Process financial transactions Chapter 7 Process financial transactions Refer to page 239

Learning Outcomes Process financial transactions. Balance financial transactions. Refer to page 239

What is a financial transaction? The exchange of something of value, usually money, in return for a service or product. Refer to page 240

Process financial transactions Financial transactions in the front office are undertaken by a cashier or receptionist. Financial transactions require us to: Generate invoices and receipts Maintain accurate financial records Perform balancing procedures Control cash and other money. Refer to page 240

Process financial transactions Irrespective of who performs the cashing duties, it is essential that financial transactions are accurate and that all documentation relating to financial transactions are correct and secured. Refer to page 240

What is a source document? A source document is the evidence of a financial transaction – whether a charge or a payment Refer to page 240

Account creation The first stage of financial transaction processing is account creation. The guest’s account is created during the arrival procedure. Other accounts used by front are set up in the PMS and ‘opened’ and ‘closed’ as required. Refer to page 241

Account creation The guests account is commonly referred to as the guest folio, or account folio. The purpose of account creation is to allow accurate recording of all financial transactions between the venue and each guest. Refer to page 241

Account creation Depending on the billing requirements of the guest, a guest may have more than one account: Master account Extra’s account. Refer to page 241

Getting started Before we can undertake the processing of financial transactions we need a float. Refer to page 241

The float A float is a starting bank. The amount of the float is determined by: The level of trade The value of the transactions The number of foreign guests. Refer to page 242

The float The float is signed out at the commencement of a shift and signed back in on completion of the shift. Check the float for accuracy before using it. A float is made up of different denominations which are recorded on the float count record. Refer to page 242

Process and record charges Throughout the cycle of service we may need to record financial transactions. Charges are commonly processed during the occupancy stage. Refer to page 243

How do we know what to record? The various departments in the venue keep track of those goods and services consumed by guests. The source documents are then forwarded to front office and the charge details are recorded on each guests account('s). Refer to page 243

How do we know what to record? We also now what to record because many of the charges (and of course payments) to be posted to a guest folio occur at the front desk. Refer to page 244

What information is supplied by source documents? The source document is likely to include: Guest’s name and room number Date service provided Details of services provided Amount to be charged Guests signature. Refer to page 244 and 245

Posting charges Who we physically post charges to a guest folio depends on the PMS. That said, the procedure remains essentially the same for all systems: Open guest folio Select charge function Select department/service/good Enter the details Close the account. Refer to page 246

Posting charges We need to do this for every charge to be posted. That said, most systems allow us to post multiple gust folio’s by selecting the department through which the charge originates. Refer to page 246

Process a paid out A Paid Out refers to a charge incurred by the guest that has been paid for by the venue on behalf of the guest. A Paid Out may also arise if a guest leaves a tip either on the account to be charged to their room on a credit card. Refer to page 247

Non-guest accounts A non-guest account is an account not related to an in-house guest (folio). Used to record transactions processed by various departments that must be accounted for but aren’t linked to a guest folio. E.g. cash folio, city ledger, advance deposit ledger. Refer to page 248 and Chapter 8 for more detail.

Process payments Payments are processed at the front office and frequently by the department in which the charge (to which the payment relates) originated. Refer to page 250

Process payments A payment can be received in any (acceptable form to the venue) way and settle an account completely or partially. Refer to page 250

Process payments In general terms, the following payment options are acceptable: Cash (local or foreign currency) Credit cards (AX, Visa, MC, DC, JCB) Cheque's (personal, company, travellers, bank) City Ledger EFTPOS. Refer to page 250

Cash payments Can be received to: pay for goods and services at time of consumption Reduce an account balance Settle an account balance. Refer to page 251

Non-income transactions Transactions that display a credit or a debit that will be a direct substitute for a good or service. Examples include: Advance Deposits Contra transactions. Refer to page 251

Advance deposits A prepayment made by the guest usually to secure a reservation for a room. The deposit sits in the advance deposit ledger until the guest checks in. The deposit is transferred to the guests account when it is created at check in. Refer to page 251

Contra transactions These involve the exchange of a service or a good for a service or good of equal value. Refer to page 251

Credit cards A credit facility extended by the issuing bank/card company. The venue pays a fee (commission) to the card company for the privilege of accepting credit cards. Card holders pay interest on outstanding balances at the end of the credit period. Refer to page 252

Debit cards Used similarly to credit cards by the money used is not a credit facility but the card holders own money. The venue pays a fee for the privilege of accepting debit cards. The card holder will pay an annual fee for a debit card. Refer to page 252

Charge cards Limited credit period – balances must be paid in full at end of credit period. The venue pays a fee to the card company for the privilege of accepting charge cards – usually higher than the fee for credit and debit cards. Refer to page 252

Credit limits The amount that can be processed on a card in any one transaction is limited in that authorisation must be sought from the card issuer if a transaction exceeds a predetermined house limit. Refer to page 252

Commissions The commission (fee) a venue pays to the card issuer for accepting their cards varies – it can be a set fee per transaction or a % of the transaction. Refer to page 252

Foreign currency exchange Foreign currency exchange is the exchanging of foreign currency with Australian dollars. Guests may use foreign currency cash or travellers cheque's to settle some or all transactions. Refer to page 255

Foreign currency exchange Venues buy foreign currency from their guests. Venues sell foreign currency to the bank. Refer to page 255

Exchange rates In order to receive a payment in foreign currency (or exchange foreign currency for a guest) we need to know the exchange rate for the respective currency. Exchange rates can change daily and are obtainable from the bank. Refer to page 255

Calculating foreign currency exchanges To convert foreign currency to Australian currency equivalent, divide the foreign currency amount by the exchange rate e.g. $US500 / .72 = $AUD694.45 €500 / .62 = $AUD806.45 ₤500 / .38 = $AUD1,315.80. Refer to page 257

Calculating foreign currency exchanges To convert Australian currency to foreign currency equivalent, multiply the Australian dollar amount by the exchange rate e.g.. $AUD795 x .72 = $US572.40 $AUD795 x .62 = €492.90 $AUD795 x .38 = ₤302.10. Refer to page 258

Exchange foreign currency Important points to remember: When converting foreign currency to Australian dollars, we round up – usually to the nearest .05c. Refer to page 258

Exchange foreign currency Important points to remember: We don’t accept foreign currency coins (in the example given in last slide, if the account is $AUD795 and the US equivalent is $US572.40, the guest needs to tender sufficient notes in US currency to cover the account balance which is likely to necessitate change). Change, if required, is only tendered in Australian dollars. Refer to page 258

Calculating foreign currency Many venues charge a fee for exchanging/accepting foreign currency. The fee may be a set rate (e.g. $20) or a percentage of the value of the exchange. Refer to page 258

Processing payments to non-guest accounts Transactions posted to non-guest accounts (restaurant food, credit card account, etc.) increase the balance of these accounts. Refer to page 260

What is a cash folio? An account used for posting all cash transactions not linked to a guest account. The cash folio balance remains at zero because both the charge and the payment are recorded at the same time. Refer to page 260

Issuing a receipt When any form of payment is received a receipt must be issued. A receipt is a detailed record of the transaction, and shows the payment (amount and type) received. Refer to page 262

Impact of GST on the accounting process? The introduction of the GST means accommodation venues add 10% to the total of goods and services purchased by guests. It also means the venue pays 10% on top of the price paid for the goods and services it purchases. Refer to page 263

Impact of GST on the accounting process? GST is usually included in the price of goods and services, but must be shown separately on an invoice/receipt. Refer to page 263

Invoices An invoice is the primary source document issued by the suppliers of goods and services. It is a detailed record of the goods and services consumed. It is a request for payment. Refer to page 264

Managing refunds A refund is usually issued in the same way in which the payment (related to the purchase) was made. For example, a refund issued for a good purchased using a credit card is likely to be issued against the same credit card.

Managing refunds However, the date of the transaction and the date of the refund may determine how the refund is issued. For example, a guest who made an advance deposit with a credit card who subsequently cancels their booking may be issued a refund by company cheque. Refer to page 264

Was is a correction? Corrections occur when a debit entry (charge) is totally removed from a guests account. Corrections decrease the account balance. Refer to page 265

What is an adjustment? An adjustment is made to an account when the total of a debit (charge) is incorrect but the charge remains on the account, but for a lesser amount. An adjustment decreases the account balance. Refer to page 265

What is account settlement? Account settlement is the third stage of the guest account cycle. The objective of account settlement is to zero balance the account by recording the payment due. Refer to page 238

Balancing financial transactions At the end of every shift, all transactions processed must be accounted for. This procedure is referred to as ‘the shift balance’. The main objectives of the balancing procedure are to close the shift and balance all transactions. Refer to page 267

Balancing financial transactions To perform the balance, we are checking that all charges and payments have been recorded correctly. Refer to page 267

Balancing financial transactions Remember: Charges posted to guest accounts increase the balance of that folio Corresponding charges to non-guest accounts, increase that account balance. Refer to page 268

Balancing financial transactions Remember: Payments posted to guest accounts decrease the balance of that folio Payments posted to non-guest accounts increase the balance of that account. Refer to page 268

Balancing financial transactions To check that we balance, we: Generate reports that show the balance of each non-guest account to which we have posted charges and payments. We compare the physical money and vouchers, and source documents with the report balances. Refer to pages 268 - 270

What is the banking report? The banking report contains the summarised amounts for the cash, credit cards, cheque's, foreign currency and EFTPOS transactions managed that shift. Refer to page 272

What if the accounts don’t balance? If any the accounts to which postings have been recorded don't balance with the source document tallies and physical money, then we don’t balance. We nee to ‘track’ and correct the errors. Errors may be either debit or credit postings. Refer to page 272

Tracking errors To track an error: Identify in which department there is an error (compare manual totals with the computer totals) Recalculate manual tallies. If the result is the same then compare each source document for that department against the computer list for that department. Refer to page 272

Tracking errors When the error is found adjust the relevant account. Reprint the department balance where the error(s) were found. Refer to page 272

What are ‘overs’? Overs refers to having more physical money than the computer says we should have. Refer to page 273

What are ‘unders’? Unders refers to having less physical money than the computer says we should have. Refer to page 273

Security for cash handling Perform balancing procedures away from public view. Secure floats in one location. Sign them out and in. Never leave your cash drawer open. Never put cash in a pocket. Refer to page 274

Security for cash handling Clear and exchange register cash regularly and in a systematic way. Never leave source documents or money (cash or other) exposed or unattended. Refer to page 274

Petty cash Set amount of money used to pay for small expenses that cannot be paid by, or is impractical to pay by, cheque. Refer to page 276

Petty cash Usually controlled by front office (manager). A receipt is required for every purchase. Often a petty cash voucher completed. Person requesting the petty cash must complete the voucher and sign it. Refer to page 276

Imprest system One petty cash control system. Establishes a set amount for petty cash. As a purchase is made using petty cash, the details are recorded in the petty cash book. When funds get low, a cheque is cashed at the bank to top up the petty cash to the previously established maximum holding. Refer to page 276