Night audit is a primary part of the hotel industry as it maintains and balances the financial transactions of the guest’s account.
It maintains the records of debit and credit on a daily basis. And thus can prevent various accounting irregularities.
With its help auditor prepares the hotel’s financial reports.
Before we talk about the night audit, let’s first understand what is an audit.
It is an independent review of an entity’s financial records, the entity may or may not be profit-oriented and irrespective of its size or legal form.
The objective of the audit is to express an opinion on the financial statement.
A night audit is an internal audit system of the hotel. As in hotels, guests check-in and check-out 24/7 hours and pay their bills through cash or card.
Therefore, during slack time, hotels perform their daily audit, usually from midnight to early morning, and thus called night audit.
The Night auditors need to properly record and reconcile the guest’s folios and their transactions.
The purpose of the night auditor is to ensure the accuracy of all financial information and gathering all the needed paperwork to complete the audit.
They have to verify the completeness and accuracy of guests and non-guests accounts against the revenue center transactions report.
Hotel night audit assesses and closes the actual cash flow to and from the hotel account.
These are night audit major functions-:
- Reconciles all front office cash counters/accounts.
- Verifies posted entries to guest/non-guest accounts.
- Review guest credit transactions against the prescribed limits.
- Check room status and resolve rate inconsistency.
- Preparation of night audit report.
The first and foremost duty of the night auditor is to post all transactions on the same day in which they occur to the guest’s account.
It is important to accurately post all accounting data on the same day to avoid any confusion.
Charges posted to guest’s accounts on a different date create misunderstanding and confusion.
When there is no pending work then no dispute arises between hoteliers and guests at the time of guest’s check-out regarding financial transactions.
Hence, to settle disputes and present a true and fair view of accounts, the night auditor should post all transactions on the same day.
The night auditor must confirm that all transactions are posted before starting the audit routine.
Ensure all transactions like parking fees, room service, mini bar charges, laundry, internet, telephone, etc. are correctly posted to the guest’s account.
All transactions must reconcile with source documents.
The reconcile is done in the following sections-:
- Guest account
- Point of Sale
- Reconcile room rate discrepancies
a) Guest account
All financial transactions occurring between the hotel and its guests are examined by the night audit team.
Each guest folio matched with the source document for the account’s verification.
The night auditor reconciles financial transactions that take place between the hotel and its guests like food charges, visitors paid-out, miscellaneous expenses, discounts, etc.
b) Point of sale
The cashiers of all the POS (point of sale) prepare a summary sheet of all sales that occur at their respective point of sale and keep it in an envelope, along with a copy of bills.
The same envelope is kept in the front desk’s cash and bills section.
The night auditor reconciles individual point of sale’s checks and vouchers with the point of sale cashier’s sales summary sheets.
c) Reconcile room status discrepancies
When there are discrepancies in room status then it causes loss of revenue.
The front office must maintain accurate room status to determine the number of rooms available for booking.
The discrepancy will cause a loss in business and confusion in the front office if not solved on time.
If the housekeeping report indicates that the room is vacant, but the front office believes it is not, the night auditor should search for active room folio.
The night auditor will review the guest’s folio against housekeeping and the room status report to ensure accuracy and balance of all three
The night auditor will have to prepare room revenue and account reports.
This report helps in analyzing room revenue since it shows the standard room rate and the actual rate of booking.
The variances in room rates may occur due to discounted rates offered, one guest in a room is sharing reservation, or booking of the complimentary room.
Night auditor will have to consider all these factors before the preparation of room revenue and account reports.
The night auditor generally prepares the following reports for management-:
- High balance reports
It helps to find out all guests who exceed the normal credit limit of the hotel.
- Occupancy reports
It shows the number of rooms check-in by guests with their details.
And details of check-out rooms, rooms expected to be occupied, vacant room, block room.
After posting and reconciliation of accounting entries, the night auditor updates the system and ends the night audit process.
At the end of the day, the night auditor takes stock, checks the posting of charges, reconciles all financial transactions of the day between the hotel and its guests.
This is the last stage in the night audit routine. The night auditor must deliver accurate reports to appropriate individuals.
Managerial decisions are taken on the basis of accurate and timely delivery of night audit reports.
A night audit is a mandatory process for a hotel since it reconciles the balance of the ledger of each guest, tracks occupancy rates, reports revenue, overall hotel operating efficiency, etc.
They also prepare and distribute reports which help concern authority to take decisions.
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