How a Single Source of Truth Benefits Hospitality Managers
Founder & CEO
Most people are familiar with the saying, “before you can run, you need to learn to walk.” In the business accounting world, this might say, “before you can obtain financial insights, you need to have a single source of truth.”
What is a single source of truth?
A single source of truth (SSOT) means that all of your company’s financial data is aggregated and stored in one place. This allows business leaders to obtain a holistic view of the company’s performance and make informed decisions based on a single point of reference. Consider this for example:
John, a vacation rental manager, uses the built-in accounting functionality of his property management system to track funds received from guests. For reimbursable expenses, normal business expenses, and vendor or contractor fees, he uses a combination of a company credit card, checks, and a digital wallet. Additionally, he uses a separate platform for employee payroll and benefits management.
These systems are working for the most part, but John has to manually factor in expenses that belong on the owner statement but aren’t captured in the property management system. There are many instances where funds from the trust account cross over into the management company, and vice versa. John is worried that he doesn’t have a clear picture of his current cash position. The more the business grows, the harder it is to keep track of funds moving through the organization.
Unfortunately, this is a scenario that can quickly snowball and lead a company’s financials into the red. By bringing these datasets all into one place, however, John would be able to easily track his financial performance and quickly make decisions to improve his bottom line.
A single source of truth ensures that everything you owe (accounts payable) and what you’ve earned (accounts receivable), as well as what’s already been paid and received is all in one place. If you’re using accounting software like QuickBooks Online, Xero, or Sage Intacct, you already have a strong foundation to get started.
Integrate with accounting software
An accounting system isn’t just useful for taxes and reporting purposes. When used correctly, it’s the epicenter of all your company’s financial data, where every transaction can be tracked from beginning to end. Just like the proverb “all roads lead to Rome,” every dollar that passes through the business should funnel into the accounting system.
For a large organization, doing this by hand can involve a lot of manual data entry. That’s why there are programs designed to streamline these processes like bill pay (Bill.com), expense management (Expensify), payroll (Rippling), and even trust accounting (VRPlatform). Integrating these apps with an accounting software will automatically keep your financial records up to date.
Once you have all the data in your accounting system, reconciliations are relatively straightforward. Importantly, you can factor in expenses that aren’t captured in the property management system here, and then you can easily export owner statements that accurately reflect the trust account balance.
Advice for businesses with multiple entities
Up to this point, we’ve described how a single source of truth serves vacation rental management companies, but there are many organizations where vacation rentals are just one piece of the larger financial picture. These are commonly referred to as multi-entity organizations, holding companies, enterprises, or diversified corporations. If your business falls into this category, a single source of truth will provide an even greater strategic advantage.
Imagine multiplying the challenges of disconnected datasets and manual consolidations by three, four, or even ten businesses. Now, add in the need to transfer funds between different entities or record intercompany transactions. Not only does each operating segment need its own consolidated accounting structure, but leaders at the top of the organization need a 10,000-foot view of the entire portfolio.
At this scale, it isn’t feasible to manage a separate QuickBooks environment for each business because that means you would also need a separate Bill.com account, a separate payroll software, and so on. Intercompany transactions would involve tedious data entries between due to and due from accounts in each instance. Ultimately, this compounds the time and effort spent by the corporate accounting team.
Break through reporting barriers with a consolidated platform
A better fit would be a robust, cloud-based enterprise resource planning (ERP) system with multi-entity accounting capabilities, like Sage Intacct. Here’s why:
First, Sage Intacct integrates directly with the business apps mentioned above (as well as numerous others). This eliminates the cost of having multiple instances of the same software and uses company resources more efficiently. Combine this with rich dimensions, and now tracking and reporting is much more automated because records can be associated across multiple entities and levels of the organization.
Where a detailed cost analysis may have taken days or weeks to complete using traditional software, business leaders using Sage Intacct are instantly connected to real-time data and can quickly see how performance is trending over time with flexible reports, live dashboards, and forecasting tools.
Plus, users can drill down to specific customers or zoom out to see how the entire business is performing in just a few clicks. Unlike QuickBooks, which has a limited number of classes and features, Sage Intacct is designed to grow and evolve at your pace with a range of industry-specific and advanced modules that you can add on as needed.
All companies face the challenges of limited time and resources, but vacation rental management organizations have unique requirements that often result in complex, manual processes. Rather than trying to obtain insights from disconnected systems, these business leaders can integrate with an accounting platform to achieve a single source of truth. In addition to providing an accurate picture of cash flows and simplifying reconciliations, this approach allows vacation rental managers to gain complete visibility over the financial health of their business, whether that’s comprised of one entity or one hundred.
Looking to get deeper insights out of your hospitality organization’s financial data?
Book a call with Ximplifi today to learn how we can help you gain control over your bottom line with our industry expertise and integrated accounting solutions. Get In Touch >
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