Financial Management & Budgeting for Vacation Rental Companies Weatherby Consulting

Financial Management & Budgeting

Ben Edwards

Weatherby Consulting, LLC

Ben Edwards

Financial Management & BudgetingAbout Ben Edwards

As a respected and innovative industry leader, Ben Edwards has been positively affecting the real estate and vacation rental industries for over 15 years. From managing small resorts, to financial and operational auditing, to opening large scale resort developments, Edwards’s unique background provides a multi-level approach to consulting, transaction and advisory services.

Edwards’s experience includes: President, Vacation Rental Managers Association VP Business Development, Newman-Dailey Resort Properties, Inc. Vice President, Royal Shell Vacations, 2,000+ properties HomeAway Advisory Board Committee Flip Key Advisory Board Committee President, Waterstone Resorts and Vacation Homes, 1,000+ properties Board of Directors, Florida Vacation Rental Managers Association GM, ResortQuest SW Florida, 2,400+ properties Board of Directors & Treasurer, VRMA, 6 years Advisory Board Member, Vacation Rental Expo


Session focus is the really designed to provide financial policies and standards to help you get the most out of your business and financial reporting Proper financial management of your operation

helps to make the business more sustainable, while managing expenses and increasing the bottom line

Before we get started….


One Size Doesn’t Fit All Some of the suggestions made in this session may

not fit the size and scope of your operation or your market.

As such, please remember that the assumptions made throughout this session are designed to represent an average vacation rental company.

We encourage you to speak up and share your experience as another point of view.


Let’s get started….

Our discussion will take us through the following key areas: Financial Management 101Key polices and standards designed to help

assimilate consistent and reliable financial reporting…this is key.

Financial Reporting, Statistics & Budgeting Basics


Financial Management 101

Financial knowledge provides information imperative in order to make decisions and meet your obligations

Ensure the company remains a going concern for the benefit of owners, shareholders, employees, guests and the community

First things first…. Garbage in…Garbage out… Accounting systems and financial reports are only as reliable as the

information and processes used to create them. Ensure proper accounting setup

Chart of accounts Proper coding at the local level Consistency in coding


Create clear, standardized policies and procedures

This consistency creates trust

Ensure policies and procedures aren’t just for accounting employees—every employee is involved in some aspect of financially accountability and needs to know where he or she fits into the bigger picture

Start by reviewing the workflow of accounts receivable, accounts payable and property management revenue to ensure your company has a fundamental accounting foundation


Standardized policies and procedures cont’d

Ensure all transactions have verifiable source documents and are properly stored

Ensure that all source documents are properly coded

Consider using electronic storage to save money and space

Ensure proper authorization of transactions, such as requiring two manager signatures to approve a transaction over a specific amount

By creating standard policies and procedures in you business, your well on your way to more effective financial management


Accounting versus Bookkeeping

Bookkeeping is a systematic recording of every transaction, including dates, amounts and descriptions. It is the financial infrastructure of your business.

Accounting provides a bigger picture by tracking bookkeeping transactions and using them to analyze business results. Managers use the financial reports generated by accounting to make decisions and plans for their business.


Why You Should Know Some Bookkeeping and Accounting

To effectively manage your company to ensure it remains a viable operation

To avoid being taken advantage of financially (particularly embezzlement and fraud)

To assist in the planning and control of your business

To be able to knowledgably communicate financial information to employees, potential lenders and investors, shareholders, and the media.


Financial Management & BudgetingNow let’s talk more specifically about getting the most out of your Accounting Review

Financial management Start with intensive financial review each month

Review key accounts in total and as a % of gross rental revenue or total revenue. This helps to create benchmarking.

Reduce financial summary to writing Establish monthly meetings/conference calls Actual vs. Forecast/Budget should be a focus

Financial Management 101

Questions on Financial Management 101? Standard procedures

Clear and consistent reporting is the key

Let’s Move on…..


Financial Reporting, Statistics & Budgeting Basics Now that you’ve created consistency and reliability in you financial

reporting, your ready to move forward in your review of the financials, now know that they are 100% ACCURATE.

As you begin to review the company’s financials, it is important to focus on the metrics and statistics that comprise to form Gross Rental Revenue.

Gross Rental Revenue/Occupied Nights = Average Dailey Rate Occupied Nights/Net Available Nights = Occupancy % As Gross Rental Revenue increases or decreases, it is being driven by

either the rate or occupancy…it is important to know which. Sample Reporting….


High-level income statement review Calculate all things a a % of Gross Rental Revenue or Total Revenue.

Establishing a % of Revenue will allow you to manage certain line items more acutely, ensuring the finances are properly reviewed.

Work towards proper increases and decreases as a % of revenue.

As revenue increases, certain direct operating expenses should go up

As revenue decreases, certain direct operating expenses should go down

The key is to ensure increases and decreases in revenue properly correlate to expenses

Sample Income Statement


Financial Reporting, Statistics & Budgeting Basics

Monitoring cash flows Utilize you income statement to monitor your cash flows…

The bottom line results can be tallied to determine the company’s cash flow…

Note Cash Flow Sample


Budgeting Basics

Start conservative

Use prior year Occupancy and Average Daily Rates to budget for Revenue and work form there…

All accounts have a metric in which to effective budget Housekeeping cleans (Avg clean fee * projected # of reservations)

Look at actuals and the percentage of revenue to deliver accurate projections

As accounts are to be updated throughout the year, revised and create a forecast to ensure projections are met.

Note Stats Budget Model


In conclusion, successful Vacation Rental Managers know their statistics and financial results acutely. Spend time learning this information and knowing what makes you business tick…

Questions?

Ben Edwards

[email protected]

[email protected]

(888) 304-1405


mailto:[email protected]

mailto:[email protected]

Financial Management & Budgeting for Vacation Rental Companies Weatherby Consulting

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