Choosing the right Chart of Accounts...

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Is there a good sample Chart of Accounts that is generally used in the B&B industry?

I have copies of:

  • PAII recommended Chart of Accounts
  • Uniform System of Accounts for the Lodging Industry (11th Edition)
  • a spreadsheet from The B&B Team

While I fully understand that there is lots of flexibility in how to organize one's accounts, I have to admit that I find it annoyingly perplexing that there is no standardization.  It would seem that the Uniform System of Accounts for the Lodging Industry book would be the closest thing to a well-written standard, but is a bit of overkill for B&Bs, perhaps. 

Would anyone be interested in collaborating on this, or have I managed to miss a well-established and mature sample Chart of Accounts that would be great already?

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Looking for chart of accounts

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BeachSpaNerd wrote:
It would seem that the Uniform System of Accounts for the Lodging Industry book would be the closest thing to a well-written standard, but is a bit of overkill for B&Bs, perhaps.

And this encapsulates the nature of the problem -- why is it overkill for B&B's? What makes B&B's different from other sectors of the Lodging Industry? So for what type of business do we set a standard?

I am all for establishing "best practices" in accounting (or really, bookkeeping) practice. That does not necessarily require standardization of the actual "Chart of Accounts."

One should think fundamentally about why they need to organize income and expenses into different categories in the first place. The main reason is of course to better understand one's own business, in the way that is most meaningful to the ownership and management. Next, a well-though-out chart of accounts can simplify reporting for tax filing or other compliance reasons (e.g. public corporation SEC filings....not that this would apply to anyone here), or reporting to other businesses (such as for financing, or insurance).  Of course, standardization of the Chart of Accounts would make it easier to compare one business to another, but almost all small lodging businesses are privately owned and likely hold their financial data as very private.

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When it comes down to it, I think we ALL have standards - we just use different words to express it. I call mine categories instead of chart of accounts. Every check written has a "home" even if it is Misc. I have categories under B & B and under the regular as in groceries and B & B groceries. I have amenities, ads, bills, fees. etc as well as the B & B credit card and family credit card. We all are allowed the same deductions (they are not write-offs - a write-off is a debt you give up on collecting) by the Feds, we just most likely call them names that make sense to us.

The reason I use my checking account for my expenses is the receipts if ever needed. I have noticed the grocery receipts fade but the check record is there should I ever need it. I do not ask my tax person to put her name to anything I cannot prove.

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10/04/2015

see our system in the UK seems a lot simpler than yours

(1) i only pay tax on profit and if I make less than my salery (small) + profit less than 12,000 I don't pay any.

(2) I pay value added tax as 10.5% of turnover so that's easy to work out

any receipts for purchases are completely irrelevant to the tax man we get nothing back on them - only relevant t me so I know what and where I am spending money on - seems to be more baked beans than anything as their price has skyrocketed for some reason.

Payrole is another matter - less than £111 a week and you pay no tax or national insurance so my sat and sunday people just get paid straight and that's easy.

Weekday person will earn more but if earns less than about £12,000 a year pays no tax but does pay national insurance which has a lower limit and that I am leaving to my accountant to work out!

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In addition to my Federal and State income taxes, I pay 50 cents per $100 of GROSS revenue to the City as Business & Occupation tax quarterly as well as remitting to the State the sales tax I collected each quarter.

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   When I go shopping I organize my list according to the store layout.  I get to the cashiers and pick one that knows me.  The cashier immediately take a break while I put everything on the belt according to taxes file for the inn, for me personal, for the family, etc.  If anyone sees just me in line and tries to get behind me she sends them to another lane.  Then she turns on the belt and the process starts with me standing there with a fistful of cards and money…  Arrive home, scan receipts and put them in their proper place, give to person, or stick back in purse.   When its time a good friend comes over for a visit, coffee is put on, and the evening starts.  Plops the envelope in her lap and starts reading.  Such and Such Market.  March 2016  food. Total cost such and such.  Enter it into the log under March 2016 under breakfast supplies.  Next receipt Such and Such hardware….  It works for us.  One glance and you are on to the next one....

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(1) in the UK all businesses are standardized - all accounts no matter what are laid out the same.

(2) you are making the classic mistake - BB owners are BB owners because they want to do their own thing and be their own boss - therefore you are trying to make people who naturally rebel against standardization - sign up for  it 

(3) a lot of small businesses accounting is basically a work of fiction or best guess which is why 50% fail most are good at what they do but rarely do they have what I call the triangle of 3 sorted (financials, marketing and activity) without all three you will fail.

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You are way too intense for this little gathering of innkeepers on this forum. Your questions are better asked and answered by other experts in this field.

As for myself, I do not do any of those things you mention, and would never do them, we are operating this B&B how we want to operate it, and are in the people business, not the money crunching business. If we were, we would not have chosen a family owned and operated business that we live in, such as an inn.  Your place is different to what we operate, so I cannot even come close to recognizing your needs there. If it were me, I would get on with Anthony Melchiorri, have him stop by for a cup of coffee and see what you can glean from him. 

This forum is much more casual, it is a place to share and interact with other innkeepers. It does not hold all the answers, by a long chalk. We share, we cry, we send condolences or congratulations when necessary.

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Gosh, I thought this was a site for sharing information, wisdom and ideas of all sorts.  

 

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Tamelon wrote:

Gosh, I thought this was a site for sharing information, wisdom and ideas of all sorts.  

Tamara I think you will find that most here are happy to share information, but a few comments, [1] this post is about 3 years old, I have not seen several of the folks commenting for a long time, including the original poster. [2] think you will find everyone's operation a bit different, small, larger, one person, many persons, don't know if there is a one size fits all answer to the original question. [3] I did see wisdom shared, but expect there are as many answers as forum members, many ran away for a rigid corporate world and would find it counter productive to bring those ideas of one size fits all to their innkeeping business.

This thread was brought back up by a new poster this summer looking for a chart of accounts, I believe I replied to him/her in a PM either with my chart of accounts or my email if he/she wanted to make contact, but don't know that posting that chart here would be useful to others.

I've managed or worked in finance in several businesses, what I can tell you about charts of accounts is that much depends on the operator (person entering the information), too much detail and it becomes an endless chore, too little detail and the same charge or cost might fit in several different accounts, and all that information is only really useful if we stop to look at the results and take action.

Couple of examples: [1] do I create an account for linen, bedding and towels or do I make individual accounts for each, how much time do I want to spend on this detail and how will I use that information? [2] I have a tractor/loader/backhoe, useful to me at my location, probably not useful in an uptown location. If I repair the tractor, is the expense [a] maintenance or [b] appearance as I use the tractor to keep the place looking good, will I remember to use the same exact account two years from now?

Welcome to the forum, I think you will find most folks happy to answer questions, now will I like their wisdom or the answer that I am given, that's hard to say, but over several years that I've visited the forum I've learned and applied useful information and feel it has helped my business.

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Thank you, everyone, for your replies.  But, respectfully, when it comes to accounting--my entire point was that there should be a standard (best practices) way to set up the CoA and the reports.  Perhaps I did not explain my question well, so allow me to elaborate a bit.

Beyond my past successful entrepreneurial experience and subsequent decade as a sought-after business consultant known for rapid, sustained business growth, my husband and I both got a nasty shock when we started shopping for a B&B.  That shock was the apparent fact that many B&Bs have extraordinarily poor accounting practices--many looked like they had used their checking account and stacks of paper bills as their "accounting" package.  Every B&B broker we worked with had their own way of making up for this--generally by figuring out how to get whatever financial data was available into a standardized spreadsheet created by their firm.  Frankly, its no wonder to me that many banks are hesitant to provide financing for B&Bs due to the apparent unreliability of their "financials" and total lack of internal or external auditing.

NOTE: I realize that B&Bs that are for sale are on the market simply because some/many of the sellers aren't really good at running a hospitality business.  I have toured some of the great Inns and spoken at length with extraordinarily successful innkeepers as well--but they were all doing too well to want to sell at a price I would consider.  Smiling

Ok, so beyond the observations above, it took me several very difficult years after starting my first business to accept that "standards" are a good thing.  In those years, I railed against things like ISO 9001 and formal SOP manuals because I had my mantra, "My business is different from everyone else's--and if my clients are happy and I'm making money, then who cares?"  Thankfully, I met a few gentlemen along the way who ended becoming my mentors and showing me the error of my thinking.  Implementing "internationally-recognized standards" is not a path that leads to the death of creativity and innovation, nor does it suck the fun out of running a business.  On the contrary, putting all the basics onto nice, tight rails of standards is a way to unleash innovation by eliminating the distraction by basics. 

Wouldn't it make it easier for all Innkeepers if the "basics" like how to do bookkeeping and accounting were already worked out?  Wouldn't that leave more time to actually work on their businesses?  Doesn't it make sense that adoption of standards for non-differentiating business activities that have been evolved through the collaboration of thousands of industry professionals mean that an Innkeeper would have one less area of their business to worry about?... which then allows that Innkeeper to spend their brainpower on increasing their guests' perception of value and innovation on ways to differentiate their establishment?

Let me make my point from a purely practical standpoint... I believe that if a B&B owner has to do anything more than "print reports" when it comes time to seek (re)financing or doing taxes, then they are wasting time that should have been spent serving their guests.  Since banks have well-established standards as do the tax folks, doesn't it make sense to work towards common accounting practices among B&Bs and Inns?  How many of you have spent hours or days faced with massive piles of paper to prepare for taxes, or how many have paid the price--literally--to their CPA to make up for their bookkeeping practices?

I agree 100% with those who advised the perils of unnecessary complication or that Innkeepers who are not knowledgeable in bookkeeping should hire a professional.  My original post was intended to reach towards those Innkeepers who are both knowledgeable in accounting and who see benefit in the growth and health of our overall industry, in addition to their own business.

Please don't get me wrong... I appreciate the warm and helpful advice given by anyone and everyone.  There are lots of ways to run a B&B--and as a very new Innkeeper, I will not even attempt to claim expertise yet, but as I learn and grow in my new role, I am in the unusual position of wishing that standards existed--for the very reason that I want to focus on the joy of running my inn.

In my past experiences of running technology firms, I benefited greatly from even the partial implementation of standards such as ISO-27001, ISO-20000, and ITIL.  They made my life easier, my business more competitive, and delivered a much more consistent value to my clients--which helped move my workload from "management" to actual "entrepreneurship", i.e., thinking about innovation, invention, growth, and bringing new products and services to the market.

I'm certain that I am putting entirely too much into this post-- but I was surprised by the seeming disinterest in the benefits of collaborative standards and I wanted to explain myself a bit.  Thank you for taking the time to read my thoughts--and I hope you will consider elaborating more on yours as well.

 

 

 

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No offense taken, but you shouldn't judge people because they don't do things the way you believe is correct related to accounting.  As far as financing goes, the bank wants to see actual tax returns that you signed and filed, anything else really doesn't matter, except of course that pesky appraisal!!!   They are also more concerned about the people purchasing the inn and what experience they have -- being one of the top sales professionals in my technology area for over a decade and my husband having worked in hospitality for years (along with over $300K in cash of course) meant they gave me almost a million dollar loan in a couple days approval time.  Did they once ask about my accounting experience - NO!  Does my banker care how I keep my books, absolutely not.  He cares that my loans are paid every month on time and when he visits he sees that I'm also improving my inn every year and occupancy as well as income is improving.  

Also, you have to remember that everyone does a different amount of work at their property, leaving different amounts of time for office work.  So in my day I'm the chef, the food shopper, the wedding coordinator, the reservation taker, manager of two housekeepers, marketing/social media guru, sometimes guest greeter although hubby does more of that, bookkeeper and most importantly of all mother to two teenagers (who previously didn't have license so for years you can add chauffeur to that list above).  So you see, I really don't care about accounting.  I know I'm making money (plenty of it by the way with my poor accounting skills) and that's good.  I have a file cabinet with a hanging folder that every single receipt goes into.  By the way, I have every single receipt going back to the time I opened, including construction receipts because we built from scratch.  Many times at the end of a stupidly tiresome day, I pull all the receipts out of my jeans pocket or scoop them up from the nightstand where they landed last night and bring them over to that hanging folder.  I dump them in and then the first week of February each year I pull them all out, make myself a giant pot of coffee (and later in the evening maybe a martini), sort them on the giant kitchen island and go to town.  In two days, I have every single thing pulled together exactly as my accountant wants it, drop it off and I'm good to go.  I do admit that sometimes I'm out in the car finding those few that my husband put into the glovebox of his truck when he went to the store.  Works for me, my accountant, the tax man, the bank doesn't really give a hoot and I don't spend time in my office during the year when I have guests, I spend it with them or my kids.

So again, each of us can and should do what we want because standards like ISO 9000 may be necessary in the technology/production world but standards don't belong in innkeeping - the hotels can have all their standards and that's why people stay at B&Bs because we're nothing standard!

Enjoy innkeeping and if being so regimented/standardized makes you a happy innkeeper then go for it.  But many of us left standards behind when we left the corporate world!

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No offense meant, but many replied with their methods, if you have a better idea, that's good, but it now becomes your job to sell the rest of us on why that method is better and should be the standard.

My limited experience with banks seemed to be that they wanted to see a tax return which is the real standard of income and had little interest in plans and projections, they saw them as fluff and guesses.

Just my own opinions with sales (my area anyway) is that some sellers are selling the idea as much as the actual proven results.

I use Microsoft Money, pretty much a computerized checkbook so that we can take a printed report to the accountant.  We record all income and expenses, but even if you have a standard list of accounts it requires that you be consistent in how you enter the information.

Seems to me that some of the folks on this list are highly successful business people, perhaps larger inns and perhaps one day will sell and retire, but for us it is a lifestyle we enjoy, this is where I want to be to finish out my days, that's not to say I don't hope to make a little money, just that life comes first so that I may not have the obsession with making money as some, my goal is to make a life.

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What you say makes sense...but this is innkeeping. No one does it the same, there are no "standards" and if an association wants to come up with some....that is no guarantee that the "independent Innkeeper" will follow suit. You just need to do what is good for you and your business.

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Beachspa, you have a place that offers spa services and you have employees or independent contractors ... correct? In your case I would seek out the services of a good accountant who specializes in this field to make sure you've got everything set up properly. This is important. It's important to know when you shouldn't guess. My advice to you is to invest in those services ... and then you can focus on the areas of running your place that you are great at.

gillumhouse's picture
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I started out using Microsoft Money. When that was no longer an option I got the cheap version of Quicken and my categories transferred into it. I only use it to enter our checkbooks for taxes. If it does not go through the checkbook, it does not count (I lose cash receipts). I just print out the categories, write total revenue, Square fees on the top of the page and give her that and the envelope with all w-2s and any other tax documents that came in and she gives me back forms to sign and send in.

I keep a spread sheet from year to year with the utilities raw usage & costs (without taxes) for year to year comparison. I have my ledger on a spreadsheet with the formulas to add tax & total each room night (and track if it is horse, motorcycle, military, or bereavement) as well as monthly, quarterly, and YTD as well as calculate my B & O tax to make life easier every quarter.

Works for us.

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One of the few probably, but I hate QuickBooks.  I setup an Excel spreadsheet with the following categories which my accountant said was just fine - do what works for you.  Like everything else at a B&B, you can do what you want so long as you're doing it legally.

2015 Sales Figures & Expenses:

Mortgage (show total at end of year for depreciation and interest paid)

SBA Loan (show total at end of year for depreciation and interest paid)

Room Sales
Mug/Tixs/Package Sales
Total:

Expenses

Taxes - Town of _________

Utilities

Employee Costs: (salaries, my tax costs, social sec, etc.)

Licenses & Business Fees:

Sec State Business Fees

Insurance (Health/Life/Business/Workers Comp) & Gym Membership (Paid by business as Benefits)

Accounting:

Advertising/Website/Dues/Photography/Marketing

Auto/Truck/Tractor/Utility Vehicle Expenses

Bank, SBA, Credit Card Fees

B&B.com,Bbonlin, Air B&B, Booking.com Commission

Improvements

Outside Services:

Computer/Office Supplies/Cell Phones/Printing

Sanding, Rubbish, Pest Control:

Gift Certs: Rests/ Ski Tixs Champ & Choc.

Entertainment/Promotion:

Landscaping:

Hot Tub Supplies:

US Postal Service

Supplies: 

Furniture/Decorations/Room Decor

Equipment Repair & Rental:

JimBoone's picture
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Like EN says it is probably whatever works best for your needs or if using an accountant to complete your taxes, then whatever works best for them.

For me, I like to give my categories numbers "01 Propane" as most programs sort by letter or number and by assigning numbers I can have groups (all utilities for example) sort together in a report. I like a certain amount of detail so that I can see how costs run, year over year.

I also separate out to different accounts those items that will be expensed each year from those types of items where the expense is depreciated over a number of years.

Don't know if any of that is useful to you, but would be glad to share what I use for accounts if desired.

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05/22/2008

Everything is so individualized with innkeepers. what you have is probably the best it gets. Don't waste your time on it. Worry about running a successful B & B and how you achieve that. Smiling

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