is extremely costly as the majority is pure silver; therefore, by involving the Heads of Departments the budget will have a more accurate reflection of what will be spent. For instance, next year the Restaurant Manager mentioned that he needs to replace 50% of the cutlery as they are all damaged, this will of course be taken into account as it is a major expense. Without having the Restaurant Manager involved in the process we would not have been aware of this cost and would result in the expenses being over budget for a specific month reducing the profit percentage to sales.
In order to build the hotel master budget most hotels use the following process to formulate it: (taken from the module workbook)
• Determine overall objectives
• Sales and Marketing plan
• Determine your key driving revenue such as rooms revenue or food and beverage revenue
• Food and beverage revenue
• Cost of sales and the margin percentage
• Payroll
• Other departmental expenses – variables
• Administration and other areas such as non-revenue generating departments
• Fixed/Property costs
• Capital expenditure budget (CAPEX) – effects