HAMG 1313 Front Office Procedures The Night Audit

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HAMG 1313-Front Office ProceduresThe Night
Audit
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HAMG 1313Front Office Procedures

• Controls

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Introduction

• Control is the process of evaluating actual
  performance, comparing actual performance to
  goals and taking action on a difference between
  performance and goals
• Much of the responsibility for control is
  delegated to the hotels accounting department
• Successful hotel and lodging manager is able to
  decide which type of control system is most
  appropriate for his or her establishment
• Controls can be grouped into three categories
• Preliminary
• Concurrent
• Feedback

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Preliminary Control

• Designed to identify what factors are essential
  in the selection of a hotels employees, vendors,
  materials and supplies that will become essential
  for the hotel to deliver to its guests the
  quality of services they expect

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Preliminary Control (continued)

• Preliminary control of human resources increases
  the probability that the hotel will match its
  needs and the skills, abilities and attitudes of
  the staff that is hired
• Preliminary control of materials is the
  responsibility of the departments in which the
  materials are used
• Preliminary control of capital is the monitoring
  of the acquisition and utilization of capital

• Preliminary control of capital is done through
  the use of certain criteria
• Payback calculates the total number of years
  necessary for a proposal capital acquisition to
  repay its original cost
• Rate of Return divides any additional net income
  after taxes and depreciation by the original cost
  of the investment to measure its profitability
• Discounted Rate of Return takes into account the
  time value of money where the future value of the
  funds must be considered and discounted to
  todays value
• Capital budget is used to plan the sources and
  uses of funds

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Concurrent Controls

• These are personal, on-the-spot observations by
  the General Manager, department heads and
  supervisors to determine whether ongoing business
  objectives are being pursued by their employees
• What are some examples?

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Feedback Controls

• Those which can give information about the
  progress of a business toward achieving financial
  goals
• These are the controls I most often utilized
• The most widely-used feedback controls in
  hospitality are financial statements and standard
  cost analyses

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Feedback Controls (continued)

• Financial Statements
• Summaries of the assets, liabilities, equity,
  revenues and expenses of a hotel
• GM also needs to understand the standards of
  liquidity, inventory turnover and ability to meet
  short-term obligations
• Liquidity measures a hotels ability to meet
  current, short-term obligations as they become
  due (i.e., current ratio of assets to
  liabilities)
• Accounts receivable turnover is the ratio of
  credit sales to average accounts receivable
  higher the turnover, the more rapidly accounts
  receivable can be converted to cash

• Inventory turnover is the ratio of the costs of
  goods sold to average inventory a high inventory
  turnover indicates a low balance of goods, which
  means they are being consumer in large quantities
  by a hotels guests, while a low ratio may
  reflect over-investment in inventory
• Solvency is the ability of a hotel to meet is
  long-term obligations
• Standard Cost Analysis compares actual costs with
  estimated costs if there is a large discrepancy
  management should take corrective action

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Front Office Accounting

• A system of vouchers, journals, ledgers and
  folios designed to flow a guests financial
  transactions and summarize outstanding balances
  into a running total
• Beyond the scope of this course to get into the
  nitty gritty about front office procedures
• The Uniform System of Accounts for Hotels was
  developed in 1926 and is used to keep all hotel
  accounting procedures similar now called the
  Uniform System of Accounts

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Front Office Accounting (continued)

• Night Audit
• Hard position to fill
• Usually pays 10-25 above desk clerk hourly rate
• Provides up-to-the-minute statistics and
  financial statements so that management can make
  effective decisions regarding operations
• Staff in a full-service hotel may include several
  auditors depending on number of outlets, closing
  time of outlets and size of property

• Night auditors typically work the 1100 p.m.
  700 a.m. shift, but not necessarily
• Audit of the guests accounts is the duty of the
  night auditor
• In a limited service hotel the night auditor is
  the manager, PBX operator, security guard, sales
  director, desk clerk and auditor
• Night auditor is responsible for the daily update
  of accounts receivable (continued on next slide)

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Front Office Accounting (continued)

• Night Auditor (continued)
• Accounts receivable
• Posting of outstanding charges from all revenue
  centers
• Verification and posting of room rates and taxes
• Completion of days end balances by department
  all totals must balance
• Prepares reports such as Daily or SONA
• Preparation of cash deposit
• System backup
• Resolution of room status problems

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Front Office Accounting (continued)

• Front Office Cashier
• Cashiering procedure involves opening the
  station, posting guest charges, accepting
  payments on guest accounts, posting city ledger
  charges, marking corrections, doing transfers,
  doing a bucket check, and closing the shift
  (balanced)

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Accounts Receivable

• When a guest checks out and does not settle the
  account immediately with payment, a receivable is
  created
• Charges are transferred by the accounts
  receivable clerk from the guest ledger to the
  city ledger
• The accounting department creates a bill which is
  mailed to each guest having an outstanding
  account
• A city ledger can include many sub-classes
  including employees, guests and house expense

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Accounts Payable

• They are monies owed by the hotel to its
  suppliers, telephone, utilities, advertising,
  etc.
• An accounts payable clerk is responsible for
  assigning vendor numbers to and maintaining
  up-to-date addresses on all suppliers
• Makes a check-list of expenses accrued on a
  regular (usually monthly ) basis such as
  telephone, utilities, etc. to make sure these
  bills are not overlooked
• Compare vendor statements and invoices for
  errors, such as omissions or discrepancies
• Ensure that all payments go out before the cutoff
  date, or month-end

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Inventory Control

• A complete inventory, including both in-use and
  stored inventories, should be taken at least
  twice each year
• Prior to the inventory, a meeting should be
  scheduled by the Controller to go through
  specific duties, procedures, teams, etc.
• Work in teams to ensure honesty and integrity
• When doing linen inventory or glassware/silverware
  inventory, make sure process has a stop point
  so that items are not recounted or missed

• Accounting for Losses
• Loss can occur because of theft or damage
• All department heads should maintain records
  disclosing quantities and identification of
  damage over time
• During the inventory, any broken or damaged
  pieces spotted by the counter should be set aside
  at no time should damaged inventory be included
  in the count

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Quality Control

• Quality control is the assignment of checking
  quality to the last person involved in the
  preparation of a product or service
• Total Quality Control (TQC) or Total Quality
  Management (TQM) is a system for integrating the
  quality-development, quality-maintenance and
  quality-improvement efforts of the various groups
  in an organization to provide service at the most
  economical levels that ensure full customer
  satisfaction

• To practice TQC is to develop, design, produce
  and service a quality product thats economical,
  useful and always satisfactory to the customer
• Concerns addressed by quality planning include
• Establishing quality guidelines
• Building quality into all policies and procedures
• Procuring only quality products
• Ensuring in-process and finished product quality
• Following inspection guidelines
• Handling and following up on customer complaints
• Educating and training for quality

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Quality Control (continued)

• Principles behind TQC include
• Quality is what the customer says it is
• Quality is a way of managing
• Quality and innovation are mutually dependent
• Quality requires continuous improvement
• Quality involved a complete system connection
  customers and suppliers

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Summary

• Controls are designed to evaluate actual
  performance, compare actual performance to goals
  and to take action on any differences
• Controls are divided into
• Preliminary, concurrent and feedback
• Front Office Accounting is a complicated system
  of vouchers, journals, ledgers and folios in
  conjunction with night auditor work to keep
  everything in line and balanced
• Night auditor is an important and intensive
  position to ensure balanced accounting
• Accounts payable and receivable are also
  important in a hotels financial destiny
• Inventory control helps keep the hotel successful
  and catch theft or excessive damage which can be
  costly
• Total Quality Control (TQC) separates the great
  hotels from the average hotels

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Night Audit

• A daily comparison of
• Guest and Non-guest Accounts with
• Revenue Center Transactions

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Functions Of The Night Audit

• 1. Verify posted account entries
• 2. Balance all front office accounts
• 3. Resolve room status discrepancies
• 4. Monitor guest credit restrictions
• 5. Produce reports

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Night Audit

• The night audit focuses on two areas
• 1. The discovery and correction of front office
  accounting Errors
• 2. The creation of accounting and management
  Reports

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Night Audit

• Audit Work Time
• Time from beginning to end of night audit.
• End of Day is when the audit begins.
• Transactions received during this time are held
  and posted once the audit is completed.
• Audit Trail
• Flow of source documents which details each step
  in the processing of a transaction.
• Use cash register tapes as a cross-reference.

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Night Audit

• Bucket Check
• Cross check folios with housekeeping report and
  room rack.
• Make sure all occupied rooms are charged.
• Audit is complete when
• Totals for all guest, non-guest and departmental
  accounts are in balance.
• If it is out of balance, you have to find it!!

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Night Audit Process

• 1. Complete Outstanding Postings
• First step in the night audit process
• Post all transactions before End of Day
• 2. Reconcile Room Status Discrepancies
• Perform a Bucket Check
• Errors can lead to lost revenue
• Not a problem in fully-automated hotels

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Night Audit Process

• 3. Balance All Departments
• Trial Balance - Balance front office accounts
  with departmental transactions.
• 4. Verify Room Rates No-Shows
• Room Revenue Count Report
• Compares rack rate to actual rate
• No-shows
• Check Duplicates and Misspellings

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Night Audit Process

• 5. Post Room Tax
• Semi-automated system
• Post room tax separately for every room
• 6. Prepare Distribute Reports
• Distribution of reports is the final step in the
  night audit process.
• 7. Clear or Back-Up the System
• Clear Semi-automated system
• Back-Up Fully-automated system

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Night Audit Reports

• Department Detail Summary Report
• Verifies that all transactions were properly
  posted
• High Balance Report
• Identifies guest and non-guest accounts that are
  approaching the hotels credit limit.
• Daily Operations Report
• The most important outcome of the night audit.
• Summarizes the days business and provides hotel
  operating statistics.

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U.S. Lodging Statistics

• City Rooms Occ ADR
• Las Vegas 120,294 88.1 67.03
• Orlando 94,281 78.3 85.97
• LA/LB 80,706 70.5 88.99
• Atlanta 75,318 67.2 78.74
• Chicago 73,424 70.9 107.16

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Common Errors Corrected During The Night Audit

• Balance Pickup Errors
• Incorrectly enter the folios previous balance
• Does not happen with fully automated systems
• Transposition Errors
• Transaction numbers are reversed
• Post 25 instead of 52
• Subtract numbers and divide by 9
• 52 - 25 27
• 27/ 9 3 (Whole number)