The Night Audit Process - Hotel Front Office Management

The night audit is not one of those reports that is put on the shelf and forgotten. Management uses it to verify the integrity of the guest accounts and to review the operational effectiveness, which is the ability of a manager to control costs and meet profit goals.

Therefore, accuracy is extremely important.

The six basic steps involved in preparing a night audit are:

  1. Posting room and tax charges
  2. Assembling guest charges and payments
  3. Reconciling departmental financial activities
  4. Reconciling the accounts receivable
  5. Running the trial balance
  6. Preparing the night audit report

This listing will help guide you through the seemingly endless proofing of totals and cross checking of entries, and expedite the completion of the process.

Night Audit Process in Front Office

The night audit process described in this chapter provides information on performing the night audit with a property management system. It is important to note that learning the mechanical or “hand method” of doing the night audit will assist the front office manager in understanding the intricacies of following a paper trail of guest and departmental transactions. Undoubtedly, the more modern method of performing the night audit on a PMS will be used, but you should also be familiar with the components up close and personal.

Posting Room and Tax Charges

After the night auditor has reviewed any messages from other front office staff, reviewed guests who checked out of the hotel, extended any guest stays, reviewed all roomrates, and printed a variance report, his or her first task is to post room and tax charges to all accounts. The PMS can easily post room and tax charges to the electronic folios, with the room and tax options.

Assembling Guest Charges and Payments

The various modules in a PMS (food and beverage, call accounting, gift shop, etc.) allow for ease in assembling guest charges and payments. The following is a typical list of point - of - sale departments for which income will be reported:

  • Restaurant 1 (breakfast)
  • Restaurant 2 (lunch)
  • Restaurant 3 (dinner)
  • Room service 1 (breakfast)
  • Room service 2 (lunch)
  • Room service 3 (dinner)
  • Lounge 1 (lunch)
  • Lounge 2 (happy hour)
  • Lounge 3 (dinner)
  • Lounge 4 (entertainment)
  • Valet
  • Telephone
  • Gift shop
  • Spa and pool
  • Parking
  • Miscellaneous

Note how the restaurant, room service, and lounge paperwork is further classified by meal or function, to facilitate record keeping. General managers can review the income generation activity of each of these departments when they are reported separately.

The guest charges option of the night audit module in a property management system can sort and total all departmental charges and payments that have been posted to the electronic folios from the point - of - sale systems that interface with the PMS. These data are accurate as long as the person entering the charges at the point - of - sale terminal keys them in accurately.

Reconciling Departmental Financial Activities

The departmental totals option of the night audit module in the PMS will report the totals of sales by department, as shown in Figure. These totals are compared to posting information received from the point - of - sale system.

Another departmental total that must be verified is the cash tendered by guests at the front office. Hotels vary in their cash - processing policies. Some front offices process restaurant guest checks from cash customers or other departments in the hotel, because management wants to centralize the cash transactions. In other hotels, this policy would be a great inconvenience because of the distance of the various restaurants, lounges, and

The departmental totals option of a PMS lists amounts generated by each department. (Information courtesy of Lincoln Plaza Hotel Conference Center, Reading, Pennsylvania.)

departmental totals option of a PMS lists

departmental totals option of a PMS lists

The cashier’s report maintains a control on cashier activity. (Courtesy of Lincoln Plaza Hotel & Conference Center, Reading, Pennsylvania.)

cashier’s report maintains a control on cashier activity

cashier’s report maintains a control on cashier activity

gift shops from the front office. It also requires additional personnel in the various departments to carry the guest checks with the cash or credit cards to the front office.

The cashier option of the night audit module in the PMS will report the amount of cash, credit cards, and coupons received and discounts processed during the shift, as shown in Figure. The total amount of cash received by each cashier who has been issued a cash drawer must be verified against the total money deposited for that shift.

Reconciling Accounts Receivable

They have either received approval for direct - billing privileges or paid a depositon a future banquet, meeting, or reception. The night auditor will treat these accounts just like the accounts on the guest ledger for registered guests. He or she must assemble the charges and verify their accuracy. The cash received from these accounts is reflected the cashier’s report.

The figures in a city ledger can be quite large. A hotel that promotes direct billing as a customer service may have outstanding guest debit charges of $10,000 to $50,000. The hotel may hold a credit balance, amounts of money a hotel owes guests in future services, of $25,000 to $150,000 or more from deposits on future receptions and meeting room rentals. The controller of the hotel must closely watch the balances of these accounts to ensure effective cash flow management.

The master credit card account - an account receivable that tracks bank, commercial, private label, and intersell credit cards such as Visa, Master Card, and JCB - is held at the front office. Depending on the size of the hotel, the services offered to the guest, and the speed of reimbursement from the credit - card agency, this figure may also be quite large. It is not uncommon for a medium - size hotel to have an outstanding credit balance of $30,000 to $50,000 at any one time. As checks are received from the credit - card agency, this figure is reduced. It will rise again when new charges are posted to a guest’s folio.

When the checks from the credit - card agency are received, they are posted to the respective credit card’s account receivable, and a current balance is calculated.

The city ledger and accounts receivable options of the night audit module of a PMS will produce a report of the activity on the city ledger and master credit - card accounts.

Running the Trial Balance

A trial balance(Figure is a first run on a set of debits to determine their accuracy against a corresponding set of credits. The trial balance helps the night auditor focus on accounts in which charges may have been posted or reported incorrectly. For that reason, it is important that the night auditor compare the departmental totals against any transfers and paid - out slips for each department processed by desk clerks and cashiers.


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