Cash and Credit Control 2

7/29/2019 Cash and Credit Control 2

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CONTROL OF CASH AND CREDIT

The hotel industry is the only business where the guest enjoy thebenefit of credit facility right from the time he comes to the hotel and wherethe business man whose primary objective is to collect revenue when thetransaction is over is deprived of that and gets benefit only on or after thedeparture of the guest and that too sometimes after a period of 30-40 days innormal course. This results in the blocking of money and hence creates asituation of greater risk and this demands higher investment and hence it isimportant that the hotel takes some definite and concrete steps to ensure thatthe guest accounts will be settled in full at the agreed time thereforeprotecting the hotel from bankruptcy due to bad debts. The hotel shouldcontrol the credit of its guest to also insure a healthy cash flow. Cash flowmeans the money which moves in and out of the business. The term creditcontrol refers to the various measures taken by the hotel to ensure that theguest settle their account in full either themselves or someone else on theirbehalf {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 differentstages of the guest cycle that will help in credit control.

Credit control procedures used for different guests at the front desk duringcheck-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 theguest

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 theinstruction as required on the folio


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Guest checking in with tour groups- Groups are usually prearranged and pre registered and the creditprocedure 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 groupcharges- The POS cashiers are informed not to make any credit sales transactionsto any group member for their personal incidentals/expenses and chargecash 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 ServiceOrder} or MAO {Meal and Accommodation Order} which detail the services andfacilities that will be provided by the hotel to such guests and the airline willpay for the same. The folio in this case will be signed by the guest at check outand the bill is forwarded to the airline company for payment Crew: These guests have to sign their bills on checkout which are forwarded tothe airline for payment. Services and facilities which are provided by the hoteland paid for by the airline are mentioned in the contract which the airlinemakes 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 thecompany.

- If the room charges are to be billed to company and other incidentals are paidby the guest himself such as laundry, food etc. confirm with the guest at thetime of check in itself how he will pay his incidentals and the same instructionmust be marked on the folio.

- Examples of such guests are members of FHRAI and TAAI. In such cases asplit folio is used where charges are charges are distributed into two{between company/organization and individuals} one for rooms and the otherfor incidentals.


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Guest with scanty baggage:

- These guests are not allowed to purchase anything on credit. All payments areto 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 auditorprepares a slip which tells the guest to deposit some cash before making anynew 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 crosscheck with the companys banker before listing the company on the list ofcredit approved companies of the hotel.The account department maintains this list and is sent to the otherdepartments of the hotel such as reservations, front desk, bills, sales etc.Different limits are set for different companies, depending on the size of thecompany, volume of business provided and the reputation of the company. Forexample a company with reputation of prompt payment shall get a higher creditlimit 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 inturn 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 thereservations or registration process. Guests who present an acceptable creditcard 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-guestaccounts with other approved credit arrangements are subject to limitations


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established by the front office. These internal credit restrictions are calledhouse 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 balanceaccounts. The front office auditor, or night auditor, is primarily responsible foridentifying accounts which have reached or exceeded predetermined creditlimits. Front office management may request the guest to make a partialpayment to reduce the outstanding account balance.

AFTER DEPARTURE ACTIVITIES:If the guest settles his bill through credit card or airlines voucher or travelagents voucher or through a corporate company account his room account iszeroed out at the time of check out and the outstanding balance is transferredto the city ledger.At the end of a specified period the hotel accounting department sends thebills statement to the concerned company for making the payment and it isexpected 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 hotelrequesting them to speed up the payment in case of further failure a strongreminder will be sent and if all these measures dont produce any results a legalnotice through a lawyer will be sent.

Hotels must ensure that the guests who are given credit facility from the hotelare able to pay their bill in full within the scheduled period of time and onlythen the hotel should fix a house limit. Usually the hotels credit policy allowscredit to:

1) Guaranteed payment reservation guests2) Company guarantee payment guests3) Credit card guarantee guests4) 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 cash3) Communication gap between accounts department and cashier or night

auditor and cashier4) Negligence by the staff to look at the black list


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CASH CONTROL:

- All cash must be kept under lock and key and under the supervision of thecashier.- 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 areusually 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 previousemployers. They should be rotated from time to time and a newcombination of staff should be used.

- They must also be trained to react in emergency situations.

Documents

Cash and Credit Control 2