5 Hospitality Accounting Errors That You Should Definitely Avoid

1. 5 Hospitality Accounting Errors That You Should Definitely Avoid Your accounting system is vital to understand your hospitality business’s financial performance and position. Preparing for tax filings and complying with other government obligations is also crucial. Since accounting entails so much significance for your hospitality business, getting things right is essential. However, accounting errors can happen regardless of how skilled your accounting staff is or the technologically advanced accounting system you use. Working with a hospitality accounting services provider who understands what can go wrong and how these errors can impact your business can help. These professionals will know how to correct and avoid accounting errors in the future. Read further to learn common hospitality accounting errors and how to avoid them. Revenue Recognition One of the most common accounting errors in the hospitality business is revenue recognition- recording income when earned, not when it’s received.

2. For instance, if a guest makes a reservation in your hotel by paying an advance deposit, you should recognize it only when the guest stays at your hotel, not when you receive the deposit. It will ensure that your revenue matches the expenses you incurred to provide them with services. However, sometimes, hospitality businesses record revenue when they receive it, not when it’s earned. To avoid this accounting error, your hospitality accounting services provider should follow the Generally Accepted Accounting Principles (GAAP). In addition, you can use reliable accounting software to track and record revenue when it’s earned accurately. Inventory Management Inventory management involves tracking and valuing the assets and supplies a business uses or consumes. Your hospitality company, for example, needs beverages, food, toiletries, cleaning supplies, linens, etc., as part of its inventory. Failure to correctly count, record, or value the inventory can result in inaccurate cost of goods sold (COGS), understated or overstated profits, or tax issues. One way to avoid this inventory management error is physically counting the inventory regularly. Moreover, when you outsource bookkeeping services, don’t forget to consider using a perpetual inventory system that automatically updates inventory levels and applies the appropriate inventory valuation method, like LIFO, FIFO, or weighted average cost. Payroll Processing Payroll processing entails calculating and paying the remuneration and benefits to the employees. For example, salaries, commissions, tips, bonuses, overtime, taxes, and deductions are all part of the payroll you need to process correctly. Not calculating, recording, or paying the correct payroll can lead to employee dissatisfaction and attrition, legal disputes, fines, and penalties. You can avoid this accounting error by accessing professional hospitality accounting services that can proficiently handle complex and changing payroll regulations. Tax Compliance Tac compliance requires your hospitality organization to file and pay the due taxes to local, state, and federal authorities. Failure to calculate, record, or pay the relevant taxes correctly can lead to tax audits, fines, and penalties. To avoid this accounting error, your hospitality accounting experts should keep track of the tax rates, requirements, and deadlines for each jurisdiction.

3. Internal Controls Internal controls entail the policies and procedures to prevent misstatements, errors, and fraud. Your hospitality company must implement and monitor some necessary internal controls such as segregation of duties, reconciliations, documentation, authorizations, and audits. Inadequate, embezzlement, theft, or misrepresentation of financial data. inconsistent, or ineffective internal controls can lead to manipulation, To avoid this accounting error, ask your accounting professionals to establish and implement clear and comprehensive internal control policies and communicate them to your staff for proper implementation. Bottom Line Accounting errors might be minor or substantial and can have severe consequences for your hospitality business. Incorrect revenue recognition, inventory management, tax compliance, payroll processing, or internal controls can distort your company’s computed operating profit, dissatisfy employees, or lead to legal disputes.To avoid all these accounting errors, be sure to choose a reputed agency when you plan to outsource bookkeeping services. Your accounting service provider is well-versed in hospitality industry-specific accounting standards and regulations. Contact Us Company Name: Elevar Acc Address: 2316 Village Dr, Avenel, New Jersey, United States - 07001 Phone: 13152794460 Email id: hello@elevarhq.com Website: https://elevaracc.com/