Front Office Accounting

A front office accounting system is a set of procedures used to prepare, maintain, monitors, record the transactions of guests and groups, and other non-guests using the hotel facilities and services. The front office ability to collect outstanding balances depends upon the usage and performance of the accounting system followed by hotels. An effective accounting system consists of performed during various stages of guest cycle. At the pre-arrival stage a guest accounting system gathers data related to reservation guarantee and any advance deposits. At the time of guest arrival, the accounting system looks for room rates assigned and the taxes/discounts applicable at the registration. During the occupancy stage the transactions of the guest are tracked and posted to the folios. Lastly, at the departure stage, guest accounting system ensures payment for facilities and services availed by the guest.

Moreover the financial transaction of city guests/non-guests accounts may also be processed as per the parameters of front office accounting. It helps in promoting local business. The non-guest accounts also include accounts of former guests who did not settle their respective bills. Whereas the responsibility of collecting non-guest accounts shifts from front office cashier to accounting division.

A front office system generally

·   Creates and maintains an accounting record for each guest and non-guest account.

·   Track and record financial transaction throughout the guest cycle.

·   Ensuring control over cash and non-cash transactions.

   FRONT OFFICE ACCOUNTING:

 Accounts:

An account is a system of accumulating and summarizing financial data on a form or a sheet of computerized system. It contains and stores the various business transactions held during various stages of guest stay in the hotel. Front of accounts are recordkeeping devices to store information about guest and non-guest financial transactions. An account in written form resembles letter ‘T’ and is called a T-account.

fully automated system, charges and payments may be listed in a single column. The minus and plus signs will indicate the decrease or increase in the account.

Front office has to maintain and take care of two types of accounts:

·       Guest Account: It is the record of financial transactions between hotel and in-house guest. Such accounts are created at the time of guest guaranteed reservation or at the registration of the guest in the hotel. During the stay the front office looks for any transactions held by guests and posts the same in guest folio. The payments of the accounts is generally taken at the check- out stage of the guest, but in some cases a guest may be requested to make partial or full payment during any time of guest cycle. It may be seen when a guest crosses house limit set by the hotel for every individual guest.

·       Non-guest Account: In order to promote local business and corporates business, hotel might extend charge privilege to such guests, groups and for them non-guest accounts may be created. Non-guest account may be formed even for those guests who do not settle their account completely, hence changing their status from guest to non-guest. The non-guest accounts are generally billed monthly by the hotel accounting section.

1.1  Folios:

A folio is a statement of all transactions affecting the balance of each individual account. It list the debits and credits of your charges. For example, room charges, phone calls, minibar, laundry services, room service, valet, florist shop, spa, etc.

The invoice in hotel is no different than an invoice for any other good or service - it is simply proof of how much a guest have paid. It is generally opened at the time of reservation or once the guest registers with the hotel at check-in. At settlement the guest folio is to be returned to zero balance by any mode of payment. The process of recording transactions on folio are termed as posting.

 Folio:

· Front office transactions are charted on account statements called folios. A folio is a statement of all transactions (debits and credits) affecting the balance of a single account. There are basically five types of folios used in front office accounting and maintained with front office accountingsystem:

1. Guest Folios – Accounts assigned to individual guests or guestrooms.

2. Master Folios – Accounts assigned to more than one guest or guestroom, usually applicable for group accounts.3. Non-Guest or Semi-Permanent Folios – Accounts assigned to non-guest business or agencies with hotel charge purchase privileges.

4. Employee Folios – Accounts assigned to employees with charge purchase privileges.

5. Split Folios – Accounts assigned to a guest on his/her request to split his/her charges and payments between two personal folios – one to record expenses to be paid by the sponsoring business company and the other to record personal expenses to be paid by the guest. In this case two folios are created for the same guest.

VOUCHERS

A voucher details a transaction to be posted to a front office account. There are several types of vouchers used in front office accounting system:

1. Cash Voucher – A voucher used to support a cash payment transaction at the front desk.

2. Charge Voucher – A voucher used to support a charge purchase transaction that takes place somewhere other than the front office.

3. Allowance Voucher – A voucher used to support an account allowance.

4. Cash Advance Voucher – A voucher used to support cash flow out of the hotel, either directly to or on behalf of the guest.

5. Correction Voucher – A voucher used to support the correction of a posting error which is rectified before the close of business on the     day the error was made.

6. Credit Card Voucher – A form designated by the credit card company to be used for imprinting the credit card and recording the amount     charged.

7. Paid-Out Voucher – A voucher used to support the cash disbursed by the hotel on behalf of a guest.

8. Transfer Voucher – A voucher used to support a reduction in balance on one folio and an equal increase in balance on another. Transfer         vouchers are used for transfers between guest accounts and for transfers from guest accounts to non-guest accounts when they are settled by credit cards.

9. Travel Agency Voucher – In travel agent guaranteed reservation, the travel agent forwards a voucher to the hotel as proof of payment and guarantees that the prepaid amount will be sent to the hotel when the voucher is returned to the travel agency for payment.

1. Cash Receipt Voucher

   • Purpose: Used when cash is received from a guest, either for room charges, advance deposits, or other services.

   • Details Recorded:

     • Guest name and room number

     • Date and time of the transaction

     • Amount received

     • Purpose (e.g., advance payment, restaurant bill settlement)

     • Signature of the cashier and guest

2. Charge Voucher (Debit Voucher)

   • Purpose: Used to record charges made by a guest for services such as dining, spa, or room service that are to be posted to the guest's account.

   • Details Recorded:

     • Guest name and room number

     • Description of the service/product

     • Amount to be charged

     • Date and time of the transaction

     • Signature of the guest or staff

3. Allowance Voucher

   • Purpose: Used when adjustments need to be made to a guest's account, such as discounts, refunds, or corrections to billing errors.

   • Details Recorded:

     • Guest name and room number

     • Reason for the allowance (e.g., billing error, compensation for service failure)

     • Amount of allowance

     • Authorization signature (typically by a manager)

4. Transfer Voucher

   • Purpose: Used to transfer charges from one account to another, such as when a guest's charges are shifted to a group master account or another individual’s account.

   • Details Recorded:

     • Names and account numbers of both accounts involved

     • Reason for the transfer

     • Date and time of the transfer

     • Signature of the staff authorizing the transfer

5. Paid-Out Voucher

   • Purpose: Used to record payments made by the hotel on behalf of a guest, such as paying for taxi services or purchasing tickets.

   • Details Recorded:

     • Guest name and room number

     • Amount paid out

     • Purpose of the payment

     • Authorization signature from the guest and front office manager

6. Miscellaneous Charge Order (MCO) Voucher

   • Purpose: Used when charges are to be billed to third-party accounts, such as travel agents or corporate accounts.

   • Details Recorded:

     • Guest name and room number

     • Name of the third party to be billed

     • Description of the service/product

     • Amount to be charged

     • Approval signature

7. Correction Voucher

   • Purpose: Used to rectify errors made in posting charges to a guest's account.

   • Details Recorded:

     • Description of the error

     • Correct details of the transaction

     • Guest name and room number

     • Date and time of the correction

     • Signature of the staff and manager

Front Office Ledger

The front office ledger, also referred to as the guest ledger, is the accounting system used by the front office to record all transactions involving guests currently staying at the hotel. It serves as a central repository for all financial data related to guest accounts.

Types of Front Office Ledgers

1. Guest Ledger (Transient Ledger)

   • Definition: This ledger records the accounts of all in-house guests currently staying in the hotel.

   • Purpose: Tracks transactions such as room charges, taxes, restaurant bills, room service, laundry, and other miscellaneous expenses.

   • Characteristics:

     • Updated daily to reflect guest activity.

     • Settled at the time of guest departure (check-out).

     • Managed through the Property Management System (PMS) or manually in smaller hotels.

2. City Ledger

   • Definition: Maintains the accounts of non-resident guests or companies with outstanding balances after check-out.

   • Purpose: Used for deferred payments, such as corporate bookings, travel agent commissions, or groups billed after their stay.

   • Characteristics:

     • Invoices sent to guests or companies for payment at a later date.

     • Acts as an extension of the guest ledger for unpaid bills.

3. Advance Deposit Ledger

   • Definition: Tracks deposits made by guests prior to arrival.

   • Purpose: Ensures that advance payments for room bookings or services are properly recorded.

   • Characteristics:

     • Prepayments are credited to the guest's account upon arrival.

     • Reduces the risk of no-shows.

4. Group Ledger

   • Definition: A specific ledger for groups or conventions staying in the hotel.

   • Purpose: Simplifies the management of group bookings by consolidating transactions.

   • Characteristics:

     • Includes room charges, banquet services, and group discounts.

     • Settled by the group leader or sponsoring organization.

5. Non-Guest Ledger (House Ledger)

   • Definition: Tracks accounts of individuals or departments within the hotel, such as employees, vendors, or in-house facilities.

   • Purpose: Records internal transactions not related to guests, such as employee meals or operational expenses.

   • Characteristics:

     • Separated from guest accounts.

     • Reconciled with the hotel's general ledger.

Tracking Accounts in the Guest Folio

Tracking accounts involves managing and recording all charges and payments made by the guest. The following components are part of the account tracking process:

1. Account Creation

   • The account is opened at the time of reservation or check-in.

   • Details like guest name, contact information, room type, rate, and payment mode are recorded.

2. Posting Charges

   • Room Charges: Posted automatically based on the room rate and duration of stay.

   • Service Charges: Charges for services like food, laundry, spa, or minibar.

   • Miscellaneous Charges: For special requests or additional services.

3. Payments and Credits

   • Payments made by the guest, whether in cash, card, or other modes, are recorded as credits in the folio.

   • Advance deposits are posted during pre-arrival or check-in.

4. Adjustments and Allowances

   • Adjustments for errors, discounts, or promotional allowances are made to ensure accurate billing.

5. Daily Auditing

   • Front office staff reconcile the folios daily to ensure that all charges and payments are accurately posted.

6. Account Closure

   • At check-out, the folio is reviewed, the balance is settled, and the account is closed.