“Profit is an illusion, cash flow is fact” ~ Unknown
A Baker’s Dozen of Strategies to Make Your Hotel More Profitable
A HospitalityEducators.com Resource 2010
Cash flow is the term that refers to the amount of cash being received and spent. It’s what you see on your bank statements. Money comes in, money goes out.
Earnings and profit are not the same as cash flow. Cash flow is what happens now, while earnings and profit are what might happen in the future.
Earnings turn into cash flow as soon as someone pays you.
Investors are often advised to focus on Cash Flow, instead of accounting net income. This can be critical in hospitality businesses, as volumes and margins can swing to extremes within a single month.
The broadest definition is that Cash Flow is the total increase in cash over a year or quarter.
The Statement of Cash Flows provides this and breaks it out into three components
- I. Cash Flow from or used in operations
- II. Cash Flow from or used in financing (borrowing and re-payments) and
- III. Cash Flow from or used in investing activities (capital spending). This broad definition of Cash Flow is of great use in understanding exactly how the company generated and used cash but it is not a useful performance measure since borrowed cash is certainly no substitute for net income.
There will be additional resources devoted to each of the Baker’s Dozen of Strategies to Make Your Hotel More Profitable in future postings on HospitalityEducators.com
Dr. John Hogan CHE CHA CMHS
Hotelier, Speaker, Educator, Columnist
* Co-Founder of www.HospitalityEducators.com
A membership information site committed to MAKING YOUR HOTEL MORE PROFITABLE!
* Principal, www.HoganHospitality.com
Your Hospitality Resource for the Hotel Owner, Innkeeper, Manager and Hospitality Industry Associations.
2011 Keys to Success are results-driven programs aimed at building competitive advantage.
Program # 5
We Can Do That! – Making The Customer Service Attitude Real
These programs are available as either a keynote address or an interactive workshop. Details are available can be found at both sites.
I encourage you to read the previous blog post relating to a worthwhile proposal for qualified sites: Industry Links – A Valuable Resource