1. Importance of Night Audit in a Hotel
2. Night Audit Process
3. The Daily flash report
Importance of the Night Audit – The night audit is the control process whereby the financial activity of guests’ accounts is maintained and balanced. This process tracks charges and payments (debits and credits) and the departmental receipts and charges on a daily basis. This working definition en-compasses not only the mechanical charges and payments but also the further review of account activity by management. The front office manager will be able to monitor the credit activity of guests, project daily cash flow from room sales, and monitor projected and actual sales for the various departments. Learning the process of the night audit can provide valuable information for someone who plans to continue in the hotel industry. It will also provide the necessary objective overview to evaluate the hotel’s financial activity. Students will become aware of the role of the general manager, as the night audit allows a review of all the financial activity that takes places in a hotel in one day. Based on that review, the general manager must determine how it should be adapted to meet the expenses and profit goals for the accounting period. It also allows the general manager to see if marketing plans and operational activities have accomplished their stated profit goals. The night audit provides insight into how each department must be monitored to produce an acceptable income statement. It pulls together the plans and operations of a hotel on a daily basis, not just at the end of an accounting period. Ultimately, the night audit allows general managers to make good .financial decisions based on current and cumulative data.
The Night Auditor – The night auditor has many responsibilities in addition to preparing the night audit report. This position also includes checking in and checking out guests who arrive or depart after 11:00 p.m., processing reservations, performing the duties of security guard, monitoring .re safety systems, acting as cashier for banquet functions, and performing the duties of manager on duty. The night auditor acts as a communication link between the guest and hotel operations during the 11:00 p.m. to 7:00 a.m. shift. This is a very important position within the front office.
The Night Audit Process – 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 us about crosschecking of entries and expedite the completion of the process. The night audit process described in this chapter provides information on performing the night audit with a property management system.
Report types:
- Revenue
- Daily Guest List
- Recapitulation Report
- Daily Departure Statement Report
- Advance Booking List
- Check In Report
- Check Out Report
- Expected Departure list
- Front Office Collection
- City Ledger Transaction Report
- Accounting Balance Report
- Item Wise Revenue
- Room Wise Revenue
- Daily Sales Report
- Guest Ledger
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 room rates, 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.
• Telephon
• 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 recordkeeping. 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. 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.
The departmental totals option of a PMS lists amounts generated by each department.
Department Amount
Room
Tax
Local Telephone
Long Distance Telephone
Paid out
Beverage
Write off credit
Restaurant Breakfast
Restaurant Lunch
Restaurant Dinner
Lounge Beer
Lounge Wine
Lounge Liquor
Restaurant Tips
Restaurant Merchandise
Restaurant Tax
Room Service
Room Service Tips
Gift Shop
Movie
Vending
Parking
Dry Cleaning
Newspaper
Rollaway
Gift Certificates
Copies
Faxes
Stamps
Adv. Deposit Refund
Banquet Food
Banquet Beverage
Banquet Service Charge
Banquet Wine
Banquet Liquor
Banquet Beer
Banquet Meeting Rooms
Banquet Tax
Total
The cashier’s report maintains a control on cashier activity.
Cashier Report
Department Amount
Front Desk
Cash Received
Write Off
Travel Agent Commission
Checks
Employee Discount Fee
Credit Card Received
MasterCard
Visa
Diners Club
JCB
Hotel Gift Certificate
Restaurant
Cash Received
Credit Card Received
Visa
MasterCard
Diners Club
JCB
Gift Certificate Redeemed
Lounge
Room Service
Discounts
Welcome Discount Coupon
Banquets
Cash Received
Credit Card Received
Visa
MasterCard
Diners Club
JCB
Allowances
total
Deposit Summary
Cash/Foreign Currency
Other Payment Methods
Deposits Subtotal
A/R Total
Paid Out
Total Deposit
Actual Deposit
Over/Short
Preparing the Night Audit Report – The night audit report is usually organized to meet the needs of a specific lodging establishment. Some general managers might require more .financial data than others. Figure 10-5 is a sample of a night audit report of all .financial activities of the day. You may want to note the columns headed “Budget” and “Goal.” The budget figure is the target amount of sales planned for that day. The goal figure shows what percentage of the budgeted figure was actually achieved. If a larger amount was budgeted than was realized, then some part of the operation is not functioning as expected. Some hotel managers want a cumulative figure reported each day, to gain a more comprehensive overview of the achievement of .financial goals. It is important that managers approach this report as a functional tool that provides daily operational data. Its major components may seem overwhelming when perceived as a whole. With experience, you learn to view this seemingly complicated document in separate parts, each of which provides feedback on daily operational performance.
Departmental Totals – Each department in the hotel is required to provide a daily sales report to the front office. These figures are listed and compared to the budget goal. General Managers of hotels use these figures to determine the profitability of income-generating departments and the success of marketing programs.
Bank Deposit – Bank deposits are also part of the night audit. In large hotels, bank deposits are made several times a day to satisfy security concerns. The bank deposit includes both cash and credit-card deposits. It is important to note that cash, business checks, and checks from credit-card companies are received several times throughout the business day. After these are received and recorded, they are turned over to a cashier at the front desk to post them to the corresponding guest or city ledger account.
Accounts Receivable – The accounts receivable is an ongoing listing of outstanding amounts owed to the hotel. As mentioned in Chapter 8, these potential sources of revenue are essential to providing positive cash flow. Managing and updating these accounts, by reviewing them daily, is a primary responsibility of the controller and general manager.
Cashier’s Report – Some hotels have the traditional three shifts (7:00 a.m.–3:00 p.m., 3:00 p.m.–11:00 p.m., and 11:00 p.m.–7:00 a.m.) for cashiers. In larger hotels, there may be several cashiers per shift. No matter how many cashiers there are per shift, each is responsible for actual cash and credit cards received, which are compared to PMS totals. The cashier’s report, discussed earlier in the chapter, lists cashier activity of cash and credit cards and PMS totals and is an important part of the financial control system of a hotel. The front office manager and the controller will review this part of the night audit and look for discrepancies between the actual amount received and the PMS total. They will also assess the cashier’s accuracy.
Manager’s Report – The manager’s report is a listing of occupancy statistics from the previous day, such as occupancy percentage, yield percentage, average daily rate, RevPAR, and number of guests. Data such as these are necessary for monitoring the operation of a financially viable business. The general manager, controller, front office manager, and director of marketing and sales will review these statistics on a daily basis.
Room and Tax 
– The room sales figure represents the total of posted daily guest room charges. The night auditor obtains this figure from the PMS by activating the cumulative total feature, an electronic feature that adds all posted room rate amounts previously entered into one grand total. This figure is only as accurate as the posting of daily room rates. If a desk clerk transposes figures, then the total room sales amount will be incorrect. Since a large portion of room income is considered profit, management will watch this figure closely. The room sales figure is verified by the housekeeping report, which lists the occupancy status of each room according to the housekeeping department. The corresponding tax total is obtained by activating the tax cumulative total feature, an electronic feature of a PMS that adds all posted room tax amounts previously entered into one grand total. This figure is necessary for tax collecting and reporting.
– The room sales figure represents the total of posted daily guest room charges. The night auditor obtains this figure from the PMS by activating the cumulative total feature, an electronic feature that adds all posted room rate amounts previously entered into one grand total. This figure is only as accurate as the posting of daily room rates. If a desk clerk transposes figures, then the total room sales amount will be incorrect. Since a large portion of room income is considered profit, management will watch this figure closely. The room sales figure is verified by the housekeeping report, which lists the occupancy status of each room according to the housekeeping department. The corresponding tax total is obtained by activating the tax cumulative total feature, an electronic feature of a PMS that adds all posted room tax amounts previously entered into one grand total. This figure is necessary for tax collecting and reporting.
Total Restaurant Sales and Sales Tax – The total restaurant sales figure comprises all sales incurred at restaurants or food outlets in the hotel. Restaurant 1 may represent breakfast sales; 2, lunch sales; and 3, dinner sales. Or Restaurant 1 may represent all food sales from Restaurant A; 2, food sales from the pool snack bar; and 3, sales from Restaurant B. These figures are verified against the daily sales report, a .financial activity report produced by a department in a hotel that reflects daily sales activities with accompanying cash register tapes or point-of sale audit tapes from each of the restaurants or food outlets. The sales tax figure is also obtained from the daily sales reports.
Tips for Restaurant, Room Service, Banquet, and Lounge Employees - Tips paid out to service employees represent an important control feature. Not only is management required to report this amount to state and federal agencies, but also the tips may be paid out from the desk clerk’s cash drawer or the restaurant cash drawer. In any case, tips charged to the guest’s account on restaurant guest checks, tips paid immediately to service employees from the desk clerk’s cash drawer on paid-out slips, room service guest checks, and charged tips on credit-card vouchers are used to verify this total.
Room Service – Some hotels report room service sales as a separate figure from total restaurant sales. If a hotel has organized a special marketing and merchandising campaign to increase room service sales or feels that careful monitoring of this potentially profitable service is necessary, then the night auditor will report this figure. Room service 1 may represent breakfast sales only; 2, lunch sales; and 3, dinner sales.
Banquet Sales 
– Hotels with large banquet operations will report the banquet sales figure separately from restaurant sales. These figures are a total of the guest checks, which tally the individual banquet charges. The night auditor will also check the daily function sheet to ensure that all scheduled functions have been billed. The general manager can use banquet sales figures to determine how effective the food and beverage manager is in controlling related expenses for this division. They also indicate how effective the director of marketing and sales is in generating business. Banquet breakfast, banquet lunch, and banquet dinner figures are reported separately because they provide marketing information on which areas are successful and which could be more successful. The banquet sales figures (and the room sales figure) also provide information on the cash flow activity of the hotel. If the hotel has scheduled $25,000 of banquet business and $25,000 of rooms business for a weekend, it can meet various .financial obligations due on Monday, depending on method of payment. The controller in a hotel will therefore watch room and banquet sales very closely.
– Hotels with large banquet operations will report the banquet sales figure separately from restaurant sales. These figures are a total of the guest checks, which tally the individual banquet charges. The night auditor will also check the daily function sheet to ensure that all scheduled functions have been billed. The general manager can use banquet sales figures to determine how effective the food and beverage manager is in controlling related expenses for this division. They also indicate how effective the director of marketing and sales is in generating business. Banquet breakfast, banquet lunch, and banquet dinner figures are reported separately because they provide marketing information on which areas are successful and which could be more successful. The banquet sales figures (and the room sales figure) also provide information on the cash flow activity of the hotel. If the hotel has scheduled $25,000 of banquet business and $25,000 of rooms business for a weekend, it can meet various .financial obligations due on Monday, depending on method of payment. The controller in a hotel will therefore watch room and banquet sales very closely.
Banquet Bar and Total Lounge Sales – The sales figures for the banquet bar and lounge areas originate from the point-of-sale cash registers. The total sales figures from the various outlets that serve alcoholic beverages are reported to the front office on a daily sales report after each shift. Each report is accompanied by the cash register tapes or audit tapes. These sales figures from the various lounges and banquets are reported separately because the food and beverage manager will want to determine how well cost-control efforts have been maintained for that department and the director of marketing and sales may want to know how successful certain marketing and merchandising campaigns have been.
Room Rental – The charges for room rentals these are not guest rooms but meeting and function rooms are reported on special room rental guest checks. The night auditor will crosscheck these guest checks against the daily function sheet to be sure the banquet manager has charged room rentals to the appropriate guests. This figure is reported separately at those hotels that charge fees for the rental of facilities when no food or beverage is ordered. For example, banquet rooms may be rented for seminars, meetings, demonstrations, and shows. Since room rental represents a potentially large profit area (especially during slow banquet sales periods), general managers will want to know how effective the marketing and sales department has been in maximizing this profit center.
Valet – One of the services a hotel offers is dry cleaning and laundry. This feature must be closely monitored because the hotel pays cash to the off-premises dry cleaner or laundry service when the clothing is returned. These costs, plus a markup for hotel handling charges, are posted to the guests’ folios. Some hotels maintain a valet or dry cleaning/ laundry journal indicating valet tags, control numbers, processing dates, vendor charges, handling charges, posting activity, daily totals, and the like. Transfer slips are prepared to indicate the charges for valet service. The charges on these transfer slips are then posted to the guests’ folios. The total of the transfer slips comprises the valet total for the night audit.
Telephone Charges – After the telephone industry was deregulated in the early 1980s, call accounting became a standard practice in hotels. This allowed hotels to set individual surcharge rates, rates for adding service charges for out-of-state long-distance telephone service. The telephone department became a very profitable area in the hotel business. Since all phone calls are charged to the guest folio, an accurate accounting of the charges is necessary. In a hotel with a call-accounting system that interfaces with a property management system, this tally is electronically obtained.
Gift Shop Sales and Tax – The gift shop in a hotel prepares a daily sales report for the front office. Cash register tapes or point-of-sale audit tapes will accompany the report. The general manager will want to examine the financial activity of this profit center. This is another area in which cash flow potential is monitored. Recording the tax collected on gift shop sales and reporting this figure is a necessary accounting procedure.
Vending – Hotels that maintain their own vending machines will monitor the daily collection of cash. If a facility has a large number of vending machines, the food and beverage manager assigns one person to collect and count the money and prepare a daily sales report. These reports provide the total sales figure for vending.
Spa – The use of health facilities at a hotel may be provided free to guests. However, other products and services - such as swimsuits, health-related products and equipment, the services of a masseur or masseuse, sports lessons and rental of equipment—are sold to the guest. These costs will usually be charged to the guest folio. A daily sales report will be prepared at each of the health/recreation facilities. Some hotels offer their health/ recreation facilities for a fee to the general public. Transfer slips for charges to the guest accounts for future billing in the city ledger provide a total against which total spa charges are varied.
Parking – A hotel that offers valet parking or parking spaces to guests and the general public will acquire large amounts of cash during a business day. Cash, business checks, and debit- and credit-card payments are collected throughout the day for general parking, long-term business parking, and parking valet services. Guests in the hotel who are charged for parking services will have this amount charged to their accounts. The parking garage manager will prepare a daily report of the cash and charge activities for each shift of the day. Supporting documentation, including parking tickets, cash register tapes, transfer slips, and monthly parking permit renewals, accompany the daily report. The night auditor will prepare a summary total of this account from these reports.
Cash Sales and Accounts Receivable Balance – The total revenue represents both cash and charge guest sales. A separate figure is reported for total cash sales for the day. This figure represents the totals reported and received from the various departmental daily reports and is also required justifying the daily bank deposit. Charge sales are reflected in the outstanding accounts receivable (Today’s Out std. A/ R). This is the amount that remains to be received from the guests. Total paid-outs, total discounts, and total write-offs have been subtracted from that figure. Today’s outstanding accounts receivable figure is added to yesterday’s outstanding accounts receivable (Yesterday’s Out std. A/R) to obtain a cumulative balance of outstanding accounts receivable (Total Out std. A/R).
Cashier’s Report – In some hotels, the front desk clerk or cashier is responsible for proofreading and collecting the various departmental daily reports. In those situations, the cash and credit-card vouchers are added into the individual cashier’s shift report. Also included in that report are the amounts of cash and credit-card checks received for application to accounts receivable. Each cashier’s shift report is verified by departmental daily reports, cash and credit-card vouchers, and accounts receivable cash and credit-card check transactions.
Operating Statistics – The night auditor will prepare the daily operating statistics for the general manager and the various department directors. This quick summary provides a review of the day’s activities and the hotel’s success in meeting .financial budget targets. Hotel general managers rely on these statistics as operational feedback mechanisms because they provide information on the need to modify existing operational procedures and offer insight into budgeting for future operational procedures. Also, these figures become part of the hotel’s historical operations record. The rooms sold, rooms vacant, and rooms out of order are determined by assessing the housekeeping module and the housekeeper’s report. The number of complimentary rooms (rooms comp) is determined by reviewing guest reservations, registration cards, and folios. A quick method used to determine occupancy percentage, double occupancy percentage, yield, average daily rate, and RevPAR . Room income for the day is obtained from the total room charges that were posted after a certain time in the evening (between 11 p.m. and midnight) and any half-day rate charges. The number of guests is provided by the PMS registration module. The number of no-shows is compiled by tallying the number of reservations with a confirmed status that did not show. Not included in this figure are guaranteed reservations, which are processed with a credit-card number regardless of whether the guest showed. The preparation of a night audit report can be very time-consuming. However, with a great deal of cooperation, planning, and organization, combined with the use of a PMS that interfaces with a point-of-sale system, the time can be greatly reduced. The accurate preparation of the night audit report provides an essential control and communication tool for management.
Daily Flash Report 
– The daily flash report, a PMS listing of departmental totals by day, period to date, and year to date, is a very useful report for general managers and department managers and supervisors. This report is reviewed on a daily basis to indicate how successful a department manager was the previous day in achieving sales. This tool is important in discussing strategies for the successful achievement of financial goals.
– The daily flash report, a PMS listing of departmental totals by day, period to date, and year to date, is a very useful report for general managers and department managers and supervisors. This report is reviewed on a daily basis to indicate how successful a department manager was the previous day in achieving sales. This tool is important in discussing strategies for the successful achievement of financial goals.
The housekeeper’s report provides a verification of the number of rooms occupied on a particular night.
Housekeeper’s Report Date: ...../......../.....
Room Status Room Status Room Status
101 O 134 OOO 167 V
102 O 135 O 168 O
103 O 136 V 169 O
104 O 137 V 170 O
105 V 138 O 171 O
106 V 139 O 172 O
107 O 140 V 173 O
108 O 141 O 174 O
109 O 142 O 175 O
110 O 143 O 176 O
111 O 144 OOO 177 OOO
112 O 145 OOO 178 OOO
113 O 146 O 179 O
114 O 147 O 180 O
115 O 148 V 181 V
116 V 149 V 182 O
117 O 150 O 183 O
O: Occupied V: Vacant OOO: Out of orde