CONTROL OF CASH AND CREDIT
The hotel industry is the only business where the guest enjoy the benefit of credit facility right from the time he comes to the hotel and where the business man whose primary objective is to collect revenue when the transaction is over is deprived of that and gets benefit only on or after the departure of the guest and that too sometimes after a period of 30-40 days in normal course. This results in the blocking of money and hence creates a situation of greater risk and this demands higher investment and hence it is important that the hotel takes some definite and concrete steps to ensure that the guest accounts will be settled in full at the agreed time therefore protecting the hotel from bankruptcy due to bad debts. The hotel should control the credit of its guest to also insure a healthy cash flow. Cash flow means the money which moves in and out of the business. The term credit control refers to the various measures taken by the hotel to ensure that the guest settle their account in full either themselves or someone else on their behalf {which may be a credit card company, airline company, corporate office, a travel agent or person}within a specified period of time.
Various steps are to be taken by different front office personnel at different stages of the guest cycle that will help in credit control.
Credit control procedures used for different guests at the front desk during check-in:
Guest paying by credit card:
- Guest is required at the time of check-in to present his credit card
- Credit card is imprinted
- Name on the card is tallied with the name on registration card
- Check expiry date of the card
- Check the hotlist to check that it is not blacklisted
- Check that the hotel accepts the type of credit card presented by the guest
Guest paying by travel agent voucher:
- Guest presents travel agents voucher at the time of check in
- These are prepaid vouchers
- These are then tallied with the record copy the travel agent has sent the hotel in advance at the time of reservation
- The receptionist will then attach this voucher to the guest registration card and then sends it to the cashier who will open the folio and mark the instruction as required on the folio
Guest checking in with tour groups
- Groups are usually prearranged and pre registered and the credit procedure is established between the tour operator and the hotel much prior to arrival
- The cashier in such a case will open a master folio in case of group charges
- The POS cashiers are informed not to make any credit sales transactions to any group member for their personal incidentals/expenses and charge cash for the same
Guests from Airlines:
There are two types of guests sent by the airlines:
Stayover guests: These guests are provided with PSO {Passenger Service Order} or MAO {Meal and Accommodation Order} which detail the services and facilities that will be provided by the hotel to such guests and the airline will pay for the same. The folio in this case will be signed by the guest at check out and the bill is forwarded to the airline company for payment
Crew: These guests have to sign their bills on checkout which are forwarded to the airline for payment. Services and facilities which are provided by the hotel and paid for by the airline are mentioned in the contract which the airline makes with the hotel
Guests having all their charges billed:
- Look through the billing instructions given at the time of reservation to check what charges are covered by guests and what charges are paid by the company.
- If the room charges are to be billed to company and other incidentals are paid by the guest himself such as laundry, food etc. confirm with the guest at the time of check in itself how he will pay his incidentals and the same instruction must be marked on the folio.
- Examples of such guests are members of FHRAI and TAAI. In such cases a split folio is used where charges are charges are distributed into two {between company/organization and individuals} one for rooms and the other for incidentals.
Guest with scanty baggage:
- These guests are not allowed to purchase anything on credit. All payments are to be settled in cash unless well known to the hotel.
- An advance/deposit is taken from them at the time of check-in to be adjusted against room and incidental charges.
- The registration cards, folio and arrival notification slips will have APC {All payments cash}.
- A credit limit is also fixed in case of well known guests with scanty baggage and the moment his outstanding balance reaches the limit the night auditor prepares a slip which tells the guest to deposit some cash before making any new credit transactions.
Walk-in/chance guests
- To avoid any possibility of a skipper and hence loss of revenue, the hotel will usually ask for an advance payment or deposit at the time of check-in.
- The deposit should be enough to cover the room charges and incidental charges.
CREDIT FACILITY FOR COMPANIES/CORPORATIONS:
Hotels have to check the solvency status of the company first and also cross check with the company’s banker before listing the company on the list of credit approved companies of the hotel.
The account department maintains this list and is sent to the other departments of the hotel such as reservations, front desk, bills, sales etc.
Different limits are set for different companies, depending on the size of the company, volume of business provided and the reputation of the company. For example a company with reputation of prompt payment shall get a higher credit limit rather than a newer and smaller company
CREDIT CONTROL DURING STAY OF A GUEST:
A credit limit is set for the guest depending on his credit profile and then in turn must be marked on his folios. The front office must monitor guest and non-guest accounts to ensure they remain within acceptable credit limits. Typically, a line of credit is set for guests who establish charge privileges during the reservations or registration process. Guests who present an acceptable credit card at registration may be extended a line of credit equal to the floor limit {credit limit set by the issuing credit card company}. Guest and non-guest accounts with other approved credit arrangements are subject to limitations established by the front office. These internal credit restrictions are called house limits.
Front office management may need to be notified when a front office account approaches the house limit. Such accounts are called high risk or high balance accounts. The front office auditor, or night auditor, is primarily responsible for identifying accounts which have reached or exceeded predetermined credit limits. Front office management may request the guest to make a partial payment to reduce the outstanding account balance.
AFTER DEPARTURE ACTIVITIES:
If the guest settles his bill through credit card or airlines voucher or travel agents voucher or through a corporate company account his room account is zeroed out at the time of check out and the outstanding balance is transferred to the city ledger.
At the end of a specified period the hotel accounting department sends the bills statement to the concerned company for making the payment and it is expected out of the companies that they will make the payment promptly.
If they are late in doing so a follow up measure will be taken by the hotel requesting them to speed up the payment in case of further failure a strong reminder will be sent and if all these measures don’t produce any results a legal notice through a lawyer will be sent.
Hotels must ensure that the guests who are given credit facility from the hotel are able to pay their bill in full within the scheduled period of time and only then the hotel should fix a house limit. Usually the hotel’s credit policy allows credit to:
1) Guaranteed payment reservation guests
2) Company guarantee payment guests
3) Credit card guarantee guests
4) Deposit/advance payment reservation guests
PROBLEMS IN CREDIT CONTROL MAY ARISE IF:
1) Guest is not explained clearly as to which credit cards/foreign currencies are accepted by the hotel.
2) The guest is not informed that if his bill exceeds the house limit he will have to pay the balance in cash
3) Communication gap between accounts department and cashier or night auditor and cashier
4) Negligence by the staff to look at the black list
CASH CONTROL:
- All cash must be kept under lock and key and under the supervision of the cashier.
- The cash bank/float given to the cashier is also controlled and a check is kept on the same
- The cashier should take proper precautions when dealing with foreign currency
- Whenever the guest pays in cash the cashier has to make a cash receipt and hand it over to the guest.
- The cash collected everyday should be sent to the bank for deposit.
Cash control is important from the point of view of hotel as credit sales are usually discouraged.
PROTECTION OF HOTEL FUNDS:
- Cashiers should make frequent money drops to have minimum cash in hand.
- Cash drawers should be accessible to only one cashier at a time and should be kept closed when not in use.
- Alarm systems should be installed in all areas of the hotel where cash transactions take place.
- A consistent system for handling bank deposits and money pickup should be developed and followed.
- Staff handling money like the cashier, security etc should be appointed only after strict scrutiny and cross checking with their previous employers. They should be rotated from time to time and a new combination of staff should be used.
- They must also be trained to react in emergency situations.
nicely elaboratted...
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