Front Office Accounting System

Front office accounting may look like a herculean task but it nothing but a straight forward logic with basic skills of arithmetic’s & basic knowledge of accounts. A front office system monitors both guest account & non-guest account.

Accounting Fundamentals: Front office accounting system maintains, monitors & charts the financial transaction of guest & non-guest at the hotel during the guest cycle.

1. PRE-ARRIVAL: At the time of making reservation an advance is received to confirm or guarantee the reservation. The track of payments & deposits is systematically taken care of.

2. ARRIVAL/CHECK-IN: The various formalities are completed to form a contract between hotel & the guest. Signing of guest registration card by the guest & issuing of welcome card/ key card by the hotel to guest is a part of the contract signed between hotel & the guest. Room rent, meal plan, tax at registration is agreed upon. The bill folio is opened immediately on arrival & the opening telephone meter reading is noted in case of hotel is extending direct dialing facility from the guest room.

3. DURING THE STAY: A guest signs various bills (vouchers) & these are debited to his weekly bill (bill folio). In case of groups, a master bill is raised for all the group members. Usually a consolidated bill/ master bill is made for room rent only which is settled by the group leader & for extras individual bill folios are opened for all members of the group so that the individual bills can be presented to them for settlement. At times hotel pays on behalf of the guest & visitors paid out voucher is raised & debited to his account. Guest also deposits an advance during the stay towards his room account.

4. CHECK-OUT: At the time of check out, the hotel bill is either settled in cash or it can be settled by signing & transferring to city ledger/non guest account.

5. POST CHECKOUT: Non guest accounts are properly maintained at respective city ledgers & their payment schedules are monitored by the able staff of accounts department, either managed by front office cashiers or by the accounts department.

It can be said that front office accounting system creates, operates & maintains accurately account files for both guest & non-guest accounts. During the entire guest cycle front office cashier/accountant tracks financial transactions & records all transactions in proper ledgers & collects payment either at the time of checkout or transfers the guest ledgers to city ledgers & subsequently collects the payment. During the entire cycle both the internal control & daily night auditing is carried out to ensure the correctness of accounts. Public limited hotels require statutory auditing by chartered accountant & audited reports are made public. A proper receipt is issued for all cash receipts. The cash receipt book is serial numbered & it contains minimum of three copies. The original is handed over to the guest as his receipt, the first carbon copy is sent to control department the third copy is sent to accounts department. All cash received is recorded in the cash book. There are three most common methods of recording cash transactions in the cash book:

1.                  "T" form of cash book

2.                  Bank pass book type of cash book/ journal form

3.                  Cash book

"T" form of cash book: It is the normal cash book which we maintain in accounts. The left side of the book is debited (Dr) side & the right side is called credit side (Cr). All payments received are recorded on the left hand side & all the payments made are entered on the right side. The only difference in Front office cash book & the normal cash book used in accounts is that there is no column for date as the date is entered on the top of right hand side because all the transaction of one day is entered in one page.
Bank-pass book type of cash book /journal form: It is called bank-pass book type of cash book as it is maintained like bank maintains its pass book. In this cash book there is only one column of description & it has a separate debit amount/ receipt & credit amount/payment column & it also has a balance column. That means after each transaction the account is balanced & the cashier can see that how much balance he has & it must tally with the cash in the cash box. When an entry is made on debit side then along with the details in the description column the entry is made with a word "To" and if the amount is entered on the credit side then the entry is made with a word "By”, the amount is written the respective amount column. After each transaction the balance of debit and credit side is calculated and entered in the balance column.

Guest Accounts: The final transaction between a guest and the hotel is called guest accounts. At the time of guaranteed reservation or check-in the guest accounts are created.

We generally follow two types of accounting system: 

a) Fully automated accounting system and b) Semi automated accounting system. 

a) Fully automated: In a fully automated hotel, the information from the reservation department and from the reception department is transferred to an electronic folio. Electronic folios are automatically cross referenced with the guest with the guest registration card through local area network. Software has been developed which automatically opens a bill folio on registration of a guest and it also records the telephone meter reading. In this system there is only one column of the amount if amount is debited then a sign of '+' is affixed before the amount and in case of credit the sign of '-' is printed before the amount. there is no need to pick up the balance as the balance is automatically transaction are just handled once and the computer automatically records the transaction in the respected accounts. This helps in controlling the errors in posting significantly.

b) Semi automated accounting system: In Semi automatic accounting system, a bill folio is specially designed depending upon the system used. All vouchers are posted with the help of accounting machine. For each transaction room number to be updated is selected, the old balance is picked up then date, department/reference number, amount of the transaction is entered. The balancing and posting to visitors tabular ledger/ day book is done simultaneously by the machine. After each transaction the balance of the bill is shown in the balance column. The debit balance is the money owed by the guest to the hotel and the credit balance means that the guest has paid more in advance than the bill due to him and the balance is to be returned to the guest.

Visitor's paid out/cash paid out: Hotel at times pays on behalf of the guests. When a guest connects directly from foreign country, he may not be having Indian currency and hotels pays on behalf of the guest to taxi driver for his fare from airport to the hotel and debits the guests account with the same amount. Visitors paid out payments are made from the impressed or float issued to front office cashier. During the stay, a guest may ask hotel to buy tickets (air, rail, cinema, etc.) and also pays from the hotel account as guest is instructing on phone. Hotel pays on behalf of the guest debits his account (bill/folio). Before debiting the guests account a visitors paid out voucher is raised, signed and approved by the authorized person from the hotel, guest is also requested to sign ( guest can sign when he comes to reception).

Restaurant Bills/Debit vouchers: During the stay guest avails various services. Usually he does not pay in cash and instead signs the bills for the services. These signed bills are reffered as debit vouchers. The guest's name and room number is written on the bill and sent to the front-office. In case of fully computerized hotels, restaurant cashier posts the guest's bill on his computer and simultaneously the bill is also posted to respective guest's master folio at front office and the charged bill/voucher can be sent to front office for records purposes. In case of manual system of accounting, the restaurant cashier sends the charged bill to front office either manually or dispatches through pneumatic tube.

Tips/Service charge: It is customary to pay cash as tip to waiter. Guest staying in the rooms fined it convenient to debit their bills with tip amount. When the bill is presented to guest for settlement, guest at times add cash to be paid to waiter on his behalf as tips. The tips are immediately paid in cash to waiter and the amount is debited to guest account. The guest settles the bill along with the tip amount either at the time of check-out or subsequently. The tip amount is shown separately in the restaurant sales summary sheet from the food and beverage sale. While posting this bill at front office bills department to guest's account the total amount of the bill/cheque/voucher is debited to the master bill/ bill folio.

Rectification of bills/folios: Though hotel staff is careful enough to debit and credit the guest bill properly but still some times due to oversight or any other reason guest is over charged or under charged. Over charged bill if presented and paid by guest can create more negative reputation for the hotel. The wrong charging of bills is due to posting error, over charging by mistake, dis-satisfactory service, wrong posting of rates, posting a voucher to wrong room etc. The rectification of bills can be done either by correction or by allowance.

Correction: If the mistake is discovered before closing the account for the day then it can be rectified by correcting/ altering the amount. This method cannot be used if the mistake is discovered on the next day. Correction voucher is prepared and authorized by manager before rectifying the error. Sample format of correction voucher is given below.

Allowance: In case the mistake is discovered on the next day to rectify the mistake the allowance voucher is prepared and authorized by a manager. In case guest has been charged and rebate is to be given then credit allowance voucher is prepared and on the contrary if guest is under charged then debit allowance voucher is seen t to accounts department and control department. 

Non-guest accounts: Hotel offers credit facilities to local residents who visit hotels and avail various services other than guest rooms. The guests may organize a marriage party conference, meals at restaurants, etc. and instead of paying in cash at the time of services received; hotel allows them to sign the bills and sends them to their offices for settlement on subsequent day or days. The front office or accounts department of the hotel creates non guest accounts to track these outstanding payments. The resident guests at times do not pay cash at the time of checkout. These guest's bills are transferred to non guest accounts for settlement in future. Sometime non guest accounts are also called city ledger.

Credit Monitoring:  The front office and accounts department must monitor guest non guest accounts to ensure they remain within house limit. Hotels extend credit to all guests whether known or unknown. All guests who check in and have enough luggages are usually not asked to pay in advance. The guests are required to settle their bill at the time of check-out. But in case the credit limit during the stay of a guest if crosses the house limit then he is requested by the management to deposit cash.

SUMIT MANWAL