1. Process financial transactions
Chapter 7
Process financial transactions
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2. Learning Outcomes Process financial transactions.
Balance financial transactions.
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3. What is a financial transaction?
The exchange of something of value, usually money, in return for a service or product.
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4. 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.
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5. 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.
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6. What is a source document?
A source document is the evidence of a financial transaction – whether a charge or a payment
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7. 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.
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8. 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.
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9. Account creation
Depending on the billing requirements of the guest, a guest may have more than one account:
Master account
Extra’s account.
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10. Getting started
Before we can undertake the processing of financial transactions we need a float.
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11. 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.
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12. 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.
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13. Process and record charges
Throughout the cycle of service we may need to record financial transactions.
Charges are commonly processed during the occupancy stage.
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14. 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).
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15. 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.
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16. 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.
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17. 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.
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18. 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.
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19. 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.
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20. 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.
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21. Process payments
Payments are processed at the front office and frequently by the department in which the charge (to which the payment relates) originated.
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22. Process payments
A payment can be received in any (acceptable form to the venue) way and settle an account completely or partially.
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23. 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.
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24. Cash payments Can be received to:
pay for goods and services at time of consumption
Reduce an account balance
Settle an account balance.
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25. 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.
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26. 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.
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27. Contra transactions
These involve the exchange of a service or a good for a service or good of equal value.
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28. 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.
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29. 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.
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30. 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.
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31. 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.
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32. 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.
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33. 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.
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34. Foreign currency exchange
Venues buy foreign currency from their guests.
Venues sell foreign currency to the bank.
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35. 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.
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36. 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,
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37. 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 = ₤
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38. Exchange foreign currency
Important points to remember:
When converting foreign currency to Australian dollars, we round up – usually to the nearest .05c.
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39. 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.
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40. 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.
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41. Processing payments to non-guest accounts
Transactions posted to non-guest accounts (restaurant food, credit card account, etc.) increase the balance of these accounts.
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42. 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.
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43. 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.
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44. 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.
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45. 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.
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46. 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.
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47. 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.

48. 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.
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49. Was is a correction?
Corrections occur when a debit entry (charge) is totally removed from a guests account.
Corrections decrease the account balance.
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50. 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.
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51. 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.
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52. 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.
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53. Balancing financial transactions
To perform the balance, we are checking that all charges and payments have been recorded correctly.
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54. 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.
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55. 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.
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56. 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.
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57. 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.
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58. 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.
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59. 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.
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60. Tracking errors When the error is found adjust the relevant account.
Reprint the department balance where the error(s) were found.
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61. What are ‘overs’?
Overs refers to having more physical money than the computer says we should have.
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62. What are ‘unders’?
Unders refers to having less physical money than the computer says we should have.
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63. 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.
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64. 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.
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65. Petty cash
Set amount of money used to pay for small expenses that cannot be paid by, or is impractical to pay by, cheque.
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66. 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.
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67. 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.
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