How Should B&B Inn Owners Approach Their Finances?

Please keep in mind that we are not accountants; all this should not be construed as professional legal or tax advice and simply represents the opinions of White Stone Brokers.

Buyers and B&B owners need the same thing: complete and accurate financial information. Financial organization is essential for ensuring that everything runs smoothly and that you’re prepared for unexpected situations. Don’t let confusing profit and loss statements or tax returns get in the way of your future investment; A truly important property that deserves a bright future.

group of people looking over documents

Building financial preparedness is the best way to contribute to your B&B’s long-term success, and we’ve put together some top tips to help you get started on preparing to sell your inn:

  1. Keep a balance sheet for the most recent fiscal year, and make sure it accurately shows capital improvements and inventory (e.g.: mugs, gift items, wine, etc.) A spreadsheet can do quite a bit, make sure it includes capital expenditures and improvements to buildings!
  2. You’ll want to have your federal tax returns for the three most recent years as well.
  3. Track down your most recent real estate tax statement and keep it handy.
  4. Don’t forget your monthly or quarterly state sales tax reports! Room/hotel tax reports may not apply to all properties, but make sure you have them if so.
  5. Knowing how to organize info from your property management system (PMS) should help you keep track of occupancy by month and room, essential information for your reports.

All of these items are going to assist in keeping your records as accurate as possible, an absolute must when handling the financial details of your property. The potential benefits of doing so stand to greatly improve your professional connections as well as take worries off your plate and allow for focus elsewhere:

  1. Keeping the IRS happy is easily one of your more important priorities. Organized record-keeping will make for timely and accurate reporting.
  2. Failing to report cash sales and paying staff under the table ultimately undermines the value of your business, and is illegal, so make sure you report all revenues and expenses when filing your taxes.
  3. Incomplete or muddled records will not look good to potential lenders and buyers, so keep them clean and get the funding you need to secure your future.
  4. Always remember that you cannot control what you cannot measure, and a B&B without financial control is on shaky ground. This is the key to your business management, and a firm hand on the wheel will allow you to weather any storm.
a man looking over his finances

So let’s say you take all this information and improve your finances. Now you have a much better grasp on how everything fits together, but there’s still more to learn! Once you’ve got the basics down, incorporate these advanced suggestions into your record-keeping and fine-tune your financial approach:

  1. Eliminating excessive “casual labor” from your expenses will go a long way toward keeping things neat and organized.
  2. Make sure to separate personal expenses from business expenses, especially important if you plan to write off some of those business expenses.
  3. Dive deeper into your taxes for further optimizations to your financial strategy. One effective way is to learn how capitalizing and expensing major renovations, improvements, and equipment affects both your tax liability and your net operating income (NOI).
  4. Ask your accountant for an explanation of allowable depreciation and depreciation recapture. These may have future consequences and are worth the positive impact on your tax report if handled correctly.
  5. Consider paying yourself a salary and you can always ensure it’s a modest one if that is a concern. In addition, many lenders and buyers expect it, and sometimes even the IRS may want to see it in your reports.
a woman looking at a laptop

Wow! All that certainly seems like a lot to keep track of at first, but once you’ve got the ball rolling it will all start to come together. Good record-keeping will save you the headache over time, an investment into the financial future of your B&B, and a weight off your shoulders. Start building a solid foundation today with White Stone Brokers. Contact us for a consultation today.

Photo of Chris Kelly

Chris Kelly

Chris Kelly is a business broker and seasoned marketing strategist, leveraging over 15 years of experience with White Stone Marketing. With roots in direct sales and account management at Google, Chris pivoted to digital marketing, successfully growing revenues for hundreds of lodging properties. His expertise spans from consulting on operations to running in-depth marketing campaigns for bed and breakfasts, inns, resorts, boutique hotels, and event venues. Chris is passionate about helping properties reach their peak potential and ultimate sale price.