GENERAL MANAGER MANUAL ( PART I FINANCE)

FINANCE

Part 1 - General Managers Basic Audit of the Accounting Department The main objective of the GM’s basic accounting department audit is to identify that controls are in place and operating both effectively and consistently in order to ensure that: management is effectively monitoring the performance and financial position of the hotel and is being supplied with reliable information on a timely basis;

1.  GENERAL LEDGER MAINTENANCE

1.1  Review recent copies of the monthly reporting to Head Office and ensure that it is submitted on a timely basis.

1.2  For a recent period-end review the nature and content of significant balance sheet accounts with the Financial Controller.  Pay particular attention to other debtors, other creditors, accrual and provision accounts (i.e. accounts that accept manual journals that may be used to disguise problems with the profit & loss account).  Were any problems noted?  Was the Financial Controller able to explain all balances?  You should report any unusual balances including excessive accrual reserve or un-collectable amounts.

1.3  Inspect ledger reconciliations for major balance sheet accounts and ensure that reconciliations are being completed on a timely basis.  These should include a reconciliation from the nominal ledger to the following:

·         Guest ledger control; ·         City/sales ledger control; ·         Purchase ledger; ·         Cash accounts (see also treasury work); ·         Analysis of all sundry debtors and creditors; ·         Fixed asset sub-ledger; and ·         Inventory listings. Were any problems noted?

2. TIMELINESS AND QUALITY OF MANAGEMENT REPORTING The management accounts should include comparisons to budgets, forecasts and prior year results.  The accounts should also include key performance indicators such as average room rate, yield on rooms, occupancy %, payroll %, headcount, food & beverage cost of sale %, etc.

Ø  Obtain a copy of the most recent management accounts prepared by the hotel.  Are management accounts complete, prepared with prominent key performance indicators, comparatives, adequate detail and on a timely basis?

3. CHECKING THE GENERAL CASHIER PROCEDURES You should identify that controls are in place and operating both effectively and consistently to ensure: a.   cash takings received by the hotel are physically safeguarded; b.   cash takings received by the hotel are completely and accurately processed; c.   recorded cash on hand and in banks exists, and is properly recorded and disclosed; d.   cash accounts are reconciled monthly to the general ledger and any discrepancy is investigated on a timely basis; and e.   cash maintained at the property is at an optimal level.

GENERAL CASHIER PROCEDURES The General Cashier is essentially the banker to the hotel.  The duties of the General Cashier include: ·           collecting and recording cash takings on a daily basis; ·           preparing hotel banking; and ·           Holding and distributing floats for individual cashiers. Meet with the General Cashier and discuss the control procedures in the general cashiering function.  Determine if the following controls are present and effectively working (or not applicable). 1.    Is the General Cashier’s office physically secure and is access is restricted to only the General Cashier?

2.    Is a key register used to monitor the issuance and return of floats, cellar and bar keys, etc.?

3.    The General Cashier will have a fixed float with the hotel.  Is the size of the General Cashier float recorded in writing and signed by both the General Cashier and the Financial Controller?

4.    Does a member of the accounts department verify the General Cashier float at least once a month by physical counting?

5.    When cashiers lodge their cash takings into the drop safe, is this witnessed and recorded in a logbook? Ensure that when the General Cashier collects the takings from the drop safe, the entries are recorded as collected in the logbook.

6.    Discuss with the General Cashier the completion of the General Cashier’s summary or equivalent used by the hotel (the General Cashier’s summary will record cash takings by outlet, deductions for petty cash or paid outs to give the net banking for the day).  Ensure this document is prepared independently by the General Cashier based upon the physical cash receipts, petty cash vouchers, paid out slips etc. The summary should be reconciled by the revenue audit function to the FOS and Revenue journal.  Were any problems noted in the steps followed by the General Cashier to complete the General Cashier’s summary?

7.    Does the General Cashier maintain a record of over/shorts takings presented by the cashiers?  Are these investigated and actioned promptly?

8.    Are end of day data transfer slips (credit card machine daily reports) retained and reconciled to credit and debit card sales per FOS?

9.    Does the hotel ensure deposits to the bank are made on a timely basis (usually daily) to prevent excess quantities of cash being held at the hotel?

10. Is there adequate security for depositing cash at the bank (e.g. collection by a security firm)?

11. Does an individual other than the General Cashier monitor deposits to the bank account to ensure cash takings recorded on the General Cashier’s summary are actually banked?

12. Does an individual independent of the general cashiering and accounts receivable function receive and open all mail from debtors and record cheque receipts into a logbook?

4. PETTY CASH The General Cashier commonly acts as the Petty Cashier for the hotel.  Petty cash should only be used for small incidental items.  It should be recognized that often petty cash is used as a means to circumvent the controls in place in the expenditure cycle with respect to authorization of expenditure.

Discuss with the Financial Controller and General Cashier the controls used with respect to petty cash.  Common controls include: ·         vouchers stamped as paid; ·         requirement that all vouchers are authorized by the Financial Controller or other department head (the General Cashier should not be allowed to approve petty cash transactions);

·         a set maximum value of individual petty cash transactions; and ·         Requirement to lodge original documentation to substantiate the claim. ·         Are control procedures adequate?

5. CITY/SALES LEDGER MAINTENANCE OBJECTIVES To identify that controls are in place and operating both effectively and consistently to ensure: a.   receivables are valid claims and properly supported; b.   receivables are reconciled on a daily and monthly basis (as appropriate); c.   credit has been granted in accordance with a formally approved credit policy and prudent business practices and the collection of receivables is reasonable and forthcoming; and d.   a reserve for doubtful accounts has been established and the reserve is reasonable.

BACKGROUND The debtors balance of a hotel is split into two different subsidiary ledgers: Guest ledger - contains all the charges accumulated by guests that are currently staying in house and have not checked out.  This ledger is normally maintained on the FOS; and city/sales ledger - captures all charges accumulated by guests who have checked out and are to settle their account by a debtor account, advance deposits paid by guests (may appear on guest ledger) and amounts owed by credit card companies.  This ledger is usually maintained on the ‘back office system’.

Ø  GUEST LEDGER MAINTENANCE Check there are controls over the validity of charges recorded onto the guest ledger, movement of charges out of the guest ledger to the city/sales ledger and monitoring of the individual charges accumulated in the ledger to ascertain if a credit exposure exists.

For the latest month-end, obtain the Guest Ledger Control Account Reconciliation. A permanent folio does not represent a guest room; rather it represents an account opened on the guest ledger to collate rebates, adjustments, management folios, etc.  The entries recorded in a permanent folio are likely to result in revenue being adjusted out of the profit and loss account or an expense being recognised.  Hence it is important that permanent folios are monitored and cleared on a timely basis.

1.1    Identify all permanent folios used by the hotel (from review of the guest ledger) and ensure sufficient controls exist for reviewing and clearing the revenue or expenses associated with the folios on a timely basis.

1.2    For master folios maintained for groups ensure these are being posted on a timely basis to the city ledger following the departure of a group (the slow posting of groups is a common means of ensuring a favourable debtors ageing profile).  Note that outstanding balances on the paymaster could indicate breach of credit policy. Were any exceptions noted?

1.3    Ensure that the guest ledger is reviewed for excessive balances, credit limits, outstanding balances of departed guests, etc. by credit control staff on a regular basis.

Ø  CITY/SALES LEDGER MAINTENANCE The following items represent the common postings made to the city/sales ledger: ·        Guests who have checked out and will settle the balance owing to the hotel by debtor account; ·        balances owing by credit card companies (e.g. American Express, Diners Club, JCB); ·        advance deposits received from guests ahead of their stay in the hotel (may be posted to the guest ledger); ·        banquet and conference customers who will settle the balance they owe the hotel by a debtor account; and ·        Cash collections from debtors.

2.1  Obtain the latest month-end aged city/sales ledger report. Review the city/sales ledger to the general ledger control reconciliation at month-end.  Ensure all reconciling items are current and bona fide. 2.2  Review material unidentified remittances and check that action is being taken to follow them up and allocate them.  Review other credit balances and check that these are deposits for future events/prepayments.

Debtor Postings

2.3  For two days posting into the city ledger agree the posting to the city ledger to that tested in the income audit (FOS).  Were any exceptions noted? 2.4  Discuss the procedures used by the hotel to ensure invoices are raised and posted to debtors on a timely basis.  Are procedures adequate to ensure an accurate invoice is raised and mailed to each debtor on a timely basis?

Posting of cash receipts In the treasury cycle work programme work was performed to ensure the segregation of duties exists between handling cheques received from debtors and the responsibility for applying those cash receipts against individual debtors in the city ledger.  The treasury work programme should be referred to prior to completing this section.

2.5  Discuss the procedures employed in applying payments against the debtor’s ledger.  Controls include: -  using the remittance advice to apply the receipt to specific invoices and not to the oldest invoice outstanding; - using the cheque log as the basis of input; and -   using batch controls to ensure receipts applied to the city ledger agree to the cheque log. Are procedures adequate? CONTINUE ----------