In the casino business, economies of scale are important. It’s not just about generating a large amount of profit but saving a big amount as well. However, you need to make sure that the standard of casino services and products you provide are on an upward trajectory.
Before we start, did you know that the casino industry in America skyrocketed past $90 billion, wait for it, back in 2009. More and more casinos are learning to utilize key accounting components not to just stay in business but to take over the competition.
Now, here are the essential accounting and economic casino procedures.
Profit and Loss
Are you familiar with a casino’s EBITDA? Well, it stands for earnings before interest, taxes, depreciation and amortization. It is important to calculate and assess the casino’s profits and losses.
You can’t base the number from casino’s gaming winnings and losses alone.
Here’s how you calculate to get the casino’s net profit figure. First, combine casino win and loss. Then, make sure to get the total earnings from added casino services like food, drinks, parking, and other services.
Next, tally all the operating and administrative expenses such as security, amenities, utilities, marketing, and payroll. Then, subtract the total amount of these expenses from the total revenue. From that you get your EBITDA.
The last step entails subtracting all outstanding or applicable loans, taxes (federal and state), amortization of purchases and depreciation of assets. You then get your casino’s net profit figure.
This is where you assess if your casino is generating a profit or not. This is where you also determine what’s working and what’s not.
The Drop
The Drop, are you familiar with this term? The Drop is the total amount from exchanged casino chips or tokens by customers. Don’t get it wrong though, this accounting component does not calculate a casino’s daily revenue.
The Drop is merely a basis when it comes to calculating your daily revenue. That is still determined with casino winnings and losses.
The Handle
This is the sum of the casino customer wagers. Getting these numbers is important when adapting to loss circumstances and to strategize management as well.
Casino Gaming Win/Loss
In the casino business, some days are good, some days are bad. This goes to both the casino and the customers. Some days you win, some days you lose. It is important for a casino to determine if a particular day is a win or a loss.
Win meaning, the casino made money and loss if the casino loses money. This must be done per game and not in general. For example, it’s a lot harder to determine if your casino’s poker tables made money or not.
Slot machines have built-in calculation software for that. This is where you subtract the total of chips and/or tokens cashed back in by your patrons from the drop.
With this one, there’s not much you can do to put the stakes in your favor.
It’s a casino, so you can’t decide if a customer will win or not. However, casinos always have the upper hand with the house edge strategy.
House edge is the mathematical advantage the casino has over customers.
If you’re in the casino business, you should be aware of these, tax responsibilities, and more.