Night Audit

1. Night Audit A daily comparison of guest accounts (and non-guest accounts having activity) with revenue center transaction information. A night audit, so called because it is usually performed at night, helps guarantee accuracy in front office accounting

2. Night Auditor An Employee who checks the accuracy of front office accounting records and compiles a daily summary of hotel financial data as part of the night audit. In many hotels, the night auditor is actually an employee of the accounting division

3. Functions of the Night Audit Night Audit is concerned with the following functions: Verifying posted entries to guest and non-guest accounts Balancing all front office accounts Resolving room status and rate discrepancies Review guest credit transactions against established limits Producing operational and managerial reports A front office audit process which is called the nightaudit is intended to fulfill this need It is a daily review of guest account transactions recorded at the front desk against revenue center transactions

4. The Role of the Night Auditor Track room revenues, occupancy percentages, and other hotel operating statistics Prepare a daily summary of cash, check, credit card, debit card, gift certificate, and other activities that occurred at the front desk Summarizes and reports the results of operations to front office management

5. Duties of the Night Auditor Performing the night audit requires: Attention to accounting detail Procedural controls, and Guest credit transactions The night auditor should also be familiar with: the nature of cash transactions affecting the front office accounting system The night auditor should be able to track: Room revenues Occupancy percentages And other operational statistics

6. Duties of the Night Auditor The night auditor prepares a daily summary of cash, check and credit card activities and reports the results to front office management The Night Auditor generally works the night shift, from 11p.m. to 7a.m. compiling, balancing and reviewing the transactions form the previous day Each front office must decide what time will be considered the end of its accounting day

7. Duties of the Night Auditor Usually, the closing time of hotel revenue outlets such as room service, restaurants, stores, determines the end of the accounting day Typically the business day ends when the night audit begins. For e.g. if a night audit begins at 12:00 a.m., the hotel’s business day would end at 12:00 a.m. Any transactions that take place during the audit work time are considered part of the next business day

8. Cross Referencing Cross-referencing refers to the activities associated with comparing data found from different sources to ensure correctness of the audit. Some examples of cross referencing are as follows: Compare online posting and /or vouchers against guest, master, non-guest and employees folios Compare Charge Vouchers/Guest Checks against Register Tape or Sales Journal (for example, a coffee shop guest check and a front office guest folio) Compare room rate postings against Housekeeping Room Status Report and Registration Records/Files

9. Account Integrity The Night Auditor shall establish Guest and Non-Guest account integrity by cross referencing account postings with departmental source documentation The Audit Process is said to be complete when the total guest, non-guest and departmental accounts are in balance An Out of Balance position exists when the charges (debits) and credits posted to guest and non-guest accounts throughout the day do not match the charges (debits) and credits posted to the departmental revenue sources.

10. Account Integrity When Audit is not in balance: If the audit is not in balance, the Night Auditor shall thoroughly review: Account transactions Statements Vouchers Support documents Departmental source documentation

11. Guest Credit Monitoring Hotels establish lines of credit or credit limits for guest and non-guests. Those limits depend on several variables as follows: Credit Card Company floor limits The Hotel’s House limits Guest status or Reputations

12. Guest Credit Monitoring At the close of each business day, the night auditor will: Identify guest and non-guest accounts that have reached or exceeded assigned credit limits Prepare a report about High Balance Accounts to be evaluated by the management

13. Audit Posting Formula Net Outstanding Balance (NOB) = Previous Balance (PB) + Debits (DR) – Credits (CR) NOB = PB + DR - CR

14. Daily Transcript The daily transcript is a detailed report of guest accounts that summarizes and updates those guest account that had transcriptional activity on that particular day. Under the fully automated system, system produced daily transcript detailed by: Revenue center Transcription type Transcript total

15. Supplemental Transcript The supplemental transcript is a report of non-guest accounts that summarizes and updates those non-guest accounts that had transactional activity on that particular day.

16. How Daily & Supplemental Transcript are used? They form the basis for a consolidated report (Daily Transaction Report) of front office accounting from which revenue center totals can be checked. For e.g. the total of charged purchases reported by the hotel’s restaurant should equal the total amount of restaurant charge purchases posted to guest and non-guest accounts

17. The Night Audit Process The night audit process focuses on two areas: Discovery and correction of front office accounting errors through the cross-referencing process. Creation of accounting and managerial reports (e.g. Average Rate, Revenue Per Available Room (RevPAR), Occupancy Percentage, Usage of Package Plans and other marketing programs, and the number of group rooms and complimentary rooms occupied)

18. The Night Audit Process The main steps of the night audit process are: Complete outstanding posting Reconcile room status discrepancies Verify room rates Balance all departmental accounts Verify no-show reservation Post room rates and taxes Prepare reports Prepare cash receipts for deposit Clear or back up the system Distribute reports

19. The Night Audit Process Complete outstanding posting: The Night Auditor must confirm that all transactions have been posted before starting the audit routine Reconcile room status discrepancies: The Night Auditor must review front office occupancy status and HK room status reports to reconcile and finalize the occupancy status of all rooms for a given night Verify room rates: The Night Auditor shall compare registration records with system generated room report. If room’s rack and actual rates do not match, the night auditor shall consider following issues:

20. The Night Audit Process If the room is occupied by a member of a group or by a corporate-rate customer, is the discounted rate? If the room is occupied by a guest with a package rate on a special discount offered through the hotel’s reservation distribution channels, is the discounted rate correct If there is only one guest in a room and the actual rate is approximately half the rack rate, is the guest part of a shared reservation? If s/he is, did the second guest register. If the room is complimentary, is there appropriate supporting evidence for the rate(for example, a complimentary room authorization form)?

21. The Night Audit Process Balance all departmental accounts: It is more efficient for a Night Auditor to balance all departmental accounts first and then look for individual posting errors within an out-of-balance department. This process of balancing al revenue center accounts is called ‘Trial Balance’ Verify no-show reservation: The night auditor is responsible for: Clearing reservation files Posting charges to no show accounts (guaranteed reservations)

22. The Night Audit Process While doing so, the night auditor shall pay attention to the following points: Duplicate reservations Misspelling of guest name and / or reserving them Front office or system entry errors Front office forgetting to cancel properly a reservation Post room rates and taxes: Posting room rates and taxes takes place typically at the end of the day. The advantages of posting room rates and taxes automatically by the fully automated system are: Room rates and taxes posting to appropriate electronic folios can be done in minutes Posting is reliable, accurate with no pick-up, tax calculation, or posting errors

23. The Night Audit Process Prepare reports: The night auditor shall prepare reports that indicate the status of front office activities and operations. Some of the reports prepared by night auditor are: The Final Department detail and Summary Reports (help prove that a transactions were properly posted and accounted for) The Daily Operations Report (summarizes the day’s business and provides insights into revenues, receivables, operating statistics and cash transactions related to front office) The High Balance Report (identifies guests whose charges are approaching on account credit designated by the hotel Specialty Reports (Group Sales Report dispatched by each group, showing number of rooms occupied by each group, and revenue generated by each group. Report that lists guests who stay frequently and guests who are VIPs)

24. The Night Audit Process Prepare cash receipts for deposit:The night auditor should: prepare a Cash Deposit Voucher as part of the audit process if cash receipts have not yet been deposited in the bank, compare the postings of cash payments and paid-outs with actual cash on hand, call Front Desk Cashiers to deposit cash at the end of their shifts without knowing how much in cash receipts that the system has recorded for them. This process is called ‘Blind Drop’, compare system totals per cashier with the actual cashier drop document. Had any discrepancies occur, the night auditor shall report this to GM, FOM or Controller.

25. The Night Audit Process Clear or back up the system: At least two GuestLists must be printed for back-up and emergency use (one for front desk staff and the other for Switchboard Operator) Moreover, a printed RoomStatusReport shall be prepared to enable front desk agents to identify vacant and ready rooms, should the front office system become inoperable A GuestLedgerReport shall be prepared which contains the opening and closing balances for all. Report is generated to include expected arrival, stay-over and departure information for several days

26. The Night Audit Process Distribute reports: Due to the sensitive and confidential nature of front office information, the night auditor must promptly deliver appropriate reports to authorized individuals

27. Verifying the Night Audit Numerous types of posting, mathematical and clerical errors can be identified. The most typical errors are those involving: Previous balance pick-up Transpositions Misplaced folios

28. Verifying the Night Audit Pickup Errors: If the previous balance is entered incorrectly, so will be the resulting-end balance It is mostly found where the system is manual or semi-automated It is very time consuming to locate and correct as it is often necessary to review all previous and ending balances on every folio in order to identify the error

29. Verifying the Night Audit Transposition Errors: It is easiest to identify This type of error occurs when numbers related to a transaction are reversed For e.g. entering $324 into a posting machine rather than the actual previous balance of $342 Such errors can be easily identified by subtracting the smaller number from the larger and dividing by 9.

30. Verifying the Night Audit Missing Folios: In manual or semi-automated system a folio has been filed incorrectly or has been removed form the folio bucket Misappropriation may take place for check-out guest, or when a high balance account may have been temporarily removed by credit manager, etc. Hence, a written note may be helpful When a folio is missing, the night audit simply will not balance In automated hotels, where folios are stored electronically, missing folios are not an issue

31. Difference Daily and Supplemental Transcripts A dailytranscript is a detailed report of guest accounts that summarizes and updates those guest accounts that had transactional activity on that particular day It is used as a worksheet and helps to detect posting errors in the guest account on that particular day A supplementaltranscript is a detailed report of all non-guest accounts that indicates each charge transaction that affected a non-guest account that day, It is also used as a worksheet to detect posting errors in the non-guest account on that particular day