Front Office Accounting FOF401 – Front Office Operations Front Office Accounting

Introduction Each day a hotel engages in a large number of transactions with guests. In addition to using bedrooms and Food & Beverage operations, guests may use other services and facilities during their stay such as laundry, room service or the business Centre. Therefore charges obviously have to be made for the service used. On most occasion guest do not have to pay for the service immediately after its use; they may be provided with services on credit.That is, they use the service or facility and pay for it at the end of their stay.

Introduction The charges must therefore be recorded on a guest account so that they are ready for settlement when guest check out. A hotel may receive advance deposits or pay part payment of a bill from guests. In order to have an accurate and up to date record of all these financial transactions, a front office accounting system has to be set up by a hotel to deal with credit payments as well as debit charges. The main function of the front office accounting system is to: Maintain accurate and current record of all guest transactions Provide an effective internal control by monitoring credit given to guests, and prevent fraudulent staff practices

Introduction Provide management information on departmental revenue. A front office cashier may be employed those specific duty is to perform various tasks, such as preparing and settling guest accounts, administering the safe deposit system as well as offering foreign currency facilities to overseas guests. The front office accounting system which involves the above functions of bill preparation and control, must be able to intergraded with the main accounting system operated by the hotel’s accounts department. The function of the accounts department is to monitor the financial operations of all areas of the hotel i.e. the running cost and earned revenue.

The three(3) major phases of the Accounting Process   Creation of Accounts – A guest folio or guest account is usually created immediately after the guest check in.The check in procedure is to enter the guest details into the computer which automatically opens an account or to open a guest account manually. Credit limits or house limits are often set, which means that guests may not charge more than a preset amount to their accounts. Maintenance of Accounts – Once the guest account has been opened, all financial transactions between the hotel and the guest will be recorded in that account. The act of recording the transactions onto the guest account is called posting. Settlement of Accounts – This is when guests settled their account either Cash or Credit Settlements. Guest need to be given a receipt of their bill to verify that payments are being fulfilled. On the other hand, master account of travel agent should not be given to guest for verification as the amount will be different due to the calculation of commission that will be reflected on the guest folio (Master Account).

Introduction The information supplied by the food and beverage accounting system and the front office accounts system, together with financial and statistical information from other departments, is transferred to the accounts office. From this information the accounts office produces two[2] main types of report: The Operational Reports - which are used by management for daily decision-making The Financial Reports - which are concerned with profitability and revenue. The financial reports indicate the overall performance of the hotel and are used by senior and corporate management.

Types Of Accounts Maintained By The Front Office Cashier A guest account is a record of all the financial transaction between the hotel and the guest. It is sometimes called a folio or a bill. There are two main types of entry on an account: Debit - most accounts are in debit balance, because the guest is in debt to the hotel for the services which they have had and had charged to their account. Thus each time a guest charges an amount, it is a debit entry. Credit – A credit entry refers to payments or subtractions from the balance of a guest bill.

Resident Guest Account Most of the accounts held by the front office cashier are the resident guest accounts, which show the financial transactions with guests who have registered and who are currently staying at the hotel. As previously explained, some of the resident guests may have their accommodation charges settled by their company, while they settle incidentals themselves.. In these situations, the resident guest has to have two[2] folios: The Master Folio – which is the company responsibility. This folio will be send to the company for settlement. The Incidental Folio – which the guest will settle personally.

City Accounts City accounts are records of financial transactions between the hotel and the non resident guests. These could include accounts held by: Local business people who are not resident in the hotel but who use the hotel facilities and services for entertainment or business meetings. Guests who walk out of the hotel without settling the outstanding balance on their account. Walk outs are no longer resident so their account is transferred to the city[sales] ledger, to either await eventual payment or to be written off by the account as a bad debt. Guests who have spent prepayments to guarantee their bookings, but have not arrived or checked in. This amount is normally recorded in the city[sales] ledger.

Management accounts Management accounts are expense accounts or allowances given by some hotels to the hotel manager. These accounts are used to entertain guests or potential clients For example if the guest has a complaint about the hotel, the assistant manager may invite them to have a drink with him or her in the hotel bar after the problem has been resolved.

Types of Postings There are two basic types of transactions that are posted to a guest account: Debit entries Credit entries The most common debit items include: Room charges Restaurant/coffee shop/bar Telephone Laundry Use of hotel facilities e.g. health centre,business centre & Transportation

Types of Postings Credit entries: Prepayments Payments for part of the bill during stay Payments for final settlement Amendments to the bill

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