Cash Transactions Chapter 12

Handling Cash Transactions Cash Paid-Outs Are the exclusive right of the front-office cashier. Increases in assets, including accounts receivable and cash, are made with debits. Decreases in assets, including accounts receivable and cash, are made with credits.

Tips to Employees Most common cash advance. Most hotels pay employees’ tips on receipt or at the end of the shift. Often results in the hotel subsidizing its employee gratuities in 3 common ways Float – the time value of money Merchant discount fees on credit cards Potential noncollectible accounts Page 458 Float- use book example.

Cash Loans Third-Party Sources of Cash ATMs Credit-card advances Person-to-person pay services Internet money services Payday loan companies Expedited money order services These financial services are not free. Fees paid by the guest to the third parties range upward from a low of 10%.

Paid-outs to Concessionaires Concessions – beauty salon, florist, gift store, valet cleaning, etc Hotel acts as middleman in concessionaire-guest relationship Hotels earn 10% to 20% of the laundry and dry cleaning revenue (the other 80% to 90% accrues to the vendor)

Refunds at Check-Out Cash is never refunded if the original payment was not in cash! If credit card was used, hotels issue a refund against the credit card. Reasons for refund could be there was a substantial deposit with reservation or a large payment on account was made on or after arrival. Guest may have shortened the stay or hotel adjusted the rate downward.

Cash Receipts At Check-out On Account Only small percentage of guests settle with cash. Very few use cash, traveler’s checks or personal checks On Account Payments may be requested at any time, not just at departure Long term guests are billed weekly. Guests decide to make payments against their account before checkout

Cash Receipts cont’d At Check-In Reservation Deposit Receipts Guests are asked to establish credit at check-in Most guests prefer credit card Cash guests are asked to pay their room charges up front Reservation Deposit Receipts Cash seldom used to secure a reservation Even advance deposit reservations are usually charged to credit card

House Receipts and Expenses Assorted City- and General-Ledger Receipts Some hotels elect to funnel all cash and check receipts through the front office. Examples: Receipts for meetings or banquet functions Reimbursements or rebates for overpayment to vendors Refunds or credits from taxes Lease revenues from merchants or concessionaires

Assorted House Paid-outs Front office cashier acts as a depository for the accounting department and also as the accounting department’s disbursing agent. The Imprest Petty Cash Fund If the front-office cashiers are only reimbursed when petty cash vouchers reach a sizable amount or at the end of each month, it is known as the imprest petty cash fund This fund authorizes the front-office cashier to hold petty cash vouchers in the drawer day after day

The Cashier’s Daily Report Every cashier in the hotel prepares a daily report With report, cashier turns in departmental monies. These combined funds (plus any that clear through the general cashier) constitute the hotel’s daily deposit made to the bank

Preparing the Cashier’s Report The Cashier’s Bank Each cashier receives and signs for a permanent supply of cash, called the bank. One major accounting firm reported that the total of a hotel’s house banks and cash on hand should be about 2% of total sales Cashiers lock their banks in the safe or hotel vault after each shift.

Net Receipts Represent the difference between what the cashier took in (receipts) and what was paid out. Are computed by subtracting total advances (paid-outs), city and transient, from total receipts, city and transient. House paid-outs and miscellaneous receipts are not included because they’re counted as cash.

Over or Short Over or short is the difference between what the cashier should have in the cash drawer and what is actually there. It is the comparison of a mathematically generated net total against a physical count of the money in the drawer. The cashier should have the sum of the original starting bank plus the net receipts.

The Turn-In Front-office bank is used to cash checks, make change, and advance cash as well as accept receipts. The objective of the cashier’s turn-in is to rebuild the starting bank in the proper amount and variety of denominations to be effective during the next day’s shift, and “drop” the rest of the contents of the cash drawer, i.e. checks, traveler’s checks, foreign funds, large bills, casino chips, cash in poor condition, vouchers for house expenses, etc.

The Income Audit To process the cashier drops made the preceding day. Two purposes: To verify that each department’s cashiers have accurately dropped (turned in) the amount indicated on the deposit envelopes. To prepare the hotel’s daily bank deposit General cashier(s) & income auditor(s) make up the day audit team.

The Income Audit cont’d Paying Off the Due Bank Due bank is calculated by subtracting the amount of money retained by the cashier from the amount needed to open the next day’s bank The income audit staff pays each cashier’s due bank from the growing pile of turned-in cash before preparing the hotel’s daily deposit.

The Income Audit cont’d Paying Off the House Vouchers In hotels that utilize imprest petty cash fund, front-office cashiers are asked to hold their house vouchers until they reach some predetermined amount. Tour Package Coupons Redeemed coupons are proof that goods were exchanged and become the basis for the account receivable. They are part of the departmental cashier’s daily turn-in.

Foreign Currency Not regularly accepted in the United States. Cities with large number of foreign visitors have adequate exchange facilities. Exchange agencies allow hotels to service the currency needs of the international guest with a reasonable ceiling on costs. Foreign traveler’s checks are more readily accepted than personal checks.

Cash and Cash Equivalents Counterfeit Currency There may be as much as $1 billion in counterfeit currency in worldwide circulation. Detecting Counterfeit Currency In 1996, the US Treasury began issuing currency with new security features. Supernotes – Superior counterfeit fakes Search the bill for magnetic ink

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Check-Cashing Safeguards Procedures for Minimizing Fraud The Old “One-Two-Three” Is the check perforated? Do the Federal Reserve district numbers 1 to 12 match the location of the issuing bank? Is the routing code printed in magnetic ink? Simple Deterrents Closed-circuit televisions Photographing procedures Dual-lens cameras

Check-Cashing Safeguards cont’d Endorsements Cashier should use a rubber stamp that includes ID, credit card number, room number and the initials of the person approving the check Congress enacted legislation in 1988 that assigned the first 1.5 inches from the trailing edge of the check to endorsements Use a check cashing checklist before approving a check

Traveler’s Checks American Express pioneered the traveler’s check. The traveler’s check industry stalled in the late 1990’s at about $50 billion per year. Very acceptable and some hotels will cash them even for non-registered guests Prompt refund of lost or stolen checks is their major appeal.

Summary Even as the quantity of cash circulating in hotels declines, the need for careful cash-handling practices increases. Front-office cashiers receive cash from a number of potential sources and is paid out by them for a number of reasons as well. Front-office managers need to carefully train cashiers to identify situations where fraudulent practices may occur