In a perfect world, the year-end financial process should be no more difficult than any other month-end closing. But we do not live in a perfect world and although all these boxes should be ticked at the end of each month, there are times when it is just not possible…and before you know it, another month has gone by!
To avoid a mountain of check-ups in December, there are a few things you could start concentrating on from October onwards to make sure you have your New Year’s Eve champagne in peace, without thinking about numbers.
1. Clean balance sheet
Typically, the first area of concern from a corporate management perspective is the balance sheet. The balance sheet account reconciliations in December should be up-to-date, the accounts clean with no unreconciled variances or items to be researched, and the balances properly substantiated with supporting documents. Timing is, of course, everything in the finance world, so all revenues and expenses should be realized in the appropriate period. If you concentrate on cleaning up now, there will be no hidden surprises when you start closing the books at the end of the year.
2. Updated fiscal year forecast
An updated Fiscal Year Forecast for the upcoming year should be a major focus. By the time January 1st rolls around the Fiscal Year Budget that was compiled, reviewed, and approved in the Fall months will need to be updated for any known changes to revenues and expenses. COVID-19 negatively impacted equity investors’ risk tolerance and underwriting standards became tighter. Thus, timely and accurate reporting and forecasting are a must.
Forecasting is not only important to the Ownership and their lenders but also imperative for property operations to respond and adapt quickly and strategically. If your operation models have not been modified to allow a prompt reaction to business-level changes, you can experience a profit drop that will take months to recoup.
3. Clear plan of action
But overall, the stress of year-end is created by not having a proper plan of action. By the beginning of the 4th Quarter, all parties involved should be starting the assessment of needs and properly communicating these needs. Planning and preparing are our best defenses for minimizing end-of-year stress, as it is the unknown and unexpected that throws a wrench in the works.
As an example, ownership will want a new performance report with comparative analysis. This request is communicated from the Asset Manager to the management company, who will, in turn, relay the request to the property General Manager. Ultimately, the property finance team will be tasked with coordinating and fulfilling that request. If there is any miscommunication along the way, the result could be a duplication of efforts, a missed deadline, or compiling incorrect information. And no one has time for that these days.
4. Over-communication in the face of staffing issues
Difficulties managing all of the above issues – balance sheet accuracy, forecast accuracy, and communications between parties – can be exacerbated by the staffing challenges being experienced in the hospitality world. Post-pandemic staffing challenges include rampant turnover rates, average double-digit wage increases, and the loss of many experienced and knowledgeable individuals who chose to leave the industry. Combine these with the timing of the holidays and people’s desires to spend more quality time with their families, and the resulting tension can only be resolved by clear, efficient, goal-oriented communication that’s also blame–free and goes both ways. If the property staff is unable to fulfill the request, this needs to be discussed with the management company.
In short, now is the time to get your house in order. Review your needs, assess your resources, and communicate your game plan. All parties want to succeed and no one wants to be the reason for failure, so being smart before the end of the year means being sharp and detail-oriented, but also collaborative and communicative — in the spirit of the upcoming holiday season.