Introductory words

Reading many other articles and even courses, I wonder, is it really impossible to talk about finance in a clear way? Endless debits and credits, some orders from the Ministry of Finance, brrrr. Everything in this article should be clear.

My name is Alexander Gorbachev, I am Product Manager for the TURBO ERP system. I have been involved in ERP systems (from implementation to design) for over 20 years, including finance, and also in the hospitality industry. I am well acquainted with management accounting and budgeting, with accounting according to international reporting standards (US GAAP, IFRS), and with Russian accounting.

I propose to touch upon the field of finance using the example of hotels. Why did I make this choice? Firstly, because hotels are usually associated with pleasant memories for us. Secondly, because the hotel sector is quite clear and open in its processes: if not completely, then it is close to our everyday processes. Thirdly, the hotel industry is diverse in terms of types of services – accommodation, food, spa, and much more.

Typically, financiers begin their explanations with an introduction to basic financial accounting operations. The result is that in 95% of cases, beginners get lost in the details and begin to yawn from boredom because they do not see the value in the entire financial architecture – not complex, but varied. We will start from the end – with reporting. Precisely because the result is not in the process of managing finances, but in the value that they carry. The results are expressed in reporting.

This approach to studying will allow us to understand what can be gleaned from the results of financial accounting, what is the structure of reporting, and what kind of reports there are. We’ll get to debits and credits later – technically it’s not difficult. And it will be much easier to understand the system in detail if you go down to it from top to bottom.

But perhaps most importantly: there are generally accepted standards in this area.

Excursion into history

Let’s start with the standards. In 1926, the New York Hoteliers Association created a financial accounting system for hotels – USALI (Uniform System of Accounts for the Lodging Industry). Since then, changes to the system have been reflected in 11 editions. The system itself is based on US GAAP (Generally Accepted Accounting Principles, generally accepted accounting principles in the United States) – this allows you to apply uniform rules to reporting for different companies, and therefore compare them with each other. That is, use common metrics.

This means that when a report says “ADR”, everyone understands that this is the average daily rate for a room. When they say “Transient rooms”, this means that the rooms were purchased individually for a short time, and not in groups, not at a special price for client companies.