Budgeting is one of the main planning activities of an executive housekeeper. It is the process by which, based on the actual performance of establishments in the past, estimates of expenditure and receipts are made and adjusted for forecasting future outcomes. Budget can be defined in many ways:
A budget is a plan by which resources required to generate revenues are allocated. A budget is a plan which projects both the revenues the hotel anticipates during the period covered by the budget and the expenses required to generate the anticipated revenues.
The advantage in preparing a budget is that it provides an opportunity for taking a critical look at the cost of the department, reviewing past planning and present accomplishments, and then taking appropriate steps to accomplish more in the coming financial years.
TYPE OF BUDGETS
Budget may be of different kinds, based on the types of expenses involved, the departments and the flexibility of expenses.
Categorized by Type of Expenditure
Based on the types of expenses and assets involved, budgets may be categorized into capital, operating and pre-opening budgets.
Capital budgets – These allocate the use of capital assets that have a life span considerably in excess of one year, these are assets that are normally used up in day to day operations. Furniture, Fixture and Equipment (FFE) are typically examples of capital expenditures. Capital expenditures in the housekeeping department may include room attendant’s carts, vacuum cleaners, general floor machines, carpet shampoo machines, sewing machines and laundry equipment. The hotel building itself is also a capital asset.
Operating budgets – These forecast expenses and revenues associated with the routine operations of the hotel during a certain period. Operating expenditures are those costs the hotel incurs in order to generate revenue in the normal course of doing business. In the housekeeping department, the most expensive operational cost is the salary and wages or labor cost. The cost of all-recycled inventory items, such as cleaning and guest supplies, are also operational costs.
Pre-opening budgets – These force the planning necessary for the smooth opening of a new hotel. These budgets allocate resources for opening parties, advertising, generation of initial goodwill, liaisons and PR. Pre-opening budgets also include the initial cost of employee salaries and wages, as well as supplies, crockery, cutlery and other items.
Categorized by Department Involved
Base on the department involved, budgets may be categorized into master budgets or department budgets.
Master budget – These represent the forecasted target set for the whole organization and incorporate all incomes and expenditures estimated for the organization.
Department budget – each department of the hotel forwards a budget for its estimated expenses and revenues to the financial controller. For instance, there would be a housekeeping budget , an F&B budget, a maintenance budget, and so on. In fact, the room division budget is in this case the combine budget of the front office and housekeeping department.
Categorized by Flexibility of Expenditure
Budget may also be classified on the basis of the flexibility of expenditure:
Fixed budget – These budgets remain unchanged over a period of time and are not related to the level of revenues. Such budgets include budgets for advertising and administration.
Flexible budgets – These budgets pre-determine expenditure based on the revenue expected and differ with different volumes of sale.