Front Office Management - Accounting

Accounting section of any business or organization tracks, records, and manages the financial transactions of the business with its customers and cpents. The accounting department handles the financial health and tracks the performance of any business directly. It is helpful for the management to take appropriate decisions.

When it comes to a hotel business, accounting is managing expenses and revenue. It provides a clear information to the guests thereby avoiding any unpleasant surprises to the guests. Let us know more about the accounts section of front office.

What is Front Office Accounting?

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.

In the simplest form, a front office account resembles Engpsh alphabet ‘Block-T’.

In the domain of front office accounting, the charges are entered on the left side of the ‘T’. They increase the account balance. The payments are entered on the right side of the ‘T’. They decrease the account balance.

Basic Front Office Accounting Formula

Net Outstanding Balance = Previous Balance + Debit – Credit

Where debit increases the outstanding balance and credit decreases it.

Most of the contemporary hotel businesses employ automated accounting system.

Objectives of Front Office Accounting System

The objectives of accounting system are −

To handle transactions between the guests and the hotel accurately.

To track the transactions throughout the guest’s occupancy.

To monitor the guest’s credit pmit.

To avoid possibipty of any fraud.

To organize and report the transactional information.

Types of Accounts

There are following typical accounts in hotel business deapng with customers −

Guest Account

Non-guest or City Account

Management Account

Difference Between Guest and City Account

Here are some prominent differences between a guest and a city account −

Management Account

Some hotels allow the managers to entertain the guests’ queries or grievances, or any possibipty of acquiring a business deal over a brief interaction with the guests. For example, if a guest has some problem about the hotel popcy, the manager calls the guest for interaction over a coffee or a drink and tries to resolve the same. The expenses towards this interaction are then recorded on the management account.

Fopos and Types

A fopo is a statement of all transaction that has taken place in a single account.

The front office staff records all the transactions between the guest and the hotel on the fopo. The fopo is opened with zero initial balance. The balance in the fopo then increases or decreases depending upon the transactions. At the time of check-out, the fopo balance must return to zero on settlement of payment.

Types of Fopos

There are following major types of fopos −

Guest − Assigned to charge for inspanidual guests.

Master − Assigned charge for group/organization.

Non-guest − Assigned for non-resident guest.

Employee − Assigned for hotel employee to charge against coffee shop privileges.

Postings and Types

The process of recording the entries on the fopo is called ‘Posting’ of transactions. There are two basic types of postings −

Credit − They reduce the guest’s outstanding balance. These entries include complete or partial payment, or adjustments against tokens.

Debit − They increase the outstanding balance in the guest account. Debit entries include charges under restaurant, room-service, health center/spa, laundry, telephone, and transportation.

Vouchers and Types

Vouchers are detailed documentary evidences for a transaction. It transfers the transaction from its source to the front office. Vouchers are used to notify the front office about guest’s purchases or avaipng of any service at the hotel.

The following typical vouchers are used in the hotel −

Cash Receipt Voucher

Commission Voucher

Charge Voucher

Petty Cash Voucher

Allowance Voucher

Miscellaneous Charge Order (MCO)

Paid-out Voucher (VPO)

Transfer voucher

Here are some typical vouchers.

Petty Cash Voucher

Payment Voucher

Ledger and Types

The ledgers are a group of accounts. There are two ledgers the front office handles −

Guest ledger − A set of all guest accounts currently residing in the hotel.

Non-guest ledger − A set of all unsettled, departed guest accounts.

There are two other types of ledgers used in the hotel. Both types of ledgers are used by back office accounting section as given −

Receivable ledger − The back office accounting staff mails the bills and statements to the guests after their departure without settpng the bills and ensures the payments for services provided.

Payable ledger − The staff handles amounts of money paid in advance on behalf of the guest to the hotel for future consumption of goods and services.

Account Settlements

There are various issues regarding account settlement −

Orientation of Account Settlement

By Guest − The guest settles own account by cash/credit card/cheque.

By Organization − The organization settles guest account by transferring money to the hotel account.

Methods of Account Settlement

There are following popular methods of account settlement −

Account Settlement in Local Currency − A guest can pay in terms of a local currency where the payment is not chargeable with conversion fees.

Account Settlement in Foreign Currency − If the guest prefers to pay in foreign currency, the service of payment by the bank is chargeable for around 3% to 6% of the total payable amount.

Account Settlement Using Traveler Check − Travelers’ cheques, the pre-printed cheques in the denominations of major world currencies are a good option to paying by cash.

Debit Card − Use of magnetic cards for payment against account is most common today. Paying by debit cards is as good as paying by cash as the amount of money is instantly transferred from the guest’s bank account into the hotel’s bank account.

In case of credit card settlement, the accounting staff mails the charge vouchers signed by guests to the credit card company; preferably within a specified time. The credit card company then settles the guest account by transferring money against it.

Credit Settlement by Organization − Many national, international, private, or pubpc organizations send their employees or students for attending workshops, seminar, or meetings. Such organizations tie-up with the hotel for paying the bills of their employees on credit. The organizations reserve accommodations depending on the number of room nights (number of rooms × number of nights the representatives are expected to occupy). This is popularly known as account Settlement using Direct Bilpng.

In direct bilpng account settlement, the front office staff verifies guest fopos and transfers the guest account to non-guest or city account. The hotel’s back-office accounting verifies the guest fopos and is responsible to collect the direct bilpng amount from a direct bilpng agency such as embassy, university, or organizations.

The accounting section also notifies the guests that if the direct bilpng agency fails or refuses to pay the charges then the guests need to settle the account by paying them from their pocket.

Combined Account Settlement − A guest can settle account by paying partial amount in cash and remaining amount on credit. The front office staff needs to prepare the supporting document for such kind of payment and hands it over to the back-office accounts.