According to Oxford Advanced Learner’s Dictionary, audit is ‘an official examination of business and financial records to see that they are true and correct’. An audit is generally carried out at the end of every financial year in most businesses. Since hotels operate on 24 × 7 × 365 pattern, continuous auditing is a pre-requisite to safeguard the loss of revenue that may occur due to any error in the posting of charges in the folios
The daily audit is carried out in hotels during slack time; normally this time is between midnight and early morning, hence the audit is known as night audit.
Functions of Night Audit
The main purpose of the night audit is to verify the accuracy and completeness of guest and non-guest accounts against revenue center transactions reports. The night audit is concerned with the following functions:
- Verify posted entries to guest and non-guest accounts
- Balance all front office accounts
- Resolve room status and rate discrepancies
- Review guest credit transactions against established limits
- Generate operational and managerial reports
A night auditor is the person who audits the hotel accounts daily at night or at a time when the business is relatively slow. The audit team generally comprises members of the accounts department. The number of people in the audit team depends upon the size, location, and products of the hotel. A night auditor should be a skilled bookkeeper as he is required to track all the financial transactions between the hotel and its guests and to calculate the total revenue generated during the day. A night auditor should also possess the skills of a receptionist, as in many small and medium hotels, he may be required to carry out the check-in/check-out function at night. Night auditors monitor the current status of guest accounts vis-à-vis the credit limits, and verify discounts, allowances, and promotional programmes that are offered to guests.
Duties and Responsibilities of Night Auditor
- Establishes the end of the day.
- Ensures the accuracy of front office accounting records and balances them.
- Reconciles all the financial transactions between a hotel and its guests.
- Calculates the total revenue generated during the day.
- Verifies and validates the cashier’s posting of charges in the guest accounts.
- Posts the room charges in the guest folio.
- Transfers the unpaid guest to city ledger.
- Monitors the house limit of guests.
- Prepares a high balance report of guest accounts exceeding house limit.
- Monitors the current status of discounts, meal coupons, and other promotional activities that are carried out by the front desk employees.
- Prepares reports for the management.
- Tracks the room occupancy percentage.
Night Audit Process
The steps that are commonly involved in night audit process are as under:
- Establishing the End of the Day
- Completing Outstanding Postings and Verifying Transactions
- Reconciling Transactions
- Verifying No-shows
- Preparing Reports
- Updating the System
Establish End of the Day
The end of the day is the arbitrary time that is supposed to be the end of the financial transactions for a particular day. As hotels remain operational round the clock, it is very necessary to ascertain the time that will be treated as the end of the day and the beginning of a new day in a hotel. This time is generally established by the night auditor. The time when the process of night auditing begins is usually taken to be the end of the day, which means that all transactions that take place after the commencement of the night audit are taken in the next day’s business. For example, if a guest checks-in at 11.15 p.m. at a hotel where the night audit begins at 11 p.m., the guest’s account is included in the next day’s business.
Completing Outstanding Postings and Verifying Transactions
Once the end of the day is established, the first step is to complete the posting of all pending charges (room and tax) in proper account folios. An efficient front office accounting system ensures the prompt posting of the financial transactions as they occur and reach the front desk cash and bills section. The transactions should appear in the guest folio in the order of their occurrence. The night auditor physically verifies all the financial transactions by cross examining the account with supporting vouchers like credit vouchers, debit vouchers, visitors paid-out vouchers, allowance vouchers, etc. There might be errors in the posted charges, which should be caught by the night auditor and correct it, saving the hotel from a lot of embarrassment and from the trouble of amending many records. The night auditors verify the postings in all accounts by going through all the documents carefully. They also validate the discounts given to guests. They examine and authenticate all the transactions that involve monetary elements.
The next step is the reconciliation of each financial transaction with the original source documents (generally vouchers). The reconciliation of accounts may be carried out in the following sections:
- Guest accounts
- City accounts
- Points of sale
- Reconcile Room Status Discrepancies
All the financial transactions that occur between a hotel and its guests are examined by the night audit team. The folio of each guest is matched with the original documents of transactions for the verification of the account. The night auditor also checks for any discrepancy in room status reports of the front office and housekeeping departments. The reconciliation of charges in guest accounts is done in the following order:
- Room charges
- Food and beverage charges
- Other charges
Room charges: The night auditor posts the room rent in the guest folio at the beginning of the night audit process. The basis of posting of the room charges may be as under, depending upon the house customs:
Food and beverage charges: The food and beverage charges posted in the guest folio by the front desk cashier are verified by the night auditor against the restaurant checks, which bear the guest’s signature as a token of the guest’s acceptance that the services were availed by her and that the amount is correct.
Other charges: The night auditor also reconciles other financial transactions that take place between the hotel and its guests such as:
- Visitors paid-out
- Miscellaneous expense
Night auditors also examine the entries in non-resident guest accounts or city accounts. They check these accounts for completeness and accuracy. If any instance of high outstanding balance is found during the night audit process, the night auditors prepare the report of high balance, which is presented to the management, and the responsibility of collecting payment (part/full) shifts to the accounts department.
Points of Sale (POS):
The cashiers of all the points of sale (POS) prepare a summary sheet of financial transactions that occur at their POS and keep the same in an envelope, along with the second copy of bills. The same envelope, along with the cash and credit transactions, is generally deposited with the cashier at the front desk cash and bills section. The night auditor pulls out all the checks/vouchers (including void checks, paid-outs, allowances, foreign exchange transactions, miscellaneous charge vouchers, etc.) of individual POS and reconciles them with the POS cashiers’ sales summary sheets.
Reconcile Room Status Discrepancies:
The night auditor must review front office (occupancy) and housekeeping room status reports to reconcile and finalize the occupancy status of all rooms for a given night.Room status discrepancies must be resolved in a timely manner since imbalances can lead to lost business and cause confusion in the front office. Errors in room status can lead to lost and uncollectible room revenues and omissions in postings
A no-show is a situation when a guest with a confirmed reservation does not arrive at the hotel on the date of arrival without any prior intimation about the cancellation. The night auditor verifies all such no shows, and in the case of guaranteed reservations, posts the no-show in the guests’ folios. Usually, hotels charge one night’s retention for no-shows. The night auditor should verify carefully that the reservation was guaranteed, that the guest has not registered, and that it was not a duplicate reservation. For example, if there is a no show in the name of John Adam, and a guest called Adam Johns has registered at the hotel, it should be checked if the two are the same.
The night auditor generally prepares the following reports for the management:
- High balance report
- Occupancy reports
A night auditor monitors the credit limit of individual resident guest accounts as well as city accounts.
Updating the System
Once the outstanding charges have been posted and reconciled, no-shows have been verified, and reports and summaries for the management have been prepared, the night auditor updates the system and ends the night audit process.
In fully automated hotels, the computerized system automatically carries out system updates. Thus, a night auditor establishes the end of the day, takes stock, checks if charges have been posted properly, and reconciles all the financial transactions of the day between a hotel and its guests.
Due to the sensitive and confidential nature of front office information, the night auditor must promptly deliver appropriate reports to authorized individuals. The distribution of night audit reports is the final step in the night audit routine, and is important to efficient front office operations. Informed managerial decisions can be made if all night audit reports are completed accurately and delivered on time.