3 Things to Know About Financial Management in the Vacation Rental Industry
Financial management is key to being successful in the vacation rental industry. Read on to learn 3 main things about financial management in the vacation rental industry that are important to know.
1. Frequency of Managing Financial Data
In any business you want to be successful, tracking and reviewing financials is a must. The simplest way of doing so is through checkbook accounting. This way at least you’re always aware of the cash flow coming in and out — and where it’s coming from. Even if you have an accountant, check your finances on a regular basis so that you always know the amount of funds you have available. Cash is king! This method won’t work for long as you scale and losing track can easily happen if you’re not cautious. Once you have a larger company you will see hundreds of transactions each day. With so much financial activity, there is ample room for error. Make your life simpler as quickly as possible by getting away from checkbook accounting and set up easy-to-use systems and templates that are simple to follow. Prepare and review monthly P&L statements, balance sheets, and some version of a cash flow statement. This will allow you to catch anything going wrong as early as possible. We can help you with this inside the VRU accounting modules when you subscribe to the master’s level program, or through 1 on 1 coaching.
2. Advanced Pace Report
On top of checking your finances daily, also prepare daily and weekly pace reports. These reports are an excellent accounting and rate-setting tool that will undoubtedly increase your visibility into your business. Note any increases/decreases in booking pace. See trends develop while tracking cash balances. See upcoming slow periods and prepare for them by reducing expenses. Be mindful of checking your records back previous periods and noting the difference — this comparison will give you a point of reference to know if you’re improving or not. Especially if you’re seasonal, this tracking will allow you to see if you’re meeting your goals required to make it through the off-season. Is your booking pace ahead or behind schedule, are you hitting adequate occupancy levels for each future period? If not, you can make tweaks early enough to make a difference! Pace reports are the barometers of success for vacation rental businesses.
3. Financial Controls
Always remember ARC controls: Authority, Record-keeping, and Custody. Keep these 3 controls separate at all times. Again, the bulk of these funds are not yours, but the funds of the future guests and your owners. Take advantage of the technology available, like bill.com, Xero, and Checkeeper. To prevent theft, think about the flow of money, who handles each type of transaction, where the money goes, who can make money, and separate who accomplishes each task. Employees require some spending authority such as using petty cash when necessary. However, always let employees know you are tracking this activity by having appropriate methods for issuing cash, tracking receipts, and providing reimbursements. Be aware that employees can and will steal company funds if you are not responsibly keeping track. You work hard to earn your money in this business, put significant effort into managing it well.
Join Vacation Rental University today to learn more about financial management in the vacation rental industry!