1. Chapter 11 Cash or Credit: The City Ledger

2. Learning Objectives

3. Cash (1 of 7) Cash Paid Outs
When cash is taken out of the F.O. cash and “paid out” to someone (Employee, Guest, Vendor, Manager etc.,)
Tips to employees
Most common form of cash “paid out” at FO
Guest adds the tip amount and signs the check.
Tip is paid out on the same day to the employee
Employee signs the “Cash Advance Voucher” for this
Cost to the Hotel: Float
Hotel gets money later, pays employee up-front!
Cost to the Hotel: Discount fees
Hotel has to pay fee to VISA or AMEX, but does not reduce tip! 3

4. Cash (2 of 7) Cash Loans Cost to the Hotel: uncollectible accounts
If the bill is not paid, hotel cannot recover tip already paid out!
Another look at the employee tips
All the above can end up costing the hotel a lot of money!
Cash Loans
A loan given to a guest from FO cash
Common earlier for taxi fare, similar small amounts
Not a good idea for large amounts
Very rare these days with ATMs and Credit Cards
Third party sources of cash
Encourage guests to use ATMs, get a loan on their credit card, or use wire services like Western Union 4

5. Cash (3 of 7) Refunds at Check-out Automatic Teller Machines(ATMS)
Dispense cash world-wide in local currencies
ATMS in Hotel Lobbies
Source of revenue for hotel as ATM company pays a fee
Encourages guests to spend more money in the hotel!
Paid outs to concessionaries
Hotel pays the Dry-Cleaner or Hairdresser and charges it to guest account as a “Paid Out”
Guest pays on departure
Refunds at Check-out
If the guest paid a large advance up-front and has money left over, they are refunded as a “paid out”
Have a limit of $100 or so in cash to avoid fraud! 5

6. Cash (4 of 7) Cash Receipts The Cashier’s Daily Report House expenses
House Receipts
The Cashier’s Daily Report
The Bank
A permanent supply of cash received by the FO cashier for daily use
Net Receipts
The difference between money taken in and paid out
Total Receipts – Total Payments = Net Receipts 6

7. Cash (5 of 7) Over or Short The Turn-In
Difference between “What should be” and “What is”
“What should be” = Cash according to accounts
“What is” = Actual cash in dollars and cents in the cash drawer
“Over” = More money in cash drawer than should be
“Short” = Less money in cash drawer than should be
Differences due to errors, over/under payments, fraud
The Turn-In
The cashier turns in the actual cash, along with the Cashiers Report, accounting for “over” and “short”
The cashier turns in the actual cash and an auditor does the accounts 7

8. Cash (6 of 7) Other Related Issues Due Back Tour Package Coupons
Refunding the Due Back
Refunding House Vouchers
Other Related Issues
Tour Package Coupons
Coupons used by members of tour groups to “pay” for meals, etc.
Must be accounted for like regular cash 8

9. Cash (7 of 7) Foreign Currency Normally not accepted in US hotels
Canadian $ may be accepted close to Canadian border
Online reservation systems generally show the rates to the potential guests in the currency of their choices
Some hotels provide money-changing facilities at FO
Rarer in US than in most other countries
In India, even small hotels change currency at FO
Currency exchange restricted to “major” currencies
Can be profitable for hotel, but has its own risks!
USA hotels refer customers to specialized money changers
Automated Currency Conversion Systems
Example from the Land of Nod 9

10. Credit and The City Ledger (1 of 2)
Review of the City Ledger
Credit Cards
History
Started in the USA in 1915
Became big in 1950 with the founding of Diners Club
American Express (AMEX) founded in 1958
BankAmericard in 1960, becoming VISA later
MasterCard in 1970
Hotel chains started issuing their own credit cards, but dropped the idea later with increasing acceptance of general cards 10

11. Credit and The City Ledger (2 of 2)
Kinds of Credit cards
How the system works
Customers get convenience, float, credit, security
Debit cards and smart cards
Debit cards
Transfer funds instantly from customers bank account
No float for customer, less fees for merchants
Smart cards
Credit cards with memory chips that can store other information
ID, medical info, insurance info, etc.; becoming more popular
Still other cards 11

12. Other City-Ledger Categories (1 of 4)
Master Accounts
Accumulate charges for groups
Four common errors that irritate meeting planners
Split billing
Unauthorized signatures
The sequence of posting
Comp rooms
Groups, Packages, and Company Sponsored Functions

13. Other City-Ledger Categories (2 of 4)
Individual “Direct Bill” City-Leger Receivables
The Original City-Ledger Accounts
Travel Agencies (TAs)
A travel agency can become an account receivable in the city ledger when guest pays the first night’s room charge with the travel agency’s coupon
Banquet Charges
An open account created by a catered party in the hotel, that a guest pays after-the-fact
Credit Cards are increasingly replacing this
Late Charges
Charges that appear on the folio after the guest has checked out
May be “written off” as un-collectible if amount is to small to pursue 13

14. Other City-Ledger Categories (3 of 4)
Delinquent Accounts
Accounts that have not been paid in a long time
May be transferred to “Bad Debts” account and “written off” if found to be uncollectible
Executive Accounts
Personal account of Managers in the hotel
May receive discounts for hotel services
Need to distinguish “personal” and official entertainment
Due bills or Trade Advertising Contracts or Trade-outs or Reciprocal Trade Agreements
Hotels trade their room nights for other services like newspaper or TV advertising
The voucher issued by the hotel is often traded like real money!
The guests presents the Due Bill on check-in for payment 14

15. Other City-Ledger Categories (4 of 4)
Frequent (Preferred) Guest Programs
Hotel company is billed for the room rate on the A folio
Guest is billed for other personal charges on B folio

16. Managing Cash and Credit (1 of 2)
Counterfeit Currency
It is a very real problem
Hotels are targets as FO is busy and easy to cheat
Important to train cashiers to detect fake currency
Can buy devices that detect fake bills
Managing Check
Three Quickies
Simple Deterrents 16

17. Managing Cash and Credit (2 of 2)
Traveler’s Checks
Issued by AMEX and other issuers, As good as cash
Cashed with a verifying signature
Train employees in proper procedures, fraud detection
Be careful about Canadian/Australian/ other dollars!
Less popular now with increasing ATM, credit card use. 17

18. A Cost/Benefit Decision (1 of 2)
If you do not extend credit you will certainly have no losses due to “bad debts”, skippers, etc.
However, you will also miss out on good business that was turned or scared away by your rigid credit policies
Collecting, Billing, and Dunning 18

19. A Cost/Benefit Decision (2 of 2)
Minimizing Chargebacks
Chargebacks
When the credit card company refuses to pay the bill
The guest refuses to pay (No-show fees etc.,)
The hotel did not follow card company procedures
How to minimize them…
Communicating charges/fees clearly to the guest
Avoiding “late charges” by better training and good systems
Training employees in following correct procedures