Credit Policy And Direct Billing Authorization Process
The SOP (Standard Operating Procedure) for finance and accounting regarding credit policy and direct billing authorization process is crucial for any business. This SOP outlines the guidelines for extending credit to customers and the procedures for obtaining authorization for direct billing.
The credit policy establishes the terms and conditions under which the company will grant credit to its customers. It includes the credit limits, payment terms, and the procedures for credit checks and credit approvals. These guidelines ensure that the company’s financial risk is minimized, and the customers are satisfied with their payment terms.
The direct billing authorization process is also an essential part of the SOP. It outlines the procedures for obtaining authorization for direct billing from customers. This process ensures that the company can bill its customers directly for the products or services provided, without having to go through a third party.
Overall, the SOP for finance and accounting regarding credit policy and direct billing authorization process is critical for the smooth operation of any business. It helps maintain a healthy cash flow and ensures that the company’s financial risks are kept to a minimum.
These questions cover various aspects of the SOP, testing the reader’s understanding of the procedures outlined for secure handling and storage of cash in a hotel or resort environment.
Hotel Clients interested in establishing a direct billing relationship with the hotel must comply with the minimums, limitations, and procedures outlined in this policy.
It is the Sales Manager’s responsibility to establish a method of payment before the group’s arrival. The Director of Sales and Marketing, Controller/DOF, and General Manager are responsible for administering and monitoring adherence to this policy.
Credit Policy And Direct Billing Authorization SOP Procedure:
The method of payment must be addressed in the initial sales phase and the method of payment must be agreed to in the final sales contract. Direct Billing Privileges will only be granted to certain groups as per the hotel’s policy.
For groups that will not be considered for direct billing and require payment in advance, the procedures to handle advance payments are as follows:
- Any events that fall into the category of Political, Sports, Theatre, Travel agencies, School functions (except as covered by a School District Purchase Order), Weddings, Bar/Bat Mitzvahs, Religious, Christmas Parties, Contests, any function depending upon ticket sales, and any business with total billable revenue under $2,000 [Mention the Amount as per your hotel policy] will not be considered for direct billing.
- For such groups where payment in advance is required by policy, it is the booking Sales Manager’s responsibility to communicate this policy requirement to the client during the initial phase of the sales process.
- The booking Sales Manager must ensure that full payment is received 5 days before the start of the event. This may be in the form of cash, credit card, or company/personal check. (Accounts Receivable is responsible for getting check guarantee approval for all checks received within the last 10 days before the group’s event, and for obtaining credit card approval for the amount of the prepayment at least 5 days before the function.) Any payments made after this 5-day window must be in the form of cash or cashier’s check a minimum of 3 days (72 hrs.) before the group’s arrival. FULL PRE-PAYMENT must be received a minimum of 3 working days before the start of the event or the event will not take place.
- Government, Military, and School District Purchase Orders will be accepted instead of a Credit Application to establish a direct billing relationship with the hotel. The booking Sales Manager is responsible for ensuring that the Purchase Order is sufficient to cover all charges, including local tax or any tax exceptions applicable.
Credit Card Payment:
Events may be paid by credit card upon completion of a credit card authorization form. The credit card authorization must include an estimate of anticipated charges. Account Receivable is responsible for obtaining a credit card authorization code at least three business days before the start date of the event.
The final balance will be charged by AR the day after the event. The booking Sales Manager must notify AR if the anticipated charges vary from the original amount.
Direct Billing Authorization Process:
Direct Billing privileges will be extended to groups that do not fall under the prepayment requirement policy outlined on the prior page, and that are approved by the Controller or General Manager by the following procedures:
- A credit application form must be sent to the client by the booking Sales Manager, completed by the client, and returned and reviewed by the booking Sales Manager. Once reviewed, the booking Sales Manager forwards the application to Accounting, retaining a trace file copy for the sales file. The application must be returned by the client no later than 30 days before the arrival of the group. (For internal purposes, a minimum of 21 days in advance is required.)
- The credit application must be processed by Accounts Receivable, and acceptance/denial of the application communicated back to the booking Sales Manager at least two (2) weeks before the arrival of the group. It is recommended that the process of checking the client’s credit be outsourced to a company that processes such credit applications for the hotel industry.
- If processing the credit application is done in-house, at least two hotel references must be contacted to determine the client’s payment history, and the client’s bank must be contacted to provide the client’s bank history. The application is then forwarded to the Controller for a credit decision.
- If the Controller denies the application, the decision may be appealed to the General Manager who has the final say on the billing decision. If the GM chooses to override the Controller’s decision, the Controller is not responsible for the outcome of the billing process but will make every attempt to collect the amount due.
Each week the hotel is to conduct a “BEO Review Meeting”. A representative from the Accounts Receivable function of the hotel must attend this meeting. The purpose of the A/R person’s attendance is twofold:
- Ensure that each group coming to the hotel has an approved form of payment in advance of their arrival.
- To gain intimate knowledge of the group that will assist in the billing process.
If an approved form of payment has not been determined for each group, banquet, or catering event to arrive at the hotel in the next 10 days, immediate action by the booking Sales or Catering Manager must take place, and the manager must notify Accounts Receivable immediately upon receipt of the form of payment.
Training Summary Questions:
- What is the primary purpose of the Credit Policy and Direct Billing Authorization SOP Procedure in a hotel’s financial management?
- Which groups are not considered for direct billing and are required to make advance payments according to the policy?
- What responsibility does the booking Sales Manager have regarding the communication of the advance payment policy to clients during the initial phase of the sales process?
- In the case of groups requiring advance payments, what are the acceptable forms of payment, and when should full payment be received before the start of the event?
- Explain the process for handling government, military, and school district purchase orders in establishing a direct billing relationship with the hotel.
- What is the credit card payment process outlined in the SOP, and when should a credit card authorization code be obtained?
- What is the procedure for charging the final balance for events paid by credit card, and what role does the booking Sales Manager play in this process?
- Under what conditions will direct billing privileges be extended to groups, and who approves these privileges according to the SOP?
- Describe the steps involved in the Direct Billing Authorization Process, including the credit application form and its processing.
- What is the role of the Accounts Receivable function in the weekly “BEO Review Meeting,” and what are the dual purposes of their attendance in this meeting?
- If the Controller denies a credit application, what is the appeal process, and who has the final say on the billing decision?
- Why is it crucial for the hotel to ensure that each group has an approved form of payment in advance of their arrival, as mentioned in the SOP?
SOP Number: Finance and Accounting SOP – 02 Department: Accounts Receivable Date Issued: 18-Jun-2021 Time to Train: 30 Minutes