UNIT 4 - Front Office Accounting
UNIT 4 - Front Office Accounting
UNIT 4 - Front Office Accounting
Contents to be discussed
• Main functions of the front office accounting
system.
• Different types of guest accounts.
• Procedures necessary in creation and
maintenance of guest accounts.
• Front office accounting cycle.
• Posting charges and credits to guest accounts.
• Verification of posting.
4.1. Introduction and its fundamentals
• The objective of a hotel is to provide facilities
and services for guests in return for money, to
make a profit.
Account transfer
1. Involves two different accounts and tend to
have offsetting impacts on subsequent account
balances.
when a guest offers to pay a charge posted on
another guest’s account
• Transfer voucher supports this.
• Decrease /reduction/ in balance on the
originating account.
• Increase in balance on destination account.
2. Account transfer may occur when a departing
guest wants to settle his account by credit
card.
• Guest account to non-guest account
VPO/visitor paid out /
• Used in a situation where guests’ request
services the hotel does not provide so, the
hotel pay out money on behalf of the guest for
services.
• Entered to a guest account as debit e.g. theater
ticket, sightseeing tour , postage stamps etc.
• Supported by cash advance voucher/paid out
voucher.
In summary, there are two types of posting
• There are two basic types of transactions that
are posted to a guest account: debit entries
and credit entries.
The most common debit items include:
• Room charge
• Restaurant/coffee shop
• Telephone
• Laundry
• Use of hotel facilities e.g. health centers,
business centers and transportation.
Credit entries
• Prepayments
• Payments for part of the bill during stay
• Payment for final settlement
• Amendments to the bill
Front office accounting cycle
• The first important function of the front office
accounting system is to maintain an accurate
and up-to-date record of all the financial
transactions between a hotel and a guest.
• Creation of accounts
• Maintenance of accounts
• Settlement of accounts
• E.g. Fig.
4.4. Internal control and account settlement
Involves
• Tracking transactions documentation.
• Verify account entries and balances
• Identifying vulnerability in the accounting system
Auditing – the process of verifying front office accounting records
for accuracy and completeness.
A primary set of front office accounting control procedures
involves the use of front office cashier banks.
Cash bank is an amount of cash assigned to a cashier, so that
he/she can handle the various transactions that occur during a
particular work shift.
• To make charge when guests settle their account.
• To process paid-outs.
• To provide other cash – related service during the shift.
• The bank limit- is the amount the bank should
have in it when it is issued at the beginning of the
shift.
• At the end of the shift, the cashier typically
separates out the amount of the initial bank, and
• Then places the remaining cash, checks, and
other negotiable items (e.g. paid out voucher)in a
specially designed cash voucher/front office cash
envelope.
• Monetary differences between the money placed
in the front office cash envelope and the cashier’s
net cash, receipts should be noted on the envelope
as overage, shortage, and due backs.
• Net cash receipt – are the amount of cash, checks, and other
negotiable items in the cashier’s drawer, minus the amount of initial
cash bank, plus the paid-outs.
• Overage – occurs when, after the initial bank is removed, the total
of cash, checks, negotiable/certificates that have cash value to a
hotel/ and paid outs in the cash drawer is greater than the net cash
receipts.
• A shortage – occurs when the total of the contents of the drawer is
less than the net cash receipt.
• A due back – occurs when a cashier pays out more than he/she
receives in other words, there is no enough cash in the drawer to
restore the initial bank.
• A special kind of due back may occur when a cashier accepts many
checks and large bills /are not useful for processing
transactions/during a shift.
• The bank limit- the amount the bank should have in
it when it is issued at the beginning of the shift.
• At the end of the shift, the cashier typically separates
out the amount of the initial bank.
• Places the remaining cash , checks and other
negotiable items/e.g. paid out vouchers in a f/o cash
envelop.
Settlement of account
• It is a collection of payment for outstanding account
balance.
• Involves bringing an account balance to zero.
• It is done by cash payment in full or transfer to an
approved credit billing /credit card account/ city
ledger.
Methods of handling guest accounts
• To ensure that guest accounts are accurate and current,
all guest’s credit or charge information must be
promptly communicated to the front office cashier for
posting.
1. Manually /preparing bill by hand/
2. Mechanically
3. By computer
• In large modern hotels, computers are widely used
because they are accurate and fast in the transfer of
credit or charge information.
• In addition, computers can be programmed to analyze
a hotel’s revenue in great detail and produce reports
for management in a very short period of time.
Handling of guest accounts by computer
• If a hotel is using a computer system, a guest account
will be created when the guest details are entered in to
the computer at check-in.
• The information will be stored in the memory of the
computer.
• Once a guest account is created, any subsequent debits
or credits may be posted directly to that account. This
can be done in a number of ways.
• Processor: some charges are posted by the computer
automatically: for example, the room charge /the
room rate which is recorded in the computer at check-
in/ can be automatically added to a guest’s account
each night by the computer.
• Charges can also be transferred directly from
computer terminals in other departments.
• For example, a waiter can enter a guest’s
breakfast charges by means of a small
computer terminal in the coffee shop.
• The charge will be then transferred to the main
processor at the front office and posted
directly on the guest’s account.
• E.g. Computer based front office accounting
system
Verifying posting
• To reduce errors in guest accounts and
prevent fraudulent staff practices, posting of
guest transactions are usually verified or
checked each day.
• This process is called auditing, and refers to
the process of checking the accuracy of the
guest accounts by balancing all departmental
accounts.
• During the auditing process the following are
usually carried out:
1. Posted entries are verified.
• Posted entries to each guest account are
checked to ensure that they have been charged
correctly.
• For example, if a guest has a telephone
charge on their account, a corresponding
amount should be listed for the room number
in the telephone revenue analysis.
• Any errors in posting should be corrected
immediately.
2. Accounts are balanced.
• All charges from different departments have to
be checked to ensure that they have been
correctly posted to guest’s accounts.
• E.g. the total charges stated by the coffee shop
cashier must equal the total coffee shop
charges on all of the guest’s accounts, as
recorded by front office.
3. Cash flow is checked
• This involves checking the cash and charges to
a guest’s account earned by each department,
as recorded on the department’s till/cash box,
against the amount of cash received by the
front office.
• The main purpose of this is to prevent any
fraudulent practices among staff.
• For example, the bar till may show sales of
drinks to be $ 150 in cash and $220 in signed
bills.
• The front desk must therefore, have issued a
cash receipt for the $ 150 and have $220
posted on guest counts against bar drinks.