Night Audit

Hotel Night Audit

1. [email protected] 1 NIGHT AUDIT/END OF DAY

2. Audit Meaning? An official inspection of an organization’s accounts, typically by an independent body Conduct an official financial inspection of a company or its accounts [email protected] 2

3. Why Audit? Auditing provides assurance to clients, owners, shareholders, Government, and creditors that company funds (money, material) are handled appropriately. ...no fraud, fudging or falsifications! Audit is a confirmation that books of accounts of a company are accurate (mathematically), genuine (factually) and legal (tax calculations are correct). [email protected] 3

4. Types of Audit [email protected] 4

5. Why Night Audit? Hotel runs non-stop. Large hotels, with high business levels, generate an enormous volume of transaction documents, that can not be checked once a year, like normal businesses. Customers of hotels are mostly strangers and some never return. Once a guest leaves the hotel, it is difficult to collect an unpaid account, even legally. Hotels also suffer from a Charge Back problem in Credit Card settlements, where the guest protests to the Bank that a charge is false, after leaving the hotel. E.g. Express Check-Out [email protected] 5

6. Therefore, the hotels must ensure that all accounts are exact and settled on time. Any mistake in guest account can ruin the hotel’s reputation. Any negligence could mean that revenue is lost forever. Employees may show dishonest tendencies. [email protected] 6

7. Hotel Night Audit: Definition A daily review, analysis, recapitulation and reporting of the financial data, facts and events to achieve the following three purposes: Accounts are true and error-free. Financial Health of the business is understood. Data is summarized meaningfully for management to take correct financial & operational decisions. [email protected] 7

8. The night audit is a daily review of guest accounts and non-guest accounts having activity , against revenue centre transaction information which helps guarantee accuracy in front office accounting. A successful audit will result in balanced accounts, accurate statements, appropriate credit monitoring and timely reports to management . [email protected] 8

9. Audit is concerned with Verification of posting Balancing of accounts Resolving room status discrepancies Monitoring credit limitations Producing operational reports [email protected] 9

10. THE ROLE OF THE NIGHT AUDITOR The role of night auditor requires attention to accounting detail, procedural controls, and guest credit restrictions. The auditor should be aware of the nature of cash transactions affecting the front office. The auditor tracks room revenues, occupancy percentages, and other front office statistics and prepares a summary of cash, cheques and credit card activities. These data reflect the hotel’s financial performance for the day. The night auditor summarizes the results of operations for reporting to management. [email protected] 10

11. Night Audit Procedure: Major Tasks Post room tariff plus taxes in all folios for current day. Reconcile (compare to match, voucher amount and folio amount) posting of F & B charges into respective guest folio. Reconcile , for all points-of-sale departments, sales summary sheet with copy of vouchers. Verify “No Show” reservations and post retention charge in guaranteed reservation folios. [email protected] 11

12. Resolve any discrepancy\difference between room occupancy data of FO & HK. Calculate total revenue from rooms, points-of-sale (separately) and finally, whole hotel. Prepare a list of accounts which are near or over permissible credit limit (high balance report). [email protected] 12

13. In case of small and medium size hotels, the night auditor, in addition to his normal duties may also act as night manager or night receptionist and may be required to perform the functions of 'graveyard' shift . He usually works from 11.00 pm to 8.00 a.m. next day. [email protected] 13

14. Sequence of Audit Guest Account City Account “Point-of-Sale” Sales Summary Sheet [email protected] 14

15. Transactions That are Checked Room Tariff Tax F & B Checks (Restaurant & Bar Credit Bills) Miscellaneous Charges (Laundry, Spa, Telephone, VPO, Business Centre etc.) Allowance (Rebate\Deduction\Compensation) Incentive (monetary reward for better staff performance) [email protected] 15

16. Transactions That are Checked Commission (Incentive for sales promotion to an outside agency) Complimentary (free goods or services) VPO (money paid by hotel on guest behalf to an outsider) Discount (Tool for increasing sales during offseason) Upgrade (Marketing tool of hotel promotion, by assigning a room of higher value to guest) [email protected] 16

17. Transactions That are Checked Walking a guest (denying room to a guaranteed reservation) Account Transfer (balance transferred, from one guest account to another) Room Transfer (Change of room) Coupons & Vouchers for sales promotion [email protected] 17

18. Night Audit Reports Department Detail & Summary Report: Total revenue, allowances, discounts, complimentary and transfers High Balance Report: Accounts (Resident & City) near or over the permissible credit limit, actions taken on yesterday’s high balance accounts and the result of those actions. Daily Operations Report: Occupancy % (FIT, GIT, Domestic, Foreign, Bed), House count, Average daily Rate, RevPAR, OOO\OOS rooms, Variance between actual & budget figures, etc. [email protected] 18

19. Calculating Account balance Yesterday's outstanding balance + Today’s debits (purchases) – Today’s credits (payments) = Today’s outstanding balance [email protected] 19

20. Calculating Occupancy % [email protected] 20

21. Calculating Occupancy % [email protected] 21

22. Cross Checking For every revenue generating transaction section of the hotel the originating revenue centre documents the type i.e. cash charge or paid outs and the monetary value of the transaction. Front office posts to appropriate guest or non-guest account. Transactional documentation identifies the nature and amount of the transaction and is the basis for data input into accounting system. Night audit should cross check the information on room revenue (which he receives from folio bucket) (Bucket check) with room rate posting on guest folios against housekeeping reports of occupied rooms and front office room rack to avoid any occupancy error etc. [email protected] 22

23. Account Integrity Proper internal control means correct verification posting and collection for sales transaction by front office staff members. If all activities such as selling of room posting and verification of charges, and collection were done by the same person, then any error carried out by him can never be detected and this will cause embarrassment and possible dispute at the time of departure of the guest. Hence distribution of duties, for example, one person to sell, another to enter, another to collect and another to verify the transaction should be done. [email protected] 23

24. Credit Monitoring Various factors such as credit card company, credit limit/floor limit, guest's credit profile (status/reputation), hotel's house credit limits, etc. are instrumental in fixing line of credit with guest by the hotel Guests with credit cards are given credit up to the limit of his card. which is fixed by the credit card company and guests with no credit card or with some other credit facilities are given credit only up-to the house limit which is fixed by the hotel as per hotel policy and rules. [email protected] 24

25. High risk or high balance account Where the account reaches credit or house limit the auditor informs the management to communicate to the guest and request the guest for partial or full payment till that date the management may also request the credit card company to authorize an additional credit facility to the guest. At the end of each business day, the night auditor should identify each account, which have either reached or exceeded their assigned credit limit. A list of all such accounts called 'High Balance Report ' is made and such account are called High Balance Account [email protected] 25

26. A simple basic posting formula given below should be used Previous Balance + Debits - Credits = Net Outstanding Balance [email protected] 26

27. Night Auditor as Night Receptionist Process late check-ins Process early check-outs Monitor fire alarm system Act as Manager-on-duty Handle emergencies [email protected] 27

28. Night Auditor Profile Accounts background Hotel management degree Temporary posting (no one likes continuous night shifts) Reports to FOM & Chief Accountant [email protected] 28

29. The night auditing involves following steps in sequence 1. Complete outstanding posting 3. Balance all department 5. Verify no show reservations 7. Prepare reports 9. Back-up system 2. Recognize rooms status discrepancy 4. Verify room racks 6. Post room rates and taxes 8. Deposit cash 10. Distribute reports [email protected] 29

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31. Operating Modes [email protected] 31 Non-Automated Semi-Automated Fully Automated

32. Non-automated Daily and supplemental transcripts, Guest and non-guest folio, Front office cash sheets, and Audit recapitulation sheet and transactional voucher produced by hotel's revenue centre are sent to front desk [email protected] 32

33. Semi-automated [email protected] 33 These machines are only capable of producing a limited number of departmental totals; they don't interface with other POS systems and don't retain folio balances

34. Semi-automated [email protected] 34 These systems retain folio balance to eliminate the need to enter the previous balance (pick up balance) and error associated with those entries. Many electronic posting machines can store previous account balances, which help eliminate ‘pick up error’. Forms produced in a semi-automatic system are : 1. Front office cash report, and 2. Night audit summary report (D-card) This card shows the opening balance of the system, provides a running record of all charges and credits posting through the machine and shows a final balance

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37. Fully Automated A fully automated system can be interfaced with POS equipment, telephone switches and call accounting system for automatic postings from these devices directly to guest or non-guest folios. An out-of-balance situation usually indicates internal computer problem or an unusual data handling error. More details of this have been explained in the chapter on Computer Fidelio System. Many computers based front office systems can perform nearly continuous system audit routine and provide summary reports at a predetermined time providing greater flexibility in front office operation. [email protected] 37

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39. Tracking transactions. A transaction can be one of the following (a) Cash payment (b) Charge purchase (c) Account correction (d) Account allowance (e) Account transfer (f) Account cash advance [email protected] 39

40. Cash payment Payments made by guest or non-resident guests. It decreases the payable balance of guest. A supporting cash voucher is made. For any cash purchase made by the guest other than front office, no entry is made on account folio, and For such transaction, the account is created, increased, settled and closed at the point of sales. [email protected] 40

41. Charge Purchase A deffered payment transaction. In this case the guest receives services/goods but does not pay for it at the time of purchase. In such cases the point of sales must immediately communicated to front office for posting a charge voucher which is prepared at the point of sales transmitted by a runner in manual system. [email protected] 41

42. Account Correction A posting error, rectified on the same day. A correction voucher is made. [email protected] 42

43. Account allowance This involves two types of transactions. One type of allowance is for compensation for poor service/product and rebate or discount coupons are issued and second to correct posting error found after the close of the day. In this case also an allowance voucher is prepared which is authorized by the management. [email protected] 43

44. Account allowance This involves two types of transactions. One type of allowance is for compensation for poor service/product and rebate or discount coupons are issued and second to correct posting error found after the close of the day. In this case also an allowance voucher is prepared which is authorized by the management. [email protected] 44

45. Account transfer When one guest agrees to pay the account of some other guest. In this case the balance of original account is reduced and the balance of the destination bill is increased. In this case a transfer voucher is made. [email protected] 45

46. Account Cash Advance Cash disbursed by hotel on behalf of guest. VPO voucher is made. [email protected] 46

47. THANK YOU [email protected] 47