SOP Finance and Accounting – Primary Financial Controls Process in Hotels

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Financial Controls Process in Hotels 

Purpose of Primary Financial Controls in Hotels:

To establish minimum controls to ensure proper operational efficiency and accurate financial reporting. It is the responsibility of the General Manager, Controller and Executive Committee to ensure compliance with this policy. 

Primary Financial Controls SOP Procedures:

I . Cash Handling

A. Background Checks

A complete background investigation is required for all cash-handling employees. This includes any employee who issues or receives cash or checks. An outside agency should be used to check credit, arrest record, and prior three (3) employers. The employee must sign a statement approving the background check.

B. House Banks

  1. Each employee with a House Bank must sign a standard House Bank Contract which states the amount of the bank, the safety deposit box number, and rules and regulations controlling the use of the House Bank. These banks will be audited once a month by a member of the Accounting staff if available. Otherwise, a noncash handling employee will be designated by the General Manager along with a witness to perform the audit on a surprise basis.
  2.  House Banks that are passed on from shift to shift must be counted by both cashiers at the shift change, and the standard House Bank Log is signed which states that the funds are correct and the individual cashier is responsible for that shift.
  3.   Duplicate keys will be maintained for any safety deposit box that is used for House Banks in a locked box in the General Cashier’s safe. The key to this locked box will be maintained by someone other than the General Cashier to ensure that access to House Banks requires two people.
  4.  All House Bank Contracts will be clean and a copy filed in the employee’s personnel file. If changes are to be made to any part of the contract, a new contract must be prepared and filed in the employee’s personnel file, and the old one should be cancelled.

C. Cash Drops

  1. All daily cash drops should be logged with date, time, name, the signature of the Cashier, and the amount and initialled by a witness. The witness accepted responsibility that the drop was completed and that the tumbler had been checked. The witness is not responsible for the contents of the drop.
  2.  The drop safe should have a combination and a lock to ensure that access is by two people. If a lock is not available, the combination should be split between the two people. Both people should sign the Drop Log to verify the removal of all envelopes. If only one safe is available, there should be written procedures as to how the property controls the safes, signed by both persons with access.
  3.  The General Cashier and/or the designated person will count the cash drops and make daily deposits intact.
  4.  Cash overages and shortages should be recorded daily with a copy provided to the General Manager and appropriate department head. This should be recapped on a month-to-date basis for each employee.
  5.  Every overage and shortage should be investigated and documented. A written report of any unexplained overage or shortage over $25.00 should be provided to the General Manager. 
  6.  Written warnings should be issued by the department head to any employee with unexplained overages or shortages which total $50.00 or more cumulatively over a thirty (30) day period, or any missing drops. Issuance of three (3) warnings to an employee will require disciplinary action including removal from cash handling or possible termination.
  7.  All incoming mail should be opened by someone in a non-cash handling position other than the person posting the payments. All checks should be logged restrictively endorsed and dropped in the drop safe. The person preparing the Log should post the total payments daily to the appropriate account. The General Manager should ensure all payments are posted to the proper accounts.

D. General Cashier’s Fund

  1. The General Cashier is the only person with the complete combination to the safe. Emergency access to the safe must require two Managers from different departments to open it, such as the General Manager and the Controller. This should be done by one Manager having the combination and the other having the key. If a key lock is not in use, the Managers should each have one-half of the combination. 
  2.  The General Cashier’s Fund, including House Bank Contracts, should be balanced daily with the details maintained for one month. The Fund should be audited by the Controller or General Manager at least once each month, on a surprise basis.
  3.  Petty Cash is included in the General Cashier’s Fund. Purchases should be limited to emergencies. They should not exceed $100.00. All vouchers should be filled out completely with appropriate backups attached. Vouchers must be defaced upon reimbursement. Any advance for a purchase must be settled within twenty-four (24) hours. Reimbursement for Petty Cash should be done every week if needed.

II. Bank Accounts

A. Check Signing: The signatories on all bank accounts shall be by Accounts Payable Policy AP02. No facsimile plates or stamps shall be used.

B. Bank Reconciliations: All bank accounts must be reconciled within the following month. All differences must be resolved and reflected in the following month’s Financial Statement. Stale-dated checks should be researched and resolved after six months or applicable State law, whichever is longer.

 III. Current Assets

A. Credit Card Transmissions, the General Manager or designated person needs to ensure that all credit card transactions are batched out on a daily basis and transmitted to the credit card processor. A log should be kept to compare what was booked versus what was transmitted.

B. Guest Ledger, including Advance Deposits Detail should be balanced to the General Ledger at least once a month. House Accounts carried on the Guest Ledger must be adjusted at each month’s end. Group accounts should be reviewed and resolved by each month’s end.

C. Credit Card Charge-backs should be resolved within the time allotted by each credit card company. If a credit is to be issued, the Controller and General Manager must approve the adjustment with appropriate backup and a copy of the original voucher attached. The General Manager should sign up for E-mail notification of chargeback notices and inquiries.

D. Miscellaneous Receivables must be collected within the following month with appropriate documentation maintained in the analysis file.

E. City Ledger

  1. The Tecton Credit Policy should be implemented. All accounts should be billed within twenty-four (24) hours of transfer to City Ledger. Approved individual accounts should be transferred to City Ledge upon check-out. Group Masters should be transferred within three (3) days of departure. Follow-up calls should be made within ten (10) days of billing. Statements should be mailed every thirty (30) days. Collection calls should begin at thirty (30) days.
  2. A credit meeting should be held once a month with the Department Heads, Controller and General Manager to review the City Ledger ageing. Accounts over sixty (60) days should be documented as to collection efforts. Minutes should be maintained for one (1) year.
  3. Write-offs and adjustments should be documented as to reason including comments of the appropriate department and approved by the Department Head and Controller. All write-offs over $500.00 must be approved by the General Manager.
  4. Bad debt accounts are established for each department. Write-offs which are the result of a policy violation will be charged to the responsible department. If all policies were followed correctly, the bad debt will be charged to the responsible department. If all policies were followed correctly, the bad debt will be charged to A&G Bad Debt.

F. Inventories

  1. Inventory prices should be the most current price including any applicable tax, freight and purchasing fees.
  2. All inventory extensions should be done on a computerized spreadsheet. Entry of units and prices should be done by the department and verified by the Accounting Department.
  3. Inventory pars should be established at balances to meet the needs of business volume. The Accounting Office should review levels to verify that over-purchasing is not being done and that obsolete, damaged and spoiled items are not being carried. Room linen pars should be monitored and replacements ordered.
  4. Food, beverage and room linen inventories should be counted every month by the department with spot checks by the Accounting Office. All inventories should be completed on a shelf-to-sheet, not a sheet-to-shelf basis.
  5. Other inventories such as food and beverage linen, china, glass and silver should be counted on a quarterly basis with spot checks by the Accounting Office.
  6. Only boxed items are to be counted. Open items in the operating inventory should not be counted.

1V. Current Liabilities

A. Accounts Payable

  1. All purchases must be approved by the appropriate Department Head, Controller and General Manager. A Purchase Order or established local procedures is required for all non-food and beverage consumable purchases over $100.00.
  2. All processing of invoices must follow the Accounts Payable Policy AP01.
  3. Any purchases lasting more than three (3) months with a dollar value of $1,000.00 may be prepaid over the expected life.
  4. Capital projects must be reviewed and Owned in advance. Capital items are at least $500.00 have a life of three (3) years or more and qualify as capital expenditure as per Internal Revenue Service guidelines.
  5. Each department should maintain its own monthly “chequebook” to track expenses versus budget. 6. Two (2) bids minimum are required for recurring purchases such as office supplies and food and beverage items.

B. Payroll and Related

  1. Payroll advances should only be issued in extreme emergencies and should never exceed one (1) period’s net pay or vested vacation. They must be repaid within the next pay period and must be approved by the General Manager.
  2.  Employee schedules should be prepared weekly based on the weekly forecast and staffing guides and must be approved by the General Manager.
  3.  Employee rates shall be based on the approved wage scale. Wage scales are based on yearly competitive wage surveys and are approved during the budget process. 
  4.  Banquet gratuity percentage distributions must be documented and conform to State laws. The percentage distribution calculation must be shared with the affected employees.
  5.  A payoff should be conducted twice a year on a surprise basis. Employees should present social security cards and photo identification at this time. All information such as address and date of birth should be verified at this time.

V. Miscellaneous

A. Balance Sheet Reconciliation must be completed before the close of the following month.

B. Credit Cards must be balanced and electronically transmitted by the Night Audit staff every night.

C. Division of Duties. The General Manager must divide responsibilities of payables, receivables, payroll, and cashiering and delegate a check and balance system to best ensure that no one person has total control of any area. 

D. Guest Safety Deposit Boxes. No duplicate keys should be maintained for guest boxes. If a guest loses a key, the box will be drilled in their presence and at their expense.

E. Miscellaneous and Adjustment Vouchers and House Charges should be reviewed by the General Manager several times a month and resolved in a current month as appropriate. All rebates/adjustments should have clear explanations with pertinent documentation attached and should be approved by the General Manager or his designated person. The house charges from the outlets should be signed by the authorized Manager with details of who was entertained and why.

Training Summary Questions:

Q1. Who is responsible for ensuring compliance with this policy. ?

Q2. What are the five ways to control primary finances?

Q3. How often should a payoff be conducted?

Q4. Which department will be charged if all policies are followed correctly? 
SOP Number: Finance and Accounting SOP – 36
Department: Financial Controls 
Time to Train: 30 Minutes
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