@ cFont office assignment

1.0) Discuss the front office uniform system of accounts

2.0) Discuss the responsibilities for cash accounting and control procedures in front office

3.0) Explain the principles and methods of billing guest charges

1.0) Discuss the front office uniform system of accounts

UNIFORM SYSTEMS

Uniform systems of accounts are standardized charts of accounts developed to reflect the
specific operating and financial characteristics of individual hospitality industry segments.

The Uniform System of Account for Lodging Industry (USALI) is mostly used because it brings
order to the complexity inherent in the countless revenue and cost centers comprising a
multifaceted lodging property, but the Uniform System of Accounts for Restaurants (USAR) and
the Uniform System of Accounts for Clubs (USAC) are also used.

Uniform systems of accounts are designed to meet distinct yet overlapping objectives:

 Comparability. Because uniform systems provide carefully developed formats reflecting

evolving operating and financing trends in their segments, the comparisons of financial
results among adopters’ operations are more reliable.
 Responsibility Accounting. Uniform systems distinguish between direct and indirect
costs, therfore permitting the assignment of costs to the activities and their managers.

A direct cost is an expense that is readily and reliably assigned to a revenue generating activity
or a cost center. In the USALI, for example, the cost of food sold is readily identified if
appropriate record keeping procedures are followed, and it can reliably be assigned as a cost of
generating food sales. Similarly, payroll and related expenses of both revenue centers (e.g.,
rooms department, food and beverage department) and cost centers (e.g., marketing, property
operations, and maintenance) are direct costs because they are the responsibility of individual
revenue and cost center managers.

An indirect cost is an expense that cannot be readily and reliably assigned to a revenue
generating activity. For example, under the USALI, no cost of sales is assigned to the rooms
division. Obviously, significant costs are incurred to generate the sale of room nights, but
assigning the brick and mortar (and other) costs of generating the rooms department revenue
would:

1) violate the objective of responsibility accounting, since the rooms division manager does not
control the size of the rooms division (or its marketing budget) and

2) require the use of subjective allocation bases. Indirect costs are thus considered overhead
costs, or burden. Under the front office uniform system of account, operating overhead costs
are termed undistributed operating expenses, while occupancy and financial overhead costs are
termed fixed charges.

3. Adherence to Accounting Standards. Careful use of uniform systems helps to ensure that
property level accounting personnel are reporting transactions according to Generally Accepted
Accounting Principles (GAAP).

4. Flexibility. Uniform systems typically contain far more classifications and accounts than are
used by most adopters, but this feature permits individual operations to customize the system
to their needs while preserving comparability and accuracy.

Efficient systems of accounts summarize operating results succinctly, relegating more detailed
information on revenues and costs to depart mental schedules. This yields an uncluttered, more
usable picture of operating performance while preserving a ‘drill down’ capability if greater
detail is needed. Similarly, expense dictionaries provide users with guidance by categorizing into
their appropriate departmental schedules the myriad transactions a hospitality operation
records.
Although most adopters seek above all to generate operating statements that permit
performance comparisons, uniform systems of accounts provide guidance on the presentation
of other financial statements, including: the balance sheet, statement of owners’ equity, and the
statement of cash flow. The evolution of ownership entities, changing operating characteristics,
and evolving accounting standards require periodic revision of the guidelines for presenting the
financial data for the industry’s various sectors.

Finally, although the above discussion emphasizes the record keeping function, an effective
uniform system also provides analytical guidance. This might include procedures for the
application of standard managerial accounting tools, e.g., ratio analysis, cost volume profit
analysis, operational budgeting and budgetary control, allocation and apportionment of
expenses (responsibility accounting) to the hospitality segment.

2.0) Discuss the responsibilities for cash accounting and control procedures in front office

Accounting defined as the process of collecting, recording, summarizing, and analyzing financial
transactions of a business. According to the American Institute of Certified Public Accountants
(AICPA), ‘Accounting is an art of recording, classifying, and summarizing in a significant manner
and in terms of money, transactions, and events which are, in part at least, of a financial
character, and interpreting the results thereof.’
The major functions of front office accounting system are as below:

Creation and maintenance of guest and non-guest accounts accurately

Tracking financial transactions of guests throughout the guest cycle

Monitoring the credit limit of guests, and asking for a deposit from guests in case of high
outstanding balance

Preparing a high balance report for collection and informing the management about the same

Providing an efficient management information system (MIS) to the management for

departmental revenue generation

Maintaining effective control over cash and credit transactions

Front office accounting system records settlement for all goods and services provided.

Front Office Accounting System

The automated and/or manual data collection and reporting system that summarizes and
documents the financial activities of a front office. The front desk maintains two types of
accounts:

Guest accounts

Non-guest accounts

Guest Accounts

A guest account is the record of financial transactions between and a resident guest and the
hotel. This account is created either during the registration of the guest (at the time of check-in)
or during reservation, if the guest makes an advance payment.

Non-guest Accounts

A non-guest account is the record of the financial transactions that take place between a non-
resident guest and the hotel. This is also known as a city account.

The front desk cashier also maintains other types of non-guest accounts, which include:

Guests who leave the hotel without the settlement of their accounts are known as skippers;
their accounts are also treated as non-resident guest accounts. The account is transferred to the
city ledger awaiting eventual payment, and after a stipulated wait time, the same is written off
as a bad debt.
The status of guests, whose accounts are not settled by them (in case of bills to company),
changes from resident to non-resident guests when they leave the hotel. The front desk cashier
transfers the balance to the city ledger and the payment is collected by the accounts
department.

When advance payment has been received for a guaranteed reservation and it is subsequently a
no-show, the account is normally recorded in the city sales ledger

Folios

A folio is a statement of all the transactions that take place between a hotel and a guest. A folios
is a statement of all transactions (debit & credit) affecting the balance of a single account. When
an account created, a folio is assigned with a starting balance zero. All transactions, which
increase (debits) or decrease (credits) the balance of the account is recorded on the folio. At
settlement a guest folio should be returned to a zero balance by cash payment or by transfer to
an approved credit card or direct billing account. The process of recording transactions on to a
folio is called posting. There are basically four types of folios used in front office accounting:

Guest folios: To record transactions made by an individual or independent guest with the hotel.

Master folios: Accounts assigned to more than one person or guestroom: usually reserved for
group accounts.

Non-guest folios: Also known as semi-permanent folio. Accounts assigned to non-guest business
or agencies with hotel charge purchase privileges.

Employee folios: Accounts assigned to employees with charge purchase privileges.

Split Folios – Accounts assigned to a guest on his/her request to split his/her charges and
payments between two personal folios – one to record expenses to be paid by the sponsoring
business company and the other to record personal expenses to be paid by the guest. In this
case two folios are created for the same guest.

Every folio should have a unique serial number. Folio serial numbers are needed for many
reasons. First, they serve as identification numbers that help ensure that all folios are accounted
for during an audit of front office transactions. Second folio numbers may used to index
information in automated systems. Automated systems frequently create folio numbers when
reservations are made. Finally folio numbers can provide a chain of documentation.

Vouchers

A voucher details a single transaction to be posted to a front office account. This document lists
detailed transaction information gathered at the source of the transaction. The voucher is then
sent to the front office for posting onto the guest folio. Voucher is a supporting documents used
only for internal control purposes. Usually any service or goods brought on credit by the guest
has to be supported by a voucher. Most automated front office systems require few paper
vouchers.

Types of voucher :

Cash vouchers

Travel agent voucher

Commission voucher

Charge vouchers

Transfer vouchers

Paid-out vouchers

Correction vouchers

Allowance vouchers

Visitors Paid-out Voucher: The money paid by the hotel on behalf of guests is known as visitors
paid-out (VPO). A VPO is generally made for the following charges:

Payment for taxi, travel agency services

Porter charges

Florist charges

Postage and courier charges

Emergency medical expenses

Travel Agent Voucher: In travel agent guaranteed reservation, the travel agent forwards a
voucher to the hotel as proof of payment and guarantees that the prepaid amount will be sent
to the hotel when the voucher is returned to the travel agency for payment.

Most tour operators and travel agencies receive advance payment from their clients for making
travel arrangements like accommodation, food and beverage, and other services. The travel
agency then makes the reservation in a hotel on behalf of the guest. It sends a voucher, known
as a travel agent voucher, containing the details of the billing procedure and services to be
provided to the guest. Airlines that have contracts with hotels also send meals and
accommodation order (MAO) or passenger service order (PSO) for layover passengers due to
delay or cancellation of flights. In these cases, the hotel obtains payments from the travel
agency or airline.

Telephone Call Voucher : In small hotels, where outgoing calls are routed through the operator,
the responsibility of billing the call charges lies with the telephone operator, who puts down the
call details on a telephone charge voucher and sends it to the front desk cashier for posting into
the guest account. Nowadays a lot of hotels use computerized systems, where, whenever a
guest makes a call, the call accounting module automatically transfers the call charges to the
guest folio.

Miscellaneous Charge Voucher: A miscellaneous charge voucher is prepared for the payment of
miscellaneous services and facilities, like laundry, health club, fitness centre, beauty salon, etc.
The guest verifies and signs the miscellaneous charge voucher, which is sent to the front desk
cashier for posting the charges into the guest folio.

Cash Receipt Voucher: A receipt is an acknowledgment that a payment has been made. A cash
receipt voucher is prepared and issued to the person depositing cash as a proof of remittance of
the deposited cash.

Commission Voucher: Hotels offer commission to persons who provide regular business to
them. Whenever a commission is paid by the cashier, a commission voucher is made. The
commission voucher should be authorized by a competent authority of the hotel. Generally, it is
authorized by the lobby manager. More commonly, commission vouchers are made for the
following:

A taxi driver who brings a walk-in guest to the hotel. In case the guest stays at the hotel, the
hotel pays a commission to the taxi driver. A travel agent/tour operator working on commission
basis

Any agency working on a commission basis.

Guest Allowances : An allowance is an amount deducted from an invoice to compensate the

buyer for an expense or mistake. The guest allowance is the cash paid to the guest by the hotel,
especially in the following circumstances:

If there is a wrong posting of a charge in the guest folio, an allowance is given and the voucher is
made to nullify the guest folio balance due to the wrong posting.

If a guest has deposited a large sum as advance and that amount exceeds the hotel bill.
If an airline or a tour operator sends a crew or a group and guarantees the reimbursement of
their bills.

Restaurant/Bar Check: Resident guests may enjoy their meals in any of the food and beverage
outlets in a hotel. Whenever a guest consumes food or beverage in a restaurant, a bill is raised;
in case a resident guest wishes to utilize the credit facility offered by the hotel, he should sign
the bill. The signed bills serve as the proof of financial transactions at the food and beverage
outlets and are treated as vouchers for posting the charges to the guest folio.

Ledgers

The front ledger is a collection of front office account folios. The folios represented in the front
office are a part of the front office accounts receivable ledger. An account receivable represents
money owed to the hotel. Front office accounting commonly separates accounts receivable into
two subsidiary groups- the guest ledger (for guest receivables) and the city ledger (for non-guest
receivables).

Guest Ledger : A guest ledger contains the details of all the financial transactions between a
resident guest and the hotel, including charge purchases and the payments received from the
guest. It has two parts—debit and credit. In a manual system, the financial transactions are
recorded in a tabular ledger, or tab ledger, which is of two types:

Horizontal tabular ledger

Vertical tabular ledger

In a horizontal tabular ledger, all the credit expenses of the guest are recorded in one horizontal
row, and at the end of the row, the guests’ credit or debit balance is shown.

The vertical row of the table contains the room numbers. At the end of vertical column, the
daily sales balance can be seen. A vertical tabular ledger is a variation of the horizontal tabular
ledger. It is also called visitors tabular ledger. The rows depict the room numbers, and in the
columns, the details of the guests and their credit expenses as well as payments are recorded.
At the end of every column, one can find the account balance of individual guests staying in a
particular room. It is a loose sheet and is prepared on a daily basis by the front desk cashier.

City ledger: The city ledger also called the non-guest ledger is the collection of non-guest
accounts. A city ledger contains the collective accounts of all the non-resident
individuals/agencies to whom the hotel extends credit facility. It is also called non-guest
account.
City ledgers also contain the accounts of resident guests who have left the hotel without settling
their accounts, which would be settled at a later date by a third party (may be a credit card
company, an airline, a travel agency, or a corporate house).

This account would be closed at the time of receiving the complete payment.

The account of skippers is also maintained in the city ledger for a specific period (as per the
hotel policy); at the expiry of this period the same is written off as bad debt and the account is
closed.

This ledger also includes bad cheque accounts (cheques that have bounced), disputed bills
account (bills that are in dispute), late charges accounts (bills that could not be posted in the
guest bill at the time of check-out), and retention charges accounts (reservation was guaranteed
but the same was cancelled or guest did not show up).

Front Office Accounting Cycle

An important function of the front office accounting system is to maintain an accurate and up-
to-date record of all the financial transactions (credit and debit) between the hotel and each
guest, so that all the outstanding accounts are settled and the hotel does not lose any revenue.
The front office accounting cycle has three distinct phases:

1. Creation of accounts

2. Maintenance of accounts

3. Settlement of accounts

Creation of Accounts : A guest account is created when the first financial transaction between
the hotel and a guest takes place. It may happen at one of the following stages:

At the time of reservation, if the guest pays an advance amount

At the time the hotel receives the advance payment for a booking after the reservation has
been made and before the arrival of the guest.

At the time of guest registration, when a room is allotted to the guest.

A guest folio is created on the day the hotel receives a payment from the guest and the
transactions are recorded in the order of their occurrence.

The hotel sets a credit limit, known as floor limit, for each guest, which is the maximum amount
of credit that the hotel will extend to the guest.
Maintenance of Accounts: All the monetary transactions that take place between the hotel and
a guest are recorded in the guest folio in the order of their occurrence. An entry in the guest
folio may be either debit or credit.

The most common debit entries in a guest account include the following:

Room charges

Food and beverage charges (restaurant, bar, coffee shop, room service, etc.)

Telephone and fax charges

Health centre, business centre, fitness centre charges

Laundry charges

Postage charges

Transportation charges

Visitors paid-out

Credit entries in a guest account may include the following:

Pre-payment, in part or in full (at the time of reservation or between reservation and arrival).

Part payment during the stay.

Allowances given to the guest.

Adjustments made in case of any error in posting in the guest folio.

Final payment for the settlement of accounts at the time of check-out.

Settlement of Accounts: This is the final and concluding phase of the front office accounting
cycle. The settlement of account means zeroing the balance in a guest folio. The formula for
calculating the outstanding balance is:

Opening balance + Debit entries – Credit entries = Outstanding amount

At the time of departure, the final bill of the guest is prepared and settled in such a way that the
outstanding balance is brought to zero. The settlement of the guest account may be by cash or
credit. In case of credit settlement, the account balance is transferred to the city ledger and the
responsibility of collecting the balance is transferred to the accounts department.

Tracking Transactions
Charge purchase transactions must be correctly documented in order for the front office to
properly maintain accounts. A major concern of the front office accounting process involves the
communication of transactional information from remote point-of-sale to the front office.

A transaction initiates activity within the front office accounting system. The front office
accounting system can be described as a transactional accounting system. Proper posting
procedures depend on the nature of the transaction and its monetary value. A transaction can
be classified as:

Cash payment

Charge purchase

Account correction

Account allowance

Account transfer

Cash advance

Each type of transactions will have a different effect on the front office accounting system. Each
may be communicated to the front office through the use of a different type of voucher, which
will help simplify eventual auditing procedures.

Cash Payments: Cash payments made at the front desk to reduce a guest’s net outstanding
balance are posted as credits to the guest or non-guest account, thereby decreasing the balance
of the account. The front office may use a cash voucher to support such transactions. When
cash is paid for goods or services at a location other than the front desk, no entry will appear on
the account folio. The account for this transaction is created, increased, settled and closed at
the point-of-sale, thereby eliminating the need for front office documentation or posting.

Charge Purchase : Charge purchase represent deferred payment transactions. In a deferred

payment transaction the guest receives goods and services from the hotel, but does not pay for
them at the time they are provided. A charge purchase transaction (Debit) increases the
outstanding balance of a folio. In non-automated and semi-automated properties the
transactions in revenue centers are communicated to the front office for posting by means of
account receivable vouchers.

Account Correction : An account correction transaction resolves a posting error on a folio. By

definition an account correction is made on the same day the error is made, before the close of
business. An account correction can either increase or decrease an account balance, depending
on the error. A correction voucher is used to document an account correction transaction.
Account Allowance : Account allowance involves two types of transactions. One type of account
allowance is as decrease in folio balance for such purpose as compensation for poor service or
rebates for coupon discounts. Another type of account allowance corrects a posting error
detected after the close of business. Such an error will be separately entered into accounting
records of the appropriate revenue centers, thereby also correcting their accounting records. An
account allowance is documented by the use of an allowance voucher which normally requires
management approval.

Account Transfer: Account transfer involves two different accounts and then to have offsetting
impacts on subsequent account balance. For example when one guest offers to pay a charge
posted to another guest folio the charge will need to be transferred from the first account to the
second account. A transfer voucher supports an account transfer. Am account transfer may also
occur when a departing guest uses a credit card to settle his/her account. The guest outstanding
balance is transferred from guest account to a non-guest account through the use of transfer
voucher.

Cash advance/ Visitors Paid Out (VPO): Cash advances differ from other transactions in that they
reflect cash flow out of the hotel, either directly to or on behalf of a guest. Cash advance
transactions are similar to debit transactions and increase a folio balance. Cash advances are
supported by cash advance vouchers (format). Cash disbursed by the hotel on behalf of the
guest and charged to the guest’s account as a cash advance is typically called a paid-out. Such
expenses are usually taxi charges, porter charges, emergency medical expenses, ticket
confirmation charges, floral delivery etc. For example, a guest who orders a floral delivery, may
request that the front desk agent accept the order and pay for the flowers. This payment for
flowers is a cash advance on the guest’s behalf. The front office pays for the delivery on the
assumption that the guest will reimburse the hotel. Hotel policy will dictate how cash advances
are to be handled. Usually, prior confirmation needs to be taken from the guest before any
payment is made on his behalf. These payments are made from the cash bank received at the
beginning of the shift by the cashier. Paid outs are only made in local currency

Procedure for handling paid-outs:

Confirm the name, room no. and identity of the guest

Find out details for which the paid-out is being made

Fill in details into the paid-out voucher. Every voucher is numbered to maintain control.

Get voucher authorized by the lobby manager.

The guest signs in acknowledgement.

Make the payment in cash to the guest or service provider- taxi or florist, etc.

Fill in the details in the paid-out column of the front office cashier’s report.

Points of Sale

Points of sale are the physical locations at which goods or services are purchased.

Any hotel department or area that collects revenues is a point of sale.

Large hotels typically support many points of sale: restaurants, lounges, room service, dry
cleaning, valet service, parking garage, telephone service, fitness centers, athletic facilities, spas,
and retail shops.

Some hotels offer guest-operated devices that function as self-service points of sale (in-room
movie systems, Internet-access devices, in-room vending systems

The volume of goods and services purchased at scattered points of sale within the hotel
requires a complex internal accounting system.

An automated point-of-sale (POS) system enables remote terminals at the point of purchase to
communicate directly with the front office system.

Automated POS systems significantly reduce the amount of time needed to post charges to
guest folios, minimize the number of times transactional data must be handled, and virtually
eliminate after-departure (late) charges.

POS information includes transaction number, charge amount, name of POS outlet, guestroom
number, name of the guest, and a brief description of the charge.

Charge Privileges

To establish charge privileges, a guest may be required to present a valid payment card or a
direct billing authorization at the time of registration; an automated system will allow credit to
be established at the time a reservation record is created.

Typically, the hotel obtains the number and expiration date of the guest’s payment card and
electronically requests an amount guarantee from the card company.

Once a line of credit has been approved, guests can make charge purchases at hotel points of
sale.

Guests who use cash to pay for accommodations are typically not extended charge privileges;
these guests are called paid-in- advance or PIA guests.
In an automated front office system, PIA accounts are usually set to a “no-post” status.

In addition to guests, local businesses or residents may apply to the hotel for charge privileges.

Credit Monitoring

Front office staff must monitor guest and non-guest accounts to ensure they remain within
acceptable credit limits.

Guests using a payment card may be extended a line of credit equal to the floor limit authorized
by the card company; guests and non-guests with other credit arrangements are subject to
credit limitations (house limits) set by the front office.

Accounts approaching their floor or house limit are called high-risk or high-balance accounts
and must be carefully monitored by management.

For high-risk accounts, front office managers may ask the payment card company to authorize
additional credit, or request that guests make a partial payment.

Cash Banks

A cash bank is the amount of cash assigned to a cashier to handle the various transactions that
occur during a work shift.

The hotel may issue cash banks with a specific amount of money to each cashier.

The bank limit is the starting amount the bank should have when it is issued at the start of the
shift.

Cashiers typically sign for their banks at the beginning of their shifts and are the only people
with access to their particular bank. At the end of the shift, the cashier deposits all cash, checks,
and other negotiable instruments into the hotel safe (or other designated location).

After the deposit is made, the bank should be back to its original bank limit. In hotels that do
not assign individual banks, cashiers usually pass the banks to the next shift after making their
deposits and verifying the balance of the banks at the end of their shifts; the cashiers receiving
the banks should also verify that the banks have the proper amount of cash in them.

When a cashier makes a deposit, another employee should witness the deposit and both
employees should sign a log.

Net Cash Receipts, Overages, Shortages, and Due Backs

Net cash receipts: Net cash receipts are the amount of cash, checks, and other negotiable items
in the cashier’s drawer, minus the amount of the initial cash bank, plus any paid-outs.

Overages: An overage occurs when, after the initial bank is removed, the total of the cash,
checks, gift certificates, and paid-outs is greater than the net cash receipts.

Shortages: A shortage occurs when the total of the contents of the cash drawer is less than the
net cash receipts.

Due backs: A due back occurs when a cashier pays out more than he or she receives; in other
words, there is not enough cash in the drawer to restore the initial bank.
3.0) Explain the principles and methods of billing guest charges

In the hotel it is a principle that guests are made satisfied by providing accommodation, food
and beverage and other services at a fee. It is therefore important to know the various mode of
payment and the methods of billing guests.

Credit Cards

Today’s business and pleasure travelers usually pay with a credit card. “Plastic money” has
advantages for the cardholder as well as for the hotel. The cardholder is assured instant credit
to satisfy debts incurred. The extensive travel required of some business people would make
the almost constant requests for cash advances by corporate employees difficult to manage.
The advantage for the lodging establishment is that payment is assured (less a discount paid to
the corporation issuing the credit card). It is important to note that with the increased use and
advances of computers in the business world, the reimbursement period can be reduced to
none - the hotel is immediately credited with payment. As these advances occur, the ready
acceptance of various credit cards will change.

The front office, in cooperation with the controller, usually establishes a priority system for
accepting credit cards, based on cash flow requirements and the effect of the discount rate
offered. The average guest will probably not be aware of the discount rate and may be willing to
use whatever credit card the front desk clerk requests. Processing a credit card in an automated
hotel follows a standard procedure. The objectives of the procedure include accurate recording
of the amounts of charges and tax, name (address and phone number of cardholder are
optional), verification of the credit - card dollar limit, and capture of fraudulent credit cards.
The procedure might include the following steps:

Note the credit - card expiration date.

Enter the approval of the amount of the charge on the PMS checkout screen.

Verify the credit limit available by using the credit - card validator.

Allow the guest to review folio and sign.

Check the guest signature on the folio against the signature on the card.

Give the card and the guest copy of the folio to the guest.

Once the procedure has been developed, it must be followed to the letter, without exception.
The fraudulent use of credit cards takes a great toll on the profits of the hotel.

An incentive system for cashiers and front desk clerks can be built into the procedure for
processing credit cards to encourage the capture of fraudulent cards. The small monetary
reward is nominal compared to the cost of a hotel bill that may never be recovered. However, it
is important to note that hotels should develop a procedure for retrieval of fraudulent credit
cards. Safety of front desk staff is extremely important in this procedure.

Bill - to - Account (Direct Billing)

Hotel guests, both corporate representatives and private guests, may also use the bill - to -
account, a pre - authorized account that allows guests to have their charges processed on a
regular billing cycle without the use of a credit card (sometimes referred to as “direct billing”) to
settle an account. Direct billing requires prior approval of the credit limit of an organization
(corporate representatives) or an individual (private guest).

Usually the corporation requesting direct billing will complete an application for credit approval.
The controller in the lodging establishment will then perform a credit check to determine a
credit rating and a credit limit. This house limitof credit, a credit limit set by an individual hotel,
can vary, depending on the amount of projected charges and the length of time allowed for
charges to be paid. The credit rating of the corporation in question will play a large part in
assigning a credit limit.

The application usually will list people who are authorized to use the account as well as
authorized positions within the corporation. Identification cards with an authorization number
are issued by the hotel. It is the responsibility of the corporation applying for credit to monitor
the authorized use of the credit. The cashier must verify identification of the corporate guest.

Methods of Bill Settlement in Hotel

The bill - to - account option should be reviewed with an eye toward cost - effectiveness.
Although the hotel will not have to pay a 3 – 8 percent discount rate to the credit - card agency,
the cost incurred by the controller’s office (credit checks, billing, postage, collection of bad
debts) must be considered.

The question of cash flow - almost immediate payment from the credit - card agency versus a
four - to eight - week waiting period for corporate accounts - should also be considered. The
marketing implications of direct billing also deserve attention. The status conferred by this
option may be very desirable to corporate representatives and private guests.

The following procedure is used to process a bill - to - account payment:

Request corporate or personal identification.

Check to be sure the individual is authorized by the account holder to bill to the account.

Note any credit limit per employee.

Note any red flags on the credit file due to nonpayment of bills.

Note authorized signature.

Enter charges into the point - of - sale terminal along with bill - to - account identification.
Once this information is entered into the POS, it becomes entered into an electronic folio in the
city ledger of PMS.

Cash and Personal Checks

When guests indicate during registration that they will pay their bills with cash or a personal
check, the front desk clerk should immediately be on the alert. Such a guest may very well
charge everything during his or her stay (perhaps only one day in length) at the hotel and then
exit without paying. Consequently, most hotels require cash in advance from guests who choose
this method of payment, since the guest has not established any credit rating with the hotel.

In addition, close monitoring by the night auditor and front desk clerks of the guest’s charge
activity is in order. Such guests will not be allowed charge privileges at other departments in the
hotel. In properties with a PMS, the guest name and room number will be entered to block
charges at point - of - sale areas. In a hotel without food and beverage, gift shop, and health
club POS terminals, the front office will have to alert those departments that this guest has not
been extended charge privileges.

To process a cash payment, the following procedure can be used:

Check the daily currency conversion rate when converting foreign into national currency. Take
time to ensure that math is accurate.

Retain the amount tendered outside the cash drawer until the transaction is completed.

Maintain an orderly cash drawer, with bills separated by denomination.

Develop an orderly procedure to make change from the amount tendered.

Count the change out loud when giving it to the guest.

Perform only one procedure at a time. Refuse to make change for another bill of a different
denomination if a previous transaction has not been completed.

Issue a receipt for the transaction.

Most lodging properties simply do not accept personal checks; there is too great an opportunity
for fraud. This policy often comes as a surprise to guests, who may protest that this is the only
means of payment they have. However, there are commercial check authorization companies
that a hotel can employ and credit - card companies that will guarantee a guest’s personal
check.

The procedure for processing personal checks is as follows:

Request a personal check - cashing card.

Refer to the list of persons who are not allowed to present checks as legal tender.

Compare the written amount of the check with the figures to be sure they match.

Note low - numbered checks. Low numbers may indicate a newly opened, un - established
account, and the check will require a supervisor’s approval.

Request identification (a valid driver’s license and a major credit card) and record the numbers
on the back of the check. Compare the name and address imprinted on the check with a valid
driver’s license.

Compare the signature on the check with the requested identification.

Validate the amount of the check and the credit rating of the guest with a commercial check
authorization company or credit - card company.

Traveler’s Checks

Traveler’s checksare prepaid checks that have been issued by a bank or financial organization;
they have been an acceptable form of legal tender for many years. These checks are a welcome
method of payment in the lodging industry. Traveler’s checks are processed like cash. Proof of
credit has already been established, and there is no payment of a percentage of the sale to a
credit - card agency by the hotel, as the guest has paid a percentage of the face amount of the
traveler’s check to the issuing agency.
However, checking proof of identification (a valid driver’s license or major credit card) should be
a standard traveler’s check – cashing policy. The guest should sign the traveler’s check in the
cashier’s presence, and that signature should be compared with the signature already on the
check. The list of traveler’s check numbers that are not acceptable, supplied regularly by the
check - issuing agency, must be consulted to ensure that the checks are valid.

Debit Cards

Debit cardsor check cards are embossed plastic cards with a magnetic strip on the reverse side
that authorize direct transfer of funds from a customer’s bank account to the commercial
organization’s bank account for purchase of goods and services. Some examples of debit cards
are MAC, NYCE, MOST, and PLUS. These are similar to credit cards in that they guarantee credit
worthiness, against which the hotel charges the bill; however, the payment is deducted directly
and immediately from the guest’s personal savings or checking account and transferred to the
hotel’s account rather than being billed to the guest on a monthly basis.

Debit cards continue to gain in popularity as the use of credit cards becomes more costly to the
guest. However, the concept of float, the delay in payment after using a credit card, may remain
a more attractive benefit for some guests. Some debit cards have a credit - card logo embossed
on the plastic card, which indicates they are acceptable at places that accept that particular
credit card and are processed through a credit - card financial organization. Debit cards are
processed similarly to credit cards.

To process a debit - card payment, the following procedure is used:

Insert debit card into validation machine.

Have guest enter personal identification number.

Process debit - card voucher as a cash payment on the guest folio.