Hospitality Accounting: How Operations Drive Profitability

When I attended Tripleseat Event Camp, I expected to hear a lot about hospitality, events, sales, operations and the technology businesses use to manage all of it.

What I did not expect was how often the conversations would come back to the numbers.

There wasn’t much talk about reconciliations, month-end close, balance sheets or even P&Ls. But there was constant conversation about guest counts, event revenue, price per guest, lead conversion, labor, commissions, marketing spend, revenue forecasts and which types of events were actually the most profitable.

There were discussions about what happens to your expense structure when you hit 80% of forecast instead of 100%, the cost of building an event sales team, pricing by market and geography, and whether the events generating the most revenue were also generating the most profit.

Call it sales, staffing or operations. We’re doing math now.

The numbers were everywhere. They just weren’t calling it accounting. They were calling it running the business.

The decisions happen before the financial statements

Maybe this stood out to me because I came up through restaurants.

I worked in my family’s restaurant when I was young, waited tables in high school and spent years working in bars and restaurants before eventually moving into accounting. Later, I spent six years walking the floor of an Olive Garden while I worked through college and my MBA.

I still remember the kinds of questions that come up when you’re standing on the floor. It’s slow. Do we cut somebody? How should we schedule next week? Why are we throwing so much food away? What is the supplier running on special? Are we turning tables quickly enough?

You don’t stop in the middle of a dinner rush and think, I am making a financial management decision. You’re trying to run the restaurant.

But those are financial decisions.

Cutting someone early affects labor cost. Waste affects food cost. Pricing affects margin. Table turns affect revenue. The decisions happen first, and the accounting comes later.

A P&L can tell you where to look

Today, I sit farther downstream. By the time I see something on a financial statement, the decisions that created that number have already happened.

The schedule was built. The food was ordered. Someone determined the price of an event. A salesperson earned a commission. Marketing dollars were spent. The customer either booked or they didn’t.

Accounting can tell us how those decisions ultimately shook out, but simply telling a business owner that “labor was high last month” is not much of an answer.

The better question is why.

Were we overstaffed? Did we have more overtime than usual? Are we training new employees? Did we intentionally add people because we’re preparing for growth?

Those scenarios could all create a higher labor number, but they tell very different stories about the business.

The same is true for food cost. If it increased, did supplier pricing change? Was there more waste? Did the sales mix change? Are we charging enough for what we are selling?

The number points us toward the question. The real insight comes from understanding what happened inside the business to make that number move.

More revenue does not automatically mean a better business

One of the themes that kept coming up at the conference was growth: more leads, more bookings, more events and more locations.

Those can all be good things, but each one creates another layer of financial questions.

If event revenue increased, were those events profitable? Two events can generate the same amount of revenue and have very different economics depending on the staffing, food, commissions, marketing and other resources required to deliver them.

If you are thinking about opening another location, what is the first location telling you? Do you have healthy margins? Do you have the right team? Is there a repeatable operating model? Can the business absorb the additional overhead?

Growth looks very different when you look beyond the top-line number.

Operations create the numbers

That was probably my biggest takeaway from the conference. Finance and operations are not two separate conversations. Operations create the numbers, and accounting helps us understand the financial impact of the decisions that were made.

That is why a financial statement should be the beginning of a conversation, not the end of one.

The P&L matters. Of course it does. I’m still an accountant. But the P&L is not the business. It is what happened after people spent a month running the business. If all we do is hand an owner a report and explain that labor increased, revenue decreased or margins moved, we are missing the most useful part of the conversation.

We need to understand why it happened, what changed operationally, whether it was intentional and what we are going to do differently because we know it.

Tripleseat Event Camp was not an accounting conference, but I came home thinking about accounting more than I expected.

Because the numbers were never missing. They were happening all around us.

I share more thoughts on the intersection of operations, growth and the numbers behind the business on LinkedIn.