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Accrual Accounting for Campgrounds

Accrual Accounting and Revenue Management Reporting

in Campground Reservation Systems

by Gary Pace, CEO, Friend Communications

For years the RV Park and Campground Industry has been forced to choose from a variety of property management systems which contain reporting and accounting capabilities that are inadequate for today’s competitive environment.  The challenge is the way transaction revenue is stored, making it difficult to precisely measure earned and unearned revenue between varying date ranges, and nearly impossible to provide the type of dynamic reporting that owners and managers need to effectively monitor the growth of their business.  

There are several uses of the term “accrual accounting” which create confusion and misunderstanding as systems are analyzed and compared for their operational processing, reporting, management information and accounting capabilities.  

Accrual accounting means the recording of revenue earned and expenses in the accounting period incurred.  Reservation revenue is generally earned as site nights are used and expenses are generally incurred when they become liabilities assuring that formal financial statements are not distorted by the timing of when cash is received or payments are made.  While tax returns allow the reporting of revenue on a cash basis, public companies must use accrual accounting to report revenues and expenses in their financial statements because of the accuracy in comparing between financial reporting periods.  

When evaluating reservation software systems the term “accrual accounting” actually refers to the capability of the system to summarize and report earned reservation revenue over flexible and comparable date ranges while maintaining the integrity of financial reporting.  These reports may or may not be the same point in time or accounting period used to create financial statements.  With financial reporting, measuring site nights is a much more comparable methodology to analyze trends than the timing of cash payments.
Up until now, few software systems have been able to support this definition of accounting.  Yet operationally it is important to the ongoing success of the business to be able to analyze statistics by flexible date ranges, subsets of inventory and other query and filter criteria in order to make informed business decisions.

At the heart of the problem is the way reservation revenue is stored and reported in legacy reservation systems.  Most campground reservation systems store revenue by type total, irrespective of the length of reservation or how many accounting periods it might extend to.  Thus, to properly distribute these revenue totals into earned and unearned revenue requires complex, lengthy and manual coordination of multiple reports.   There are several problems with this approach including revenue reports which may not agree with general ledgers, reduced analysis and comparison reports, limited consolidated real-time reporting for individual and multi-property properties.  

Important to the accrual accounting process is a software architecture where reservation records are stored in a data format that facilitates dynamic earned revenue measuring.  Storing revenue amounts by order and by revenue type in daily buckets that correspond to the site night of each stay creates a daily hotel type folio report making forecasting and “what if” modeling much easier.  Because the data is already split into revenue recognition days, the management reports always agree with the same data used to report earned and unearned revenue into the accounting general ledger system, and one set of numbers is a reliable subset or superset of another set of numbers.
A properly designed software system can provide the capability to obtain more accurate reporting, reduce time to creating financial statements, and improve the ability to measure and analyze business trends.  It is a must to maintain compete in today’s environment!