SOP For Credit Policy And Direct Billing Authorization Process
SOP Number: Finance and Accounting – 02
Department: Accounts Receivable
Date Issued: 18-Jun-2021
Time to Train: 30 Minutes
Purpose of this SOP
It is the Sales Manager's responsibility to establish a method of payment prior to 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 prior to 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 prior to 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 cashiers check a minimum of 3 days (72 hrs.) prior to the group’s arrival. FULL PRE-PAYMENT must be received a minimum of 3 working days prior to the start of the event or the event will not take place.
Government, Military and School District Purchase Orders will be accepted in lieu of a Credit Application to establish a direct billing relationship with the hotel. The booking Sales Manager is responsible to ensure 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 to obtain a credit card authorization code at least three business days prior to the start date of the event.
The final balance will be charged by AR the day after the event. It is imperative that the booking Sales Manager notify AR if the anticipated charges vary from this 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 is approved by the Controller or General Manager in accordance with 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 prior to 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 prior to 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.
In the event that 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 final 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:
To 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:
Q1. What is the purpose of the Credit Policy And Direct Billing Authorization SOP?
Q2. Explain the process if the payment is supposed to be by credit card?
Q3. What is the process for direct billing authorization?
Q4. Why should the hotel conduct regular BEO review meetings?