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!
The Ostrich Factor: You Can Put Your Head In The Sand, But They Can Still See You.
For decades, ratings have been a highly publicized part of marketing the RV park and campground industry to consumers. The most common method of promoting a campground business has been through printed magazines, publications and directories. There were only a few campground rating services, generally provided by directory or travel guide publishers who sent full-time RVers around the country to rate campgrounds for their respective publications.
When the rater/inspector arrived at the park, the conversation sometimes started with something like this …….” Hi, I’m here to rate your campground for XYZ publication, but before I do, I’d like to talk about how much advertising you what to purchase…… I assure you the amount of advertising doesn’t affect your rating in the least, but I just want to discuss advertising first.” Is it just me, or does that sound a little like Tony Soprano?
Over the years I have heard many campground owners complain about the lack of fairness and consistency in the rating systems. Such conversations usually included an opinion that the industry needed some sort of objective and independent method or rating all parks. The fact that directory ratings are usually determined by one person’s or one couple’s interpretation of their publisher’s rating standards, has most likely contributed to the perception of bias and unfairness. However, directory publishers continue to claim that the process is fair and consistent, and is by no means influenced by advertising purchases. So, we’ll give them the benefit of the doubt.
Right now, the market is going through major changes (the trusted information source paradigm is shifting) …. Nearly everyone agrees that the internet is proving to be the most significant communications vehicle since the invention of the telephone. The rapid growth of consumer communities (such as MySpace.com and Facebook.com) have created a worldwide trend where guests are easily sharing their experiences with other guests.
Because this shared information represents word-of-mouth advertising, consumers are starting to value and rely more on feedback from other guests than on directory ratings or promotional messages from individual business. In other words, because guests can easily find and review comments from other guests, the trend is to ignore marketing hype like “The Best Campground in the area”. Guests don’t automatically trust what the business says and they search out what other guests, who have actually stayed in your park, say about their experience.
Newsflash: The guest is now in control of the dialog, and is clearly affecting your reputation in the marketplace. The old assumption that one dissatisfied guest will tell 20 other guests has changed. Now, one dissatisfied guest is broadcasting their message to thousands if not millions.
Why Should the Campground Industry Work Together?
I received several phone calls last week from industry publications wanting to discuss our recent announcement of a strategic alliance with Campground Master. Specifically they wanted to know why either of us would work together since we had recently rolled out our Hercules enterprise class property management system and we had also acquired PARCS software. My answer was simple: Coopetetition. I wish I could claim authorship to the term or even the concept, but the reality is that coopetition has been alive and well in other industries for a long time. It is also a concept that is almost foreign to most of the campground and RV Park industry.
In talking with campground owners, I have often heard comments such as “I don’t want to work with him, he is my competitor”. This is especially visible in the various association boards across the industry as some board members support initiatives that help their park but oppose issues that might help their competitors. Yet, the auto, fast foods and other industries have discovered that working together actually grows the pie that they all share in, rather than squabbling over pieces of a smaller pie. Think about it, why would numerous auto dealers locate themselves in auto malls where their prospective customers could walk next door and buy a competitors product? Why would fast food brands locate themselves in close proximity where they could lose a prospective customer? The answer is, because (a) for every prospect they lose, they gain one from the opposite scenario, and (b) collectively they attract more customers than they could by working independently. The RV manufacturers have been pooling resources to promote GoRVing to grow the consumer perception of the lifestyle. This too is a form of coopetition.
In the case of Campground Master, we are jointly working to develop 2-way integration so that our mutual customers don’t have to manage online and offline inventory. We have also taken the relationship a step further whereby Friend can sell Campground Master software and the Campground Master staff could sell the Hercules platform. Imagine a sales person who can actually be a consultant helping owner/operators to select the right platform for their business.
Looking ahead, we are designing coopetition type functionality into Hercules so that competing parks can book guests into other parks when they are full, or provide concierge services much like larger hotel chains. One of our goals is to provide superior platforms and functionality to enable small to medium size campground owner/operators to operate like a large business with tools and capabilities that allow cost effective bundling of services, referral alliances, joint marketing and other opportunities that fall under the term of coopetition. The Campground Master relationship is just one way in which we are practicing what we preach.