INTRODUCTION

Though, front office accounting is actually grounded forward logic and maths skills, please don’t worry and panic at the sight of the words ‘accounting’ and ‘statistics’. You may not have a head for numbers and perhaps you hoped to have left the study of maths behind you forever. But it’s an important fact of life. However, the concepts and sums in this unit aren’t too complicated, and we hope you’ll see the use and relevance in everything we cover. Throughout the day the hotel undergoes many transactions with its resident guests e.g. room service or laundry service. Therefore, it is very important for hotels to keep and maintain keeping accurate and up to date records of what each guest has purchased, what has been paid (or part-paid) for, and what is still owed. Accounting may be defined as the process of collecting, recording, classifying, summarizing and analyzing the financial transaction and interpreting the result thereof.

Accounting section of any business or organization monitors or tracks, records, and manages the financial transactions that takes place between the hotel and others i.e. resident guests, companies, agencies, non-resident guests etc. In terms of hotel, it is a systematic process in which the front office accounting staff identifies, records, measures, classifies, verifies, summarizes, interprets, organizes, and communicates financial information for a hotel business. When it comes to a hotel business, accounting is managing expenses and revenue. It prepares and provides clear (efficiently and accurately) information such as: guest bills to the guests thereby avoiding any kind of confusion, chaos and complaints e.g. (overcharging, the loss from undercharging) at a busy cashier’s desk at the time of settlement of the guests. Accounting section handles the financial aspect and tracks the performance of hotel directly. It is helpful for the management to take appropriate decisions by being able to provide some basic statistical and financial reports, hence help hospitality business to survive especially in today’s harsh economic climate. In hotels the front desk cashier maintains the guest accounts and ensures the settlement of the same. Most of the contemporary hotel businesses employ automated accounting system.

ACCOUNTING FUNDAMENTALS

An effective guest accounting system consists of tasks performed during each stage of guest cycle. During the pre-arrival stage, the guest accounting system captures data related to the type of reservation guarantee and tracks prepayments and advance deposits.   When the guest arrives at the front desk the guest accounting system documents the application of room rate and tax at registration. During occupancy a guest accounting system tracks authorised guest purchases. Finally the system ensures payment for outstanding goods and services at the time of checkout.

THE FRONT OFFICE ACCOUNTING CYCLE

Front office accounting follows a chronological cycle which mirrors progress through the guest cycle.

Accounting Cycle Stage

Pre-arrival and check-in

• Determining and confirming the rates/tariffs to be applied
• Checking guest’s intended method of payment
• Checking credit worthiness and establishing credit limits
• Checking corporate and agency settlement agreements
• Opening of guest account
• Opening a master folio and extras folio for the guest
• Crediting the amount of any deposit or pre-payment
• Maintaining the guest account

During occupation

• Posting of credits and charges to the guest account as they are incurred
• Verifying the postings (night audit)
• Monitoring the guest’s credit balance against credit limits, and obtaining interim payments if required
• Settling and closing the guest account

On check-out or following departure

• Posting of final charges
• Preparation of final guest bill(s)
• Presentation of final bill(s) to guest for checking, agreement and payment (or signature on bills to be paid by companies)
• Checking payment and posting final credit to balance the guest account (or posting amounts to be paid by companies to the ledger account)
• Forwarding master folios to companies for payment
• Taking follow-up action to obtain payment of walk-outs, late-posted charges and late payments

THE PURPOSE OF FRONT OFFICE ACCOUNTING

In brief, the front office accounting system:-

1. Creates and maintain accurate accounting record for each guest/ non-guest account.
2. Tracks financial transactions control throughout the guest cycle.
3. Record settlements for all goods and services produced.
4. Handles transactions between the guests and the hotel accurately.
5. Monitors the guest‘s credit limit and ask for deposit from guest in case of high outstanding balance.
6. Avoids possibility of any fraud.
7. Organizes and report the transactional information.
8. Ensures internal control over cash & credit transactions.
9. Provides an efficient management information system (MIS) to the management for departmental revenue generation.

ACCOUNTS

An account is a form on which financial data are summarised. An account may be imagined as a bin or container which stores the results of various business transactions. The increase and decreases in an account are calculated, and resulting monetary amount is the account balance. Any financial transaction that occurs in a hotel may affect several accounts. Front office accounts are record keeping devices to store about guest and non-guest financial transactions. In a simplest written form, an account resembles letter “T”.

This form of recording is called T-account. The growing use of computers has diminished the popularity of T-account. For a front office account charges are increases in the account balance and are entered on the left side of the T-account. Payments are decreases in the account balance and are entered on the right side of the T-account. The account balance is the difference between the totals of the entries on the left ide and the right side of the T-account. Front office accounting documents typically use a journal form.

Similar to a T-account, increases in the account balance are entered under charges, while decreases in the account balance are entered under payments. In a fully automated system, charges and payments may be listed in a single column with the amounts of payments places within parentheses or noted with minus signs to indicate their effect (a decrease) on the account balance. In accounting terminology, the left side of an account is called debit (abbreviated dr) and the right side is called credit (abbreviated cr). Debit and credits do not imply anything good or bad about an account. The value of the debits and credits results from the use of double entry bookkeeping, every transaction creates entries that affect at least two accounts. The sum of debit entries created by a transaction must equal the sum of the credit entries created by that transaction. This fact forms the basis for accounting process called the night audit.

TYPES OF ACCOUNTS

The front desk maintains two types of accounts:-

1. Guest Account: A guest account in front office accounting system is to record of financial transaction between a resident guest and the hotel. It is created when the guests guarantee their reservations by giving advance payment or during registration. The front office creates an individual folio for each guest for maintaining record of all the financial transactions that take place during the stay of the guest. On that basis a guest‘s folio or final bill (payment for charges) is prepared and presented to the guest for collection during the departure and settlement stage of the guest cycle.
2. Non-Guest Account: A hotel may extend in-house charge privileges to local businesses or agencies as a means of promotion or to groups sponsoring meetings at the hotels. It is the record of financial transactions that occur between a non resident guest or non guest and the hotel. The front office creates non-guest accounts to track these transactions which may also be called house accounts or city accounts. Besides that the cashier also maintains other types of non guest accounts like: Accounts of guests who leave the hotel without settling their bills also called as skipper.