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Front Office Accounting and Night Auditing

Welcome to our comprehensive guide on front office accounting and night auditing in hotel management. This resource is designed to help students studying hospitality and tourism understand the intricacies of financial operations within the front desk area of a hotel.

Table of Contents​

  1. Introduction to Front Office Accounting
  2. Types of Front Office Accounts
  3. Cash Handling Procedures
  4. Credit Card Transactions
  5. Night Audit Process
  6. Night Auditor Roles and Responsibilities
  7. Common Night Audit Reports
  8. Balancing Front Office Accounts
  9. Troubleshooting Common Issues
  10. Best Practices for Front Office Accounting

1. Introduction to Front Office Accounting​

Front office accounting refers to the financial transactions and record-keeping processes that occur within the front desk area of a hotel. It encompasses all cash and credit transactions made during the day, including room reservations, payments, and other guest-related charges.

Importance of Accurate Front Office Accounting​

Accurate front office accounting is crucial for several reasons:

  • Maintains financial integrity
  • Ensures compliance with accounting standards
  • Provides accurate financial reports for management decisions
  • Helps identify discrepancies and fraud early

2. Types of Front Office Accounts​

In front office accounting, there are typically two main types of accounts:

  1. Cash Account: Records all cash received and disbursed during the front desk operations.
  2. Ledger Account: Tracks all non-cash transactions, such as room reservations, billing to guests' credit cards, and other guest-related services charged to the room.

Each account type requires specific procedures for recording and balancing.

3. Cash Handling Procedures​

Cash handling is one of the most critical aspects of front office accounting. Here are some key points to remember:

  • Count cash at the beginning and end of each shift.
  • Use tamper-evident bags for storing cash.
  • Balance cash drawers regularly throughout the day.
  • Follow proper change-making procedures.
  • Secure cash in a safe or vault at the end of the shift.

Example: Proper Change-Making Procedure​

When making change, always use the largest denomination bill first. For example:

  • A guest gives a $100 bill to pay for a $62 transaction.
  • Start with a $20 bill, then a $10, and then the remaining $8 in smaller denominations.

This reduces the risk of giving incorrect change and makes it easier to reconcile the cash drawer at the end of the shift.

4. Credit Card Transactions​

Credit card transactions are an essential part of front office accounting and typically make up the bulk of non-cash transactions. Key considerations for credit card handling include:

  • Ensure proper authorization and verification for every credit card transaction.
  • Handle refunds and chargebacks according to hotel policy.
  • Keep records of each transaction to aid in reconciliation.

Hotels often use secure payment processing systems that integrate with the property management system (PMS) to facilitate smooth credit card transactions.

5. Night Audit Process​

The night audit is an essential daily process in hotels. It involves reviewing and verifying all financial transactions and guest activities that took place throughout the day. The goal is to ensure that the day’s financial records are balanced and that any discrepancies are identified.

Key Steps in the Night Audit Process:​

  1. Post any unrecorded charges: Ensure that all room service charges, minibar usage, and any late check-out fees are posted to the guest's accounts.
  2. Reconcile guest folios: Verify that all guest accounts are accurate and balanced.
  3. Balance the day’s transactions: Ensure that all cash, credit card, and other transactions match the receipts and records.
  4. Generate reports: Create daily financial reports that summarize the hotel's performance, including room occupancy, revenue, and expenses.

6. Night Auditor Roles and Responsibilities​

The night auditor is responsible for running the nightly audit and performing front desk operations during the night shift. Key responsibilities include:

  • Verifying the accuracy of guest accounts.
  • Processing end-of-day financial reports.
  • Resolving discrepancies in financial records.
  • Assisting guests with late check-ins or requests.

Night auditors must have strong attention to detail and excellent problem-solving skills to identify and resolve any accounting discrepancies that occur during their shift.

7. Common Night Audit Reports​

Several important reports are generated during the night audit. Some of the most commonly used reports include:

  • Daily Revenue Report: Summarizes the revenue generated from room bookings, food and beverage services, and other hotel services.
  • Occupancy Report: Tracks room occupancy rates, including no-shows and cancellations.
  • Room Charge Audit: Verifies that all room charges are accurate and properly recorded.
  • Cashier Report: Balances cash collected and disbursed by the front office team.

8. Balancing Front Office Accounts​

Balancing front office accounts is a critical task performed during the night audit. It involves matching all financial transactions (cash, credit, etc.) with receipts and records. Here's a general approach:

  1. Match cash receipts: Ensure that the cash collected throughout the day matches the total amount recorded in the front office system.
  2. Check credit card transactions: Verify that all credit card charges are authorized and processed.
  3. Review adjustments: Ensure that any adjustments (refunds, discounts) are properly recorded and approved.

9. Troubleshooting Common Issues​

During the night audit, the auditor may encounter several issues, such as:

  • Missing transactions: Some charges may not have been posted in time.
  • Payment discrepancies: Cash receipts and recorded amounts may not match.
  • Unauthorized adjustments: Discounts or refunds may have been improperly applied.

In such cases, the night auditor should investigate and resolve these issues before closing the day’s financials.

10. Best Practices for Front Office Accounting​

To ensure smooth front office accounting, here are some best practices:

  • Maintain accurate records: Ensure that all transactions, whether cash or credit, are accurately recorded and supported by receipts.
  • Perform regular audits: Regularly audit financial records to identify discrepancies early.
  • Implement security procedures: Use secure methods for handling cash and sensitive guest information to prevent fraud or errors.
  • Train staff regularly: Ensure that front office staff are well-trained in accounting procedures and financial integrity.

By adhering to these principles and maintaining meticulous records, hotels can ensure the financial integrity of their front office operations, providing reliable data for management decisions and preventing financial discrepancies.