Financial Management & Budgeting for Vacation Rental Companies Weatherby Consulting

Financial Management & Budgeting
Ben Edwards
Ben Edwards
Weatherby Consulting, LLC

About 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 101
Key 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.

Now 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
Bedwards@NDRP.com
Ben@WeatherbyConsulting.com
(888) 304-1405

Financial Management & Budgeting for Vacation Rental Companies Weatherby Consulting

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