Night Audit Process, IHM Notes, Front Office Operations, BHMCT Notes

Night Audit Process, IHM Notes
Astro Motive Astrology by Astrologer Dr. C K Singh

Night Audit Process, IHM Notes, Front Office Operations, BHMCT Notes, The Night Audit Process, Verify Room Rates, Prepare Reports Post Room Rates, The Night Audit Process

The Night Audit Process

The front office night audit focuses on two areas:

(1) the discovery and correction of front office accounting errors, and (2) the creation of accounting and management reports. From an accounting point of view, a night audit ensures the integrity of front office accounts through a cross-referencing process. Guest and non-guest accounts are compared with data entries and source documents from revenue centers to prove individual transaction entries and account totals. Discrepancies found during a front office audit must be corrected so that the front office accounting system is in balance. From a management reporting point of view, the front office audit provides important operating information, such as average rate, revenue per available room (RevPAR), occupancy percentage, usage of package plans and other marketing programs, and the number of group rooms and complimentary (no-charge) rooms occupied.

Nearly all front office accounting systems perform a continuous system audit routine and provide summary reports at predetermined times as well as on demand. The degree of scrutiny required during the front office audit process depends on the frequency of errors and the volume of transactions to be reviewed. While the first of these factors relates to the quality of data entry work, the second correlates with the size and complexity of the hotel. Large, complex hotels typically require closer account scrutiny due to the high volume of transactions posted.

The following steps are common to the sequence of a front office audit:

Complete outstanding postings
Reconcile room status discrepancies
Verify room rates
Balance all departmental accounts
Verify no-show reservations
Post room rates and taxes
prepare reports
Prepare cash receipts for deposit
Clear or back up the system
Distribute reports

In an automated system update, several of these steps may be condensed or combined. The following sections present front office audit procedures from an operational perspective. Astro Motive Astrology by Astrologer Dr. C K Singh

Complete Outstanding Postings.

Once of the primary functions of the front office audit is to ensure that all transactions affecting guest and non-guest accounts have been posted to appropriate folios. It is important that the system accurately posts and accounts for all transactions as they occur. Posting errors are problematic and can lead to discrepancies and delay at check-out. This can prove time-consuming, since the debated charges will have to be researched for explanation.

While effective front office practice dictates that transactions are posted to the proper accounts as they occur, the front office auditor must confirm that all transactions have been posted before starting the audit routine. This may mean waiting until all food and beverage outlets, including banquet facilities, are closed. Incomplete postings will result in errors in account balancing and complicate summary reporting. Astro Motive Astrology by Astrologer Dr. C K Singh

In addition to completing the posting function, the front office auditor will need to verify that all vouchers for revenue center transactions are posted. If the hotel does not have an interfaced automated telephone call accounting system, outstanding telephone charges may require manual posting. If the hotel supports point-of-sale or call accounting system interfaces to the front office accounting system, then the previously posted totals should be verified to ensure that all outlet charges have been posted. This can be done by generating printed posting reports from the interfaced systems and comparing them with the totals reported by the front office accounting system. If the figures are identical, the systems are in balance. If they are not the same, the front office auditor should compare transactions between the two systems to identify the transactions that have been omitted or improperly posted. Night Audit

Reconcile Room Status Discrepancies

Room status discrepancies must be resolved in a timely manner, since imbalances can lead to lost business and cause confusion in the front office. Errors in room status can led to lost and uncollectible room revenues and omissions in account postings. The front office system must maintain current and accurate room status information to effectively determine the number and types of rooms that remain available for sale. For example, if a guest checks out but the front desk agent fails to properly complete the check-out procedure, the guest’s room may appear elsewhere in the system as occupied when it is really vacant. This error in procedure could prevent the room from being sold until the error is discovered and corrected.

To minimize errors, housekeeping departments typically require staff to record the perceived status of all rooms as they are serviced. While a preliminary reconciliation of the housekeeping and front office guestroom status is usually done on the shift before the front office audit, the auditor must review front office and housekeeping reports to reconcile and finalize the occupancy status of all rooms for a given night. If the housekeeping report indicates that a room is vacant, but the front office believes it is occupied, the auditor should search for an active electronic folio and registration card. If the folio exists and has a current outstanding balance, there are several possibilities: Night Audit Astro Motive Astrology by Astrologer Dr. C K Singh

A guest may have departed but forgotten to check out.
A guest may be a skipper who left with no intention of checking out.
A front desk agent or cashier may not have properly closed the folio at checkout.

After verifying that the guest has left the hotel, the front office auditor should process the check-out and set the folio aside for front office management review and follow-up. If the folio has been settled, the front office room status system should be corrected to show that the room is vacant. The front office auditor should verify the guest folio against the housekeeping reports and room status reports to ensure that all three are consistent and in balance. The check-out process, which is typically a rooms management function, automatically monitors and updates the room’s status. Few, if any, room status discrepancies should occur in an automated front office system. Night Audit Astro Motive Astrology by Astrologer Dr. C K Singh

Verify Room Rates

This step is usually done at the same time as reconciling the room status, because they are both part of the bucket check and it is more efficient to perform both simultaneously. The front office auditor will need to review a system-generated room report. This report provides a means for analyzing room revenues, since it shows the rack rate (price) for each room and the actual rate at which the room was sold. If a room’s rack and actual rates do not match, the front office auditor should consider several factors: Night Audit

If the room is occupied by a member of a group or by a corporate-rate customer, is the discounted rate correct?
If the room is occupied by a guest with a package rate or on a special discount offered through the hotel’s reservation distribution channels, is the discounted rate correct? Astro Motive Astrology by Astrologer Dr. C K Singh
If there is only one guest in a room and the actual rate is approximately half the rack rate, is the guest part of a shared reservation? If he or she is, did the second guest register? Night Audit
If the room is complimentary, is there appropriate supporting back-up for the rate (for example, a complimentary room authorization form)?

This verification is usually done by comparing the registration form to the front office system record. The registration form provides a snapshot of the guest’s information, including room rate, at the time of check-in. Any changes made to the guest’s record would come during or after check-in, resulting in changes from the original record. The proper use of room revenue and count information is the foundation of room revenue analysis. The front office auditor may be required to produce this report for review by the front office management, since it provides a method for measuring room revenue potential against actual room revenue. The actual room revenue posted is compared with the rack rate of the rooms occupied for the night. This comparison may be shown as a percentage or as a dollar amount.

Balance All Departmental Accounts

The front office audit process can become quite complicated when errors are discovered. It is generally considered more efficient to balance all departmental accounts first and then look for individual posting errors within an out-of-balance department. Night Audit

The front office auditor typically balances all revenue center departments using source documents that originated in the revenue center. The front office auditor seeks to balance all front office accounts against departmental transaction information. Vouchers received at the front desk and other documents are totaled and compared with revenue center summaries. Source documents help resolve discrepancies as they arise. Night Audit Astro Motive Astrology by Astrologer Dr. C K Singh

When the front office accounting system is out of balance, the correctness and thoroughness of account postings must be investigated. A detailed department audit (by shift or by cashier) may be conducted and individual postings reviewed until the front office accounting error is corrected. Night Audit

The process used to balance the revenue center departments is often called the trial balance. The trial balance is a test of the front office accounts to see if they are in balance before the final audit is completed. The front office system may generate the trial balance before initiating final audit reports. The trial balance usually uncovers any corrections or adjustments that need to be made during the audit process. Front office auditors may prefer to perform the trial balance before the system posts the day’s room and tax charges. Doing so can simplify the final audit procedure. If the trial balance was correct and the final balance is wrong, the auditor can deduce that the error must relate to the room and tax posting.

It is important to note that a mathematical balance in guest and non-guest accounts against departmental totals does not necessarily mean that the proper accounts were selected for posting. Posting the correct amount to an incorrect account would still present an in-balance total. This type of error usually goes unnoticed until a guest has a problem with the validity of an entry on his or her statement.

Exhibit 3 presents a sample sequence of front office audit procedures useful in department balancing. Night Audit

Verify No-Show Reservations

The front office auditor may also be responsible for clearing the reservation file or filing and posting charges to no-show accounts. When initiating the electronic posting of no-show charges, the front office auditor must be careful to verify that the reservation was guaranteed and the guest never registered with the hotel. Sometimes duplicate reservations may be made for a guest or the guest’s name may be misspelled and another record accidentally created by the front office staff or system. If these are not identified by front office or reservations staff, the guest may actually arrive but appear to be a no-show under the second reservation.

No-show billings must be handled with extreme care. A front desk agent who does not record cancellations properly may cause clients to be billed incorrectly. Incorrect billing may lead the credit card company to reevaluate its legal agreements and relationship with the hotel. Incorrect billing may also cause the hotel to lose the guest’s future business and (if applicable) the business of the travel agency or intermediary that guaranteed the reservation. Front office staff must adhere to established no-show procedures when handling reservation cancellations or modifications. Night Audit Astro Motive Astrology by Astrologer Dr. C K Singh

Post Room Rates and Taxes

The automatic posting of rooms rates and room taxes to guest folios typically takes place at the end of day. Once room rates and taxes are posted, a room rate and tax report may be generated for front office management review. The ability to electronically post room rates and room taxes on demand is one of the most frequently cited advantages of an automated front office system. Once the front office initiates room rate postings, the system is capable of auto-posting rates and taxes to the appropriate electronic folios in a matter of minutes. System postings are highly reliable, since automatic charge postings are guaranteed to be accurate, with no chance for pickup, tax calculation, or posting errors. This feature is especially helpful to hotel located in municipalities that have bed or occupancy taxes in addition to a sales tax. Some hotels pre-set their front office systems to post daily recurring charges, such as valet parking or gratuities. Auto-posting these charges can save front office audit time and improve accuracy. Night Audit

Exhibit 3 Departmental Balancing Sequence

Sort vouchers by originating departments.
Consider each department’s vouchers

Separate the correction vouchers according to the departments they are to be applied against.
Total the corrections for each department.

After verifying each of the corrections with the departments affected, totals the correction vouchers. The corrections total must coincide with the correction figures on the front office shift report.
Consider the vouchers again.

Total the rest of the outstanding vouchers.
Check individual transaction values on the bottom of the voucher against the figure appearing on the department detail report.

The vouchers should agree with the corrected figures of the departments. If the totals do not agree with either figure, the error should be resolved before proceeding.

Verify that the date on the voucher is the current day’s date
Check off each individual posting against its support document (voucher) until the errors is found. This can be tedious if there are several errors. However, if the front office uses validating printers, a thorough check of the support document validations will help pinpoint errors.
Post any additional corrections or adjustments.
In a computerized system, revised individual shift reports can be printed after the corrections and adjustments have been made. In any operations mode, all of the backup data should be packaged for the accounting office to review.

Prepare Reports

The front office auditor typically prepares reports that indicate the status of front office activities and operations. Among those prepared for management review are the final department detail and summary reports, the daily operations report, the high balance report, and other reports specific to the property. Night Audit

Final department detail and summary reports are produced and maybe e filed along with their source documents for accounting division review. These reports help prove that all transactions were properly posted and accounted for.

The daily operations report summarizes the day’s business and provides insight into revenues, receivables, operating statistics and cash transactions related to the front office. This report is typically considered the most important outcome of the front office audit. The high balance report identifies guests whose charges are approaching an account credit limit designated by the hotel (the house limit).

The software of an automated front office system may be programmed to produce many management reports on demand. For example, the high balance report may be produced at any time during the day as a continuing check on guest transactions and account balances. Another important report is the daily summary, or flash report. The daily summary provides a snapshot of important operating statistics for the previous day, as well as month-to-date totals. Hotel managers find this summary report very informative and easy to read; they often read it at the start of a work shift. The daily summary may also show an occupancy and rate forecast for the new business day, alerting management to any changes that may have happened overnight. Night Audit Astro Motive Astrology by Astrologer Dr. C K Singh

In addition, automated front office systems can produce an assortment of specialty reports. For example, a group sales report can be produced for each group in the hotel, showing the number of rooms occupied by each group, the number of guests for each group, and the revenue generated by each group. This system-generated report helps the hotel sales department track group histories. The same type of report may be generated for guests on package plans or guests staying in the hotel due to a special promotion or advertising program. Other reports may list guests who stay frequently and guests who are VIPs. This type of marketing information can be automatically tracked, sorted, and reported. Night Audit

Prepare Cash Receipts for Deposit

The front office auditor frequently prepares a cash deposit voucher as part of the audit process. If front office cash receipts have not yet been deposited in a bank, the front office auditor compares the postings of cash payments and paid-outs (net cash receipts) with actual cash on hand. A copy of the front office cashier shift report may be included in the cash deposit envelope to support any overage, shortage, or due back balances. Since account and departmental balancing often involves cash transactions, accurate cash depositing may depend on an effective audit process.

Some hotels have the front desk cashiers deposit cash at the end of their shifts without knowing how much in cash receipts that the system has recorded for them. This is called a blind drop, since the cashier is not aware of the total that he or she should be depositing according to the system. Blind drops are used when hotel management is concerned that employees may not be reporting all cash received. When blind drops are used, the night auditor compares system totals per cashier with the actual cashier drop document. Variances are reported to the hotel general cashier, front office manager, or controller. Night Audit

Clear or Back Up the System

Since an automated system eliminates the need for a room rack, reservation cards, and a variety of other traditional front office forms and devices, front office accounting depends on the continuous functioning of the system. A system back-up in the front office audit routine is unique to an automated front office system. Back-up reports must be run and various media duplicated in a timely manner so that the front office can continue to rum smoothly. Night Audit

Normally, at least two guest lists are printed for back-up and emergency use; one for the front desk staff and one for the switchboard operator. Other guest lists may be printed for departments that don’t usually have access to the hotel’s front office system, such as the security department. A printed room status report enables front desk agents to identify vacant and ready rooms should the front office system, such as the security department. A printed room status report enables front desk agents to identify vacant and ready rooms should the front office system become inoperable. A guest ledger report can be generated, such as the one shown in Exhibit 4. This report contains the opening and closing account balances for all registered guests. A front office activity report can also be generated; such a report contains expected arrival, stay over, and departure information for several days (s ample activity report is shown in Exhibit 5). In some front office systems, the next day’s registration cards are pre-printed as part of the front office systems, the next day’s registration cards are pre-printed as part of the front office activity report. Due to requirements of the Americans with Disabilities Act, hotels must also keep track of guests with disabilities. One reason for this is to ensure that all disabled guests are accounted for in case of an emergency. This report is usually distributed to the various departments needing this information. Night Audit

System-generated front office information should also be copied (backed up) onto magnetic tape, optical tape, or other media, depending on the system configuration. A system back-up should be conducted after each audit and stored in a safe place. Many front office systems have two types of system back-up; a daily back-up (a copy of front office electronic files) and system back-up (eliminating account and transaction information deemed to no longer be of value). For example, expired guest folio accounts that are at least three days old may be deleted from active storage files and be archived. If an account must be researched in the future, it can be found in an archived storage file. Night Audit

Distribute Reports

Due to the sensitive and confidential nature of front office information, the front office auditor must promptly deliver appropriate reports to authorized individuals. The distribution of front office audit reports is the final step in the front office audit routine, and is important to efficient front office operations. Managers can make more informed decisions if all front office audit reports are completed accurately and delivered on time. Astro Motive Astrology by Astrologer Dr. C K Singh