The daily revenue audit - the must do's

The hotel business is a retail business and in order to stay on top of your business, you must fully and completely balance your daily revenues and settlements. This means dotting the eyes and crossing the Ts, examine them. Every day we begin anew and every day is a story unto itself when it comes to the revenues and settlements. I may sound like I’m repeating “revenues and settlements,” but it cannot be emphasized enough.

Many hotels operate on what I call autopilot when it comes to this bedrock function. Many leave it in the hands of their latest manager of the day to ensure this function is properly done. Many hotel owners don’t even know that these controls can or should exist, let alone following up to ensure they’re not bleeding money.

Seven things you must do each day

These are practices to ensure you are keeping all the cash that has legitimately come your way from customers and not letting someone else lose it because of careless practices, or worse still, taking it from you. You may think you are too small but think again because you’re never too small for someone to take your cash.

This piece was inspired by a second generation hotel owner who was curious enough about what wasn’t happening at her parent’s hotels to call me and get the skinny on what should be done each day to balance those revenues and settlements. What she found was appalling and you don’t want this to happen to you, and neither do I.

1. Balance your cash control total. Cash is king and cash is the most desirable thing you have that needs to be controlled. If you use a property management system, the end of day generates a cash control total. Make sure that is what actually hits your bank account. Follow the money from the cash control total, plus the credit cards to the bank statement.
2. Balance your credit cards. The credit cards are complicated by a three-plus step-balancing act. Make sure all three are right every day and don’t wait to do this weekly or monthly. Let me repeat myself – do this every day. Even for a small hotel, this is a big mistake. Do it daily. Balance the PMS to the terminals and in turn to the processor. Follow the deposits less those nasty commissions to the bank statement. Pro tip: Send me a note and request my credit card reconciliation, just send me an email and ask for it by name.
3. Separate the critical duties. If you have the same person perform two parallel critical tasks that involve assets like cash or inventory, and you don’t put up safeguards you are literally asking for a disaster to land in your lap. In the business world, these are simply called separation of duties. There is a long list of these. As it relates to the daily revenue audit you must separate or check the cash control from the end of day and POS system with what lands in your bank. Don’t leave these two Level 1 controls to the same person.
4. Balance your PM to your GL. Ensure the sub-ledgers balance to your general ledger every day. You should be pulling your daily PMS details to your GL and balancing back. Your guest ledger, city ledger (AR), and advance deposits all must tie back to the PMS control totals to the penny. If they’re off, then something is rotten and it’s a convenient place to hide variances that may be tied to something very wrong. Some hotels NEVER do this and when they are shown how to compare these, they are left holding the bag.
5. Review every rebate and adjustment. If an adjustment is made for a service delivery issue, make sure a corresponding adjustment slip is prepared. The slip must indicate the reason for the adjustment, and who made it. Follow up on these with a daily review and look for patterns. If your staff can adjust a guest folio without a proper review, then you’re wide open for mischief.
6. Prepare a room for verification report. Making sure you cross-check what the PMS says is occupied with what housekeeping cleans may sound like a 19th Century faulty towers fool’s errand but make no mistake and understand that a dirty room that’s not in the PMS is a smoking gun. If you don’t run this cross-balancing act you’re missing a critical step. If I work at your front desk and I know I can give someone the key to a room without checking the same room into the system then there is nothing stopping me from selling the room for cash and putting it in my pocket or giving someone access to that room for misadventure.
7. Review the daily room rates. Every single room rate posted every day needs to be reviewed from the room rate report generated thru the end of day process. Look for rates that don’t make sense. Where did that $50 rate come from? All discounting and special rates need approval, and your review is critical.

There are more controls for sure but making this list part of your defenses is simply good housekeeping. Be sure to check out my other articles on internal controls on my website blog.

David Lund – The Hotel Financial Coach

Contact David at (415) 696-9593
Email: david@hotelfinancialcoach.com

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