Night auditing is actually the audit process of taking inventory of the day’s work. In other words, it is the activity of checking and confirming that whatever transaction has been done during the day is correct and complete. Any mistakes made during the day are corrected and balanced. The audit is done during the night and hence it is called ‘Night Auditing’.
What is the night audit process?
The night audit, by definition, is a daily review of guest account transactions recorded at the front desk against revenue transactions. This accounting practice guarantees that all departments of the hotel are working in sync. It also ensures the reliability and thoroughness of front-office accounting. Since the front office audit also includes active non-guest accounts.
A successful night audit process in a hotel balances guest and non-guest accounts. It also maintains a record of account statements, helps to appropriately monitor account credit and delivers timely reports to the management. Regular night audits increase the likelihood of correct account settlement.
Before the introduction of automated front office systems, the preferred time to perform the audit was late evening or early morning hours. Since guest interaction was reduced to a minimum and front office auditors could work with zero interruption, it came to be known as “night audit”.
Who is a Night Auditor?
Carrying out the night audit requires attention to detail, especially with accounting. A night auditor is an experienced hospitality professional who is familiar with the nature of cash transactions that affect the front office accounting system. He is also responsible for any discrepancies that may arise during the audit. Night auditors are finance masters with a thorough understanding of hospitality functions. More often than not, night auditors are senior front desk personnel like managers.
Functions of Front Office Audit
The main purpose of front office audit is to verify the accuracy and completeness of the guest and non-guest accounts against the revenue centre transaction report. Specifically, the front office audit is concerned with the following functions.
Verifying posted entries to guest and non-guest accounts.
Balancing all front office accounts.
Revolving guest credit transactions against establish limits.
Generating operational and managerial reports.
It is important to understand that the front office audit is concerned with only front office activities. The audit of food, beverage in-room refreshment centre, banquets, and other revenue outlets is usually the responsibility of the accounting department and accrue the day after these outlets close. Very large hotels may require extensive staff to audit food, beverage and other revenue-producing departments.
In some small hotels, the front office auditor may perform several parts of a complete audit in addition to the front office audit since there are fewer revenue outlets in small hotels and the outlets are less complex.
Hotel departs may generate paperwork to document transactions. For each revenue center transaction, the originally revenue center classifies and records the transaction type (cash, charge, or paid out) and its monitory value. Front office personnel may review on online postings to ensure that the appropriate guest or non-guest electronic folio has been properly accessed. In addition, revenue centers not interfaced to the front office system may need to use a voucher to communicate transactional information to the front office for posting.
The front office auditor relies on transaction documentation to prove that proper front office accounting procedures have been followed. The auditor’s review of daily posting of daily posting reconcilers front office accounts with revenue center and departmental records.
Software responsible for monitoring the credit limits of guest and non-guest’s accounts helps maintain the integrity of the front office accounting system. Establishing line of credit or credit limits depends on many factors. Such as credit card company floor limits, the hotels house limits and the guest’s status or reputation as a potential credit risk. The front office auditor should be familiar with these limits and how they relate to each guest and non-guest account. At the close of each business day. The front office auditor should identify guest and non-guest accounts that have reached or exceeded assigned credit limits (front office software can flag these accounts automatically). These accounts are typically called “High balance accounts” a report lighting high balance accounts or a high balance report. Should prepare for appropriate front office management action.
Verify No show
The front office auditor may also be responsible for cleaning the reservation file or filling and posting charges to no-show accounts. When initiating the electronic posting of no-show charges. The front office auditor must be careful to verify that the reservation was guaranteed and the guest never registered with the hotel. Some times duplicate reservations may be made for a guest or a guest’s name may be misspelled and another record accidentally created by the front office staff or system. If these are non identified by front office reservations staff. The guest may actually arrive but appear to be a no-show under the second reservation.
No show billings must be handled with extreme care. A front desk agent who does not record cancellation properly may cause clients to be billed in correctly. In correct billing may lead the credit card company to reevaluate its legal agreement and relationship with the hotel. In correct billing may also cause the hotel to less the guest’s future business and the business of the travel agencies or intermediary that guaranteed the reservation front office staff must at here to establish no show procedures when handling reservation cancellation or modification.
What is the Night Audit Posting Formula?
Regardless of how the night audit is conducted, the basic account posting formula applies:
Previous Balance + Debits – Credits = Net Outstanding Balance
PB + DR – CR = NOB
Night Auditing process
Transfer sheet wise total of all guest ledger transcripts in to the recapitulate sheet. Total each column of the recapitulation sheet.
Check all paid and endorsed bills of the day separate out paid bills and endorsed bills.
Separate endorsed bills into the once payable in foreign currency and other payable in Indian currency.
Prepare city ledger transfer with the endorsed bills. Totals of city ledger transfer must tally with the total of the transfer credit in the recapitulation sheet.
Prepare master food and beverage sales summary from the sales summary received from different food and beverage sales outlets.
Tally room sale prepared by the receptionist in the night receptionist with the room count and house count of the recapitulation sheet.
Tally room count and house count prepared by the receptionist with the room count and house count of the recapitulation sheet.
Check all non food and beverage sales summaries from their sales points with the help of supporting vouchers credit sales must tally with the total credit sale indicated for the respective sales point in the recapitulation sheet.
Compare duplicate copies of the restaurant vouchers with the restaurant sales summaries to check that entries in cash and credit columns are in order.
Total credit sale of mater food and beverage sales summary should tally wit the total of the food sales in the recapitulation sheet.
Check all cash receipts with the FOC & MC cash receipt and their corresponding entries in the FOC & MC cash books.
Check all paid out vouchers and allowance vouchers. Prepare summary of paid out’s and allowances. Total of the paid out and allowances must tally with their respective total in the recapitulation sheet.
Prepare cross sales summary.
Prepare cash turn over statement. Total of cash turned in and impressed should be equal to the amount of cash in the cash book.
Prepare trial balance and ensure that it tallies.
Preparing Night Audit Report
The front office auditor typically prepares reports that indicates that status of front office activities and operations. Among those prepared for management preview are the final department detail and summary reports, the daily operations reports, the high balance report and other reports specific to the property.
Final department detail and summary report are produce and may be filled along with their source documents for accounting divisions review. These reports help to prove that all transactions where properly posted and accounted for.
The daily operations report summaries the days business and provides insight into revenues, receivables, operating statistics and cash transactions related to the front office. This reports is typically consider the most important out come of the front office auditor. The high balance report identities guest whose charges are approaching an account credit limit designated by the hold (house limit).
The software of an automates front office system may be programmed to produce many management reports on demand. For example, the high balance report may be produced at any time during the day as a continuing check on guest transactions and account balances. Another important report is the daily summary or flash report. The daily summary provides a snap short of important operating statistics of the previous day, as well as month to date totals. The hotel manager find this summary report very informative and easy to read, they often read it at the start of a work shift. The daily summary may also show an accompany and rate forecast for the new business day, altering management to changes that may have happened over night.