Managing Front Office Operations 9th Ed. Chapter 11: The Front Office Audit

1. Chapter 11: The Front Office Audit
Competencies for The Front Office Audit
1. Identify the functions of the front office audit.
2. Identify the steps in the front office audit process.
3. Explain the function of a system update and describe
centralized front office audits.
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2. Chapter 11: The Front Office Audit
Front Office Audit Functions
• Verify posted entries to guest/non-guest accounts
• Balance all front office accounts
• Resolve room status and rate discrepancies
• Review guest credit transactions against established limits
• Generate operational and managerial reports
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3. Chapter 11: The Front Office Audit
Front Office Auditor Duties
• Tracks standard operating statistics
Room revenues
Occupancy percentages
Other statistics
• Summarizes daily transactions
Cash
Credit card
Debit card
Gift card
Other transactions Continued
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4. Chapter 11: The Front Office Audit
Front Office Auditor Duties
• Reconciles account postings with departmental source
Continued from previous slide…
documentation
• Summarizes hotel’s financial performance for the day
• Produces reports for management
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5. Chapter 11: The Front Office Audit
Establishing an End of Day
• Each hotel must decide what time will be considered the end
of its accounting (or hotel) day.
• An “end of day” is simply an arbitrary stopping point for the
business day.
• The front office manager must establish an end of day so that
the front office audit can be considered complete through a
specific, consistent point in time.
• Usually, the closing time of hotel revenue outlets determines
the property’s end of day.
Continued
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6. Chapter 11: The Front Office Audit
Establishing an End of Day
Continued from previous slide…
• For hotels with 24-hour retail outlets, the end of day is typically
when a majority of the outlets no longer have frequent
transaction activity.
• Typically, the business day ends when the front office audit
begins.
• Transactions that occur while the audit is taking place are
considered part of the next business day.
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7. Chapter 11: The Front Office Audit
Cross-Referencing
• Hotel departments may generate paperwork to document
transactions.
• For each revenue center transaction, the originating revenue center
classifies and records the transaction type (cash, charge, or paid-out)
and its monetary value.
• Front office personnel may review automated postings to ensure
that the appropriate guest or non-guest folio has been properly
accessed.
• Revenue centers not interfaced to the front office system may need
to use a voucher or other form of documentation to communicate
transactional data to the front office staff for posting. Continued
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8. Chapter 11: The Front Office Audit
Cross-Referencing
• A front office accounting system depends on system interfaces and
Continued from previous slide…
transactional documentation to establish accurate records and
maintain operational controls.
• An accounting system should provide independent supporting
documentation to verify each transaction. In a non-automated
operation, supporting documents (restaurant guest check, front
office guest folio, etc.) provide cross-reference information.
• A “bucket check” ensures that accurate room rates have been
posted for all occupied rooms and helps reduce occupancy errors.
• The auditor’s review of daily postings reconciles front office
accounts with revenue center and departmental records.
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9. Chapter 11: The Front Office Audit
Account Integrity
• Sound internal control techniques help ensure the accuracy,
completeness, and integrity of front office accounting procedures.
• Internal control techniques include cash control and the separation
of duties.
• Different front office staff members should post, verify, and collect
sales transactions at the front desk. No single individual should be
responsible for accounting for all phases of a transaction.
• The front office auditor establishes guest and non-guest account
integrity by cross-referencing account postings with departmental
source documentation.
• An audit is complete with the totals for guest, non-guest, and
departmental accounts are “in balance” (i.e., proven correct).
Continued
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10. Chapter 11: The Front Office Audit
Account Integrity
Continued from previous slide…
• As long as the audit presents an “out-of-balance” position, the
audit is considered incomplete.
• An out-of-balance position exists when the charges (debits)
and credits posted to guest and non-guest accounts
throughout the day do not match the debits and credits
posted to the departmental revenue sources.
• An out-of-balance condition may require a thorough review of
all account transactions, statements, vouchers, and other
support documents.
• With a fully automated system, out-of-balance positions are
rare.
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11. Chapter 11: The Front Office Audit
Guest Credit Monitoring
• Software responsible for monitoring the credit limits of guest and
non-guest accounts helps maintain the integrity of the front office
accounting system.
• Establishing credit limits depends on many factors, such as payment
card company floor limits, the hotel’s house limit, and the guest’s
reputation as a potential credit risk.
• At the close of each business day the front office auditor should
identify guest and non-guest accounts that have reached or
exceeded their credit limits; these accounts are called “high-balance
accounts.”
• A report listing high balance accounts should be prepared for
appropriate action by management.
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12. Chapter 11: The Front Office Audit
Audit Posting Formula
Previous balance + debits – credits = net outstanding balance.
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13. Chapter 11: The Front Office Audit
Daily and Supplemental Transcripts
• A daily transcript is a detailed report of guest accounts that
summarizes and updates those guest accounts that had
transactional activity on that particular day.
• A supplemental transcript may track the day’s transactional
activity for non-guest accounts.
• Together, the daily transcript and supplemental transcript
detail all transactions occurring on a single hotel day.
• Data appearing on a system-produced daily transcript is
typically detailed by revenue center, transaction type, and
transaction total.
Continued
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14. Chapter 11: The Front Office Audit
Daily and Supplemental Transcripts
• The daily transcript and the supplemental transcript form the
Continued from previous slide…
basis for a consolidated report of front office accounting
transactions from which revenue center totals can be checked.
• Daily and supplemental transcripts are simply electronic
spreadsheets designed to eliminate posting discrepancies.
• Daily and supplemental transcripts can facilitate the front office
audit routine by identifying out-of-balance figures in advance of
a detailed review.
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15. Chapter 11: The Front Office Audit
Front Office Automation
• Front office software modules of a front office system can be
interfaced with point-of-sale equipment, call accounting systems, in-room
entertainment devices, and other revenue sources for timely,
accurate, and automatic postings to electronic guest and non-guest
account folios.
• Automated systems allow the front office auditor to spend more time
auditing transactions and analyzing front office activities and less time
performing routine postings and bookkeeping entries.
• An automated system may retain previous balance information for
guest and non-guest accounts, along with appropriate transactional
details, in an electronic database.
• An automated system performs numerous mathematical verifications
to ensure postings are correct.
Continued
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16. Chapter 11: The Front Office Audit
Front Office Automation
• Front office automated systems can organize, compile, and
Continued from previous slide…
print records faster than can be done manually.
• During an audit, an automated system can process a large
quantity of data, perform numerous computations, and
generate accurate account totals.
• Automated system updates are run daily to establish an
audited end of day and allow for report production, file
reorganization, and system maintenance.
• Front office automated systems offer rapid access to
information, enabling front office managers to more
knowledgeably plan, organize, and direct operations.
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17. Chapter 11: The Front Office Audit
The Front Office Audit Process
1. Complete outstanding postings
2. Reconcile room status discrepancies
3. Verify room rates
4. Balance all departmental accounts
5. Verify no-show reservations
6. Post room rates and taxes
7. Prepare reports
8. Prepare cash receipts for deposit
9. Perform system back-up routine
10. Distribute reports
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18. Chapter 11: The Front Office Audit
Complete Outstanding Postings
• One 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 all transactions be accurately posted and
accounted for.
• Posting errors lead to discrepancies and delays at check-out.
• The front office auditor must confirm that all transactions
have been posted before starting the audit routine.
Continued
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19. Chapter 11: The Front Office Audit
Complete Outstanding Postings
• The auditor must verify that all vouchers for revenue center
Continued from previous slide…
transactions have been posted.
• Outstanding telephone charges may require manual posting.
• With automated systems, revenue center totals can be
compared to totals reported by the front office accounting
system; if the figures are identical, the systems are in balance.
• If the figures are not identical, the auditor must look for
transactions that have been omitted or improperly posted.
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20. Chapter 11: The Front Office Audit
Reconcile Room Status Discrepancies
• Room status discrepancies must be resolved quickly to avoid
confusion at the front desk and lost business.
• The front office system must maintain current and accurate
room status information to determine the number and types of
rooms still available for sale.
• The housekeeping department typically requires staff to record
the perceived status of guestrooms as they are serviced.
• The auditor must review front office and housekeeping reports
to reconcile and finalize the occupancy status of all guestrooms
on a given night.
Continued
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21. Chapter 11: The Front Office Audit
Reconcile Room Status Discrepancies
• If housekeeping reports a room as vacant, but the front office
Continued from previous slide…
considers it occupied, the auditor should search for an active
guestroom folio and registration record, and verify that the guest has
indeed left the hotel.
• If the guest has left the hotel, the auditor should process the check-out
and set the folio aside for front office management review and
follow-up. The room should then be recorded as vacant in the system.
• The auditor should check guest folios, housekeeping reports, and
room status reports to make sure that all three are consistent.
• Few, if any, room status discrepancies should occur in an automated
front office system.
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22. Chapter 11: The Front Office Audit
Verify Room Rates
• Verifying room rates is usually done at the same time as reconciling
room status.
• The front office auditor will review a system-generated room report to
check guestroom rack rates (standard rates) against actual rates (what
the rooms actually were rented for) and analyze room revenues.
• Guestroom rate verification is usually performed by comparing the
room rate in the registration record with the room rate in the front
office system. (Any changes made to the guestroom rate would happen
during or after check-in.)
• During room revenue analysis, the actual room revenue posted in the
system is compared with the rack rate of the rooms occupied for the
night.
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23. Chapter 11: The Front Office Audit
Balance All Departmental Accounts
• It is considered more efficient to balance all departmental
accounts first, then determine individual posting errors within
an out-of-balance department.
• The front office auditor typically balances all revenue center
departments using source documents that originated in the
revenue center.
• The auditor seeks to balance all front office accounts against
departmental transaction information.
• Vouchers received electronically or manually at the front desk
are totaled and compared with revenue center summaries.
Continued
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24. Chapter 11: The Front Office Audit
Balance All Departmental Accounts
• When the front office accounting system is out of balance, the
Continued from previous slide…
correctness and thoroughness of account postings must be
investigated. A detailed department audit (by shift or cashier) may be
conducted and individual postings reviewed until the error or errors are
detected and corrected.
• The process used to balance revenue center departments is often called
the “trial balance.” A trial balance is a test of the front office accounts
to confirm proper balancing before the final audit.
• The front office system will normally generate a trial balance before
initiating final audit reports. The trial balance usually uncovers
corrections or adjustments that must be made during the audit process.
• A mathematical balance in guest and non-guest accounts against
departmental totals does not necessarily mean that the proper
accounts were selected for posting.
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25. Chapter 11: The Front Office 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 a front office system posting of no-show charges,
the auditor must verify that the reservation was guaranteed and
the guest failed to register with the hotel.
• The auditor must check that a duplicate reservation was not
made for the “no-show” guest, or that the guest’s name was not
misspelled.
Continued
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26. Chapter 11: The Front Office Audit
Verify No-Show Reservations
• No-show billings must be handled with extreme care. A front
Continued from previous slide…
desk agent who does not record cancellations properly may
cause guests to be billed incorrectly.
• Incorrect billings may cause payment card companies to
reevaluate their legal agreement and relationship with the hotel.
• An incorrectly billed guest may not return to the hotel, and if a
travel agency or other intermediary was involved in helping the
guest make the reservation, the hotel may lose the travel
intermediary as a client as well.
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27. Chapter 11: The Front Office Audit
Post Room Rates and Taxes
• The automatic posting of guestroom rates and room taxes to
guest folios typically occurs at the hotel’s end of day.
• Once guestroom rates and taxes are posted, a rate and tax
report may be generated for front office management review.
• The ability to electronically post room rates and room taxes is
one of the most frequently cited advantages of an automated
front office system.
Continued
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28. Chapter 11: The Front Office Audit
Post Room Rates and Taxes
• Once the front office initiates guestroom rate postings, the
Continued from previous slide…
system auto-posts rates and taxes to the appropriate
electronic folios.
• Some hotels pre-set their front office systems to post daily
recurring charges, such as occupancy taxes (in those
communities who impose them), valet parking fees, or
mandatory gratuities.
• Auto-posting charges saves front office audit time and
improves accuracy.
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29. Chapter 11: The Front Office Audit
Prepare Reports
• The front office auditor typically prepares reports for
management review, such as the final department detail and
summary reports, the daily operations report, the high
balance report, and other reports specific to the property.
• Final department detail and summary reports help prove that
transactions were properly posed and accounted for.
Continued
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30. Chapter 11: The Front Office Audit
Prepare Reports
• The daily operations report summarizes the day’s business
Continued from previous slide…
and is considered the most important product of the front
office audit.
• The high balance report identifies guests whose charges are
approaching their credit limits.
• The front office system may be programmed to produce a
variety of other management reports on demand: daily
summary reports or flash reports, group sales reports,
frequent guest reports, VIP reports, and so on.
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31. Chapter 11: The Front Office 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, 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.
Continued
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32. Chapter 11: The Front Office Audit
Prepare Cash Receipts for Deposit
• The hotel may require the front desk cashier to deposit cash
Continued from previous slide…
at the end of each shift without knowing the value of cash
receipts the system has recorded (that is, make a “blind
drop”).
• Blind drops are used when management is concerned that
employees may not be reporting all cash received.
• When a blind drop is used, the auditor compares system
totals per cashier with the cashier drop document; variances
are reported to management.
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33. Chapter 11: The Front Office Audit
Perform System Back-Up Routine
• System back-up routines are performed in hotels that have
automated systems.
• Normally, at least two guest lists are printed for back-up and
emergency use: one for front desk staff and one for the
telephone switchboard operator. A guest list may be printed
for other hotel departments as well (such as the security
department).
• Other reports that may be printed: a room status report,
guest ledger report, front office activity report, next day’s
registration report, and disabled guest report.
Continued
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34. Chapter 11: The Front Office Audit
Perform System Back-Up Routine
• System-generated front office information should also be
Continued from previous slide…
backed up onto a DVD or other media.
• A system back-up should be conducted after each audit and
stored in a safe place.
• Many front office systems have two types of back-ups: a daily
back-up and system back-up.
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35. Chapter 11: The Front Office Audit
Distribute Reports
• Due to the sensitive and confidential nature of front office
information, the front office auditor must promptly deliver
the front office reports to authorized individuals.
• The distribution of front office audit reports is the final step in
the front office audit routine.
• Front office managers can make more informed decisions if
front office audit reports are completed accurately and
delivered on a timely basis.
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36. Chapter 11: The Front Office Audit
System Update
• A system update in a front office accounting system
accomplishes many of the functions in the audit routine.
• System updates are performed daily to enable system file
reorganization, system maintenance, and report production,
as well as to provide an end-of-day closure.
• Since front office systems audit transactional postings as they
occur, there may be little or no need for the front office
auditor to perform account postings.
• The front office system may be connected to revenue centers
for automatic postings, enabling the system to monitor
charges made at revenue outlets throughout the hotel.
Continued
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37. Chapter 11: The Front Office Audit
System Update
• The auditor should routinely review system interface
Continued from previous slide…
procedures to ensure the proper handling of automatically
posted transactions from revenue outlets.
• Room status discrepancies are rare in an automated front
office environment; the system can be programmed to
automatically flag discrepancies when they occur so that they
can be quickly dealt with.
• In some front office systems, the balancing of front office and
department accounts is continuously monitored in real time.
• Front office systems can be programmed to produce a variety
of reports for management.
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38. Chapter 11: The Front Office Audit
Centralized Front Office Audits
• Front office automation significantly simplifies the front office
audit process and allows multiple audit tests to be performed
simultaneously.
• Centralization of multiple audits reduces staffing
requirements for the participating properties and provides a
basis for consolidated reporting.
• Centralized front office audits usually work best in limited-service
hotels where there are few revenue outlets and
operating departments are closed before the start of the audit
process.
Continued
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39. Chapter 11: The Front Office Audit
Centralized Front Office Audits
• At the central location, the auditor can obtain all the
Continued from previous slide…
information necessary to complete the audit routine over
secure data lines connecting participating hotels.
• The auditor can post corrective entries, back up the system,
and produce reports for distribution to each hotel.
• Being able to quickly produce aggregate or consolidated
reports for a group of hotels is especially beneficial to
managers of chain properties.
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