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Night Audit Overview

Auditing is the process of checking and reviewing all financial and non-financial transactions to determine
accuracy. For a hotel business, financial management starts at the front office. Accurate posting of transactions
on the guest folios at the front office is further carried to the back-office accounting department. The guest
accounts are counterchecked daily during auditing.
Night audit is a process of auditing, a control procedure, and a financial inspection undertaken regularly to
ensure accuracy of guest and non-guest accounts. It is also called the end-of-day close or end-of-day
processing. This process is usually conducted overnight during the graveyard shift (23:00–07:00). The
transactions and records may relate to arrival and departures, food and beverage, mini-bar, laundry and other
services, interdepartmental vouchers, foreign currency activities, and all types of payment. Night audit can be
performed by the conventional method of using papers, receipts, vouchers, coupons, and files. But performing
audit using modern Property Management System (PMS) is easier, faster, and more efficient than the manual
or conventional method.
The Night Auditor
The night auditor is the hotel personnel who controls the accuracy of guests and non-guests accounts and
provides reception service overnight. The reason why the task of auditing is performed at night is because the
guests’ accounts and the departmental sale accounts and records are closed and submitted at midnight.
Moreover, all restaurant bills, records, vouchers, and documents become free and are made available for
auditing in the night as there is less activity in the front office at that time.
Functions of the Night Auditor
 Room Auditing. The room sale of the hotel is checked with the help of the following records and
documents:
o Guest registration card
o Guest arrival sheet: arrival-departure register
o Guest departure sheet: arrival-departure register
o Housekeeper’s report
o Night receptionist’s room sales report.
The night auditor ascertains the total number of various types of rooms sold during the day and
compares the same with the total amount of room revenue reported and accounted for. In case of
discrepancy, s/he has to check each guest account to find whether the room charges have been posted
correctly. S/He also checks whether each room sold has been duly charged.
 Auditing of Departmental Credits. The hotel has several service outlets such as restaurants, bars,
room service, telephone, swimming pool, and other minor operational departments. Each credit sale
in each of their departments is charged to the guest account in the front office. By the end of the day,
the night auditor should ensure that the total credits as per the departmental sales summary tally with
the departmental credit totals of the tabular ledger or machine balances. In case of discrepancy, s/he
has to check the posting of each credit voucher and reconcile the departmental credits.
 Checking the Brought-Forward Account in Guest Account. The night auditor verifies all the brought
forward balances of guest accounts with the corresponding carry forward balances of the previous
day. S/He also has to check each guest bill in the process.
 Checking the Credits to the Guest Account. The guest account can be credited by allowances, cash
payments, or transfer to city ledger. The total amount of allowances, cash payments, and city ledger
transfers as per guest accounts should tally with the allowance journal, cash collections, and record of
daily city ledger transfer, respectively.

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 Checking the Trial Balance. After reconciling both the charges and credits to the guest accounts, the
night auditor has to ensure the arithmetic accuracy of the guest billing using the following equation:
Debit (Dr) Credit (Cr)
Daily Brought Forward Balance Allowances + Payments + City
=
+ Departmental Credit Sales Ledger + Carry Forward Balances
The above balances can be obtained from the departmental total of the visitor tabular ledger (VTL) or
from the memory of the machine under a mechanized system of the front office accounting.
 Preparing the Daily Sales Recapitulation. After completing the day’s audit, the night auditor has to
prepare a sales recapitulation based on the departmental sales records submitted to him/her for
verification. The sales recapitulation shows the day’s sales under various heads like room, food,
laundry, telephone, swimming pool, and other sales or income.
Night Audit Procedure
The main objectives of night auditing are to correct front office accounting errors and to create accounting
and management reports. In the night audit process, various accounts are compared with the source
documents and entries. Discrepancies found must be corrected so that the front office accounting system is
in balance. The steps in night auditing are as follows:
1. Check posting. The front office staff must post various transactions onto the proper folio as and when
they arrive at the front desk. The night auditor must confirm the posting before the audit process.
Charges posted with the wrong date will confuse guests and complicate cross-referencing. Incomplete
posting will result in errors in account balancing and complicate summary reporting. To verify this, the
night auditor checks all vouchers and their postings on the proper folios.
2. Reconcile room status discrepancies. Errors in room status can lead to loss of revenue, confusion at
the front office, uncontrollable room revenue or omission in posting. The night auditor reconciles
discrepancies between the housekeeper’s report and the front office’s status report. If the
housekeeper’s report says that a room is vacant while the front office report does not say so, then the
possibility can be as follows:
o The guest has departed and forgotten to checkout
o Front office cashier must not have closed the folio properly at checkout.
If such situations arise, the night auditor closes the folio and keeps it aside for the front office manager
to review and follow up.
3. Verify room rates. The night auditor completes a room revenue and count report. This shows the rack
rates and selling prices of rooms. If a discount is given, the night auditor considers the following
factors:
o Whether the discount rate is correct or is in accordance with the policy of the hotel.
o If it is a shared reservation
o If the room is given on complementary, s/he checks back-up documents.
4. Balance all departments. The night auditor balances all revenue-producing departments. S/He
balances all the front office accounts against departmental transaction information. The vouchers
received at the front desk are totaled and compared with departmental sales summaries. When the
front office accounting system is not balanced, the correctness and thoroughness of postings must be
investigated. A detailed department audit is conducted and individual posting is reviewed until the
front office account error is corrected.
The mathematical balance in guest accounts against departmental totals does not necessarily mean
that the proper accounts were selected for posting.

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Posting the correct amount in an incorrect account would still present an in-balance total. This type
of error usually goes unnoticed until a guest has a problem with validity of an entry in the statement.
Departmental Balancing Sequence
I. Sort vouchers by originating departments.
II. Consider each department’s vouchers separately.
A. Separate correction vouchers.
B. Total the corrections.
III. Verify corrections. The total correction vouchers should tally with correction figures on the front
office shift report.
IV. Consider the vouchers again.
A. Total the rest of the outstanding vouchers.
B. Check individual transaction values on the bottom of the vouchers against the figure on
the departmental report.
V. The vouchers should tally with the department’s figures. If it does not tally, the error should be
resolved.
A. Verify if the date is correct.
B. Check individual posting against supporting documents.
C. Post any additional corrections or adjustments.
VI. All of the back-up data should be for the accounting department to review.
5. Verify no-show reservations. The night auditor is also responsible for filing and posting charges to the
no-show account. This should be done very carefully because, at times, a duplicate reservation is done
or a separate data is created when the name of the guest is misspelled at the time of reservation. If
cancellations are not recorded correctly, guests might be billed incorrectly.
6. Post room rates and taxes. Posting of room rates and taxes take place at the end of the day. After
posting these, a room rate and a tax report are generated for the front office manager to review.
7. Prepare reports. The night auditor prepares reports that indicate the status of the front office
activities. The reports which are prepared by the night auditor include the following:
o Final Departmental Summary Report – This is prepared to check if the transactions were
correctly posted.
o Daily Operations Report – This is prepared to reflect revenues, receivables, operating
statistics, and cash transactions related to the front office.
o Group Occupancy Report – This is prepared to consolidate details of group occupancy and the
revenue they generate.
o VIP (Very Important Person) Occupancy Report – This is prepared to determine details of
occupancy of VIPs and the revenue they generate.
8. Deposit cash. The night auditor prepares a cash deposit voucher as part of the night audit process.
S/He compares the posting of cash payments and paid-outs with actual cash in hand. Cash payments
by guests less paid-outs determine the cash in hand.
9. Clear or back up the system. In the front office accounting system, totals must be cleared at the end
of the day. This is done by simply moving the closing balance from the night audit report to the opening
balance of the next day’s report.
10. Distribute report. Since the front office information is crucial, the night auditor must deliver reports
to authorized individuals. The distribution of the night audit reports is the final step of the night audit
process. Important managerial decisions can be made if all night audit reports are completed
accurately and delivered on time.

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Various types of posting, as well as mathematical and clerical errors, can be identified through a sound night
audit system. Among the most typical errors are those involving previous balance pick-up, transportations,
and misplaced folios.
 Pickup Errors. The front office cashier accesses the previous balance (pick-up) of a folio, posts the
debits and credits, and calculates a new current balance. If the previous balance is picked up (entered)
wrongly, the current balance will also be wrong. This happens in the bill folio and not in the night
audit. Pick-up errors are most difficult to locate, and all the folios are to be reviewed to locate them.
 Switch Errors. These errors are easiest to identify. These occur when the numbers related to
transactions are reversed while entering. For example, ₱987.00 is entered as ₱978.00.
 Missing Folios. Many times, the front office accounting system is out balance; a folio is filed incorrectly
or been misplaced from the folio bucket. After checkout, the settled folios are placed separately in the
forwarding section. At times, current folios are placed in the forwarding section or settle folios are
placed along with the current ones.
To tackle such case, the front desk staff should be very cautious and aware of what is happening.
Sometimes, folios are kept separately for review—for example, folios with high-risk balance or folios
with some disputes. In that case, a note should be left behind so that others may come to know about
the situation.
Types of Night Audit Reports
The best method of communicating information is in the form of reports. Today, PMS helps night auditors to
a great extent in auditing and generating accurate reports. Here are some typical reports generated during
night audit:
• Night Audit Accommodation Report – It gives a snapshot or details of the days when accommodations
are occupied, the days when the accommodations are available, as well as check-ins, checkouts, no-
shows, and cancellations.
• Night Audit Counter Report – It gives details on cash and credit card receipts and withdrawals.
• Night Audit Revenue Report – It delivers information on accommodation revenue, cancellation and
no-show revenue, and other Point-of-Sale (POS) revenues. Revenues generated through various
agencies and bodies such as travel agents, corporate organizations, Internet booking, etc., is also listed
in this report.
• Night Audit Tax Report – It contains all the tax information on reservation revenue and other POS
revenues such as value-added tax (VAT), luxury tax, and service tax.
• Cashier’s Report – It is the detailed list of cashier activity of cash influx and outflux, credit cards, and
PMS totals. The cashier’s report is very important part in the financial control system of a hotel. The
front office manager reviews the night audit and looks for any divergences between the actual amount
received and the PMS total.
• Manager’s Report – It is a statistical list of the previous day’s occupancy. It includes details about
available accommodations, occupied accommodations, sold and vacated accommodations, rack rate,
number of guests in the hotel, number of no-shows, and so on.
• General Manager’s Report – Each department in the hotel is required to send daily sales report to the
front office. Using their information, a department’s total report is generated for the general
manager’s (GM) assessment. The GM determines the profit-generating departments and evaluates
the success of sales and marketing.
• High Balance Report – This is a detailed report about the guests who have exceeded the credit limit
set by the hotel management.

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• Ledger Balance Summary Report – It displays the opening and closing balances for the Advance
Deposit Ledger, Guest Ledger, and City Ledger.
• Room Rate Audit Report – It lists all rates that are applied to each guest and the difference from the
rack rate with the predetermined rack code.
The actual creation of reports will depend on who needs to know what information. Morning shifts will require
different information to the afternoon shift. Aside from the reports mentioned above, the following reports
are also utilized to contribute to management decisions:
• In-House Activity Report – This report is prepared for staff information in all areas of the
establishment. It indicates the number and type of guests arriving, staying and departing the
establishment that day. It will often indicate major groups, conferences or other activities taking place
within the establishment.
• Arrival and Departure Lists – This is an essential report for housekeeping and front office departments.
It is sometimes compiled as two (2) separate reports depending on the size of the property and the
number of arrivals and departures.
• In-House Guest List – This report lists all guests who are registered in the establishment. It lists basic
details of guests such as arrival and departure dates, room and folio number, number of guests, special
packages, and any other details deemed necessary by an establishment.
• Special Requests Report – This lists all special requests required by guests and is detailed by
department. For example, if a guest needs a rollaway bed, it would go to the housekeeping’s report.
The electronic system provides an accurate “trace” report for each department. A trace is an electronic
message to request a service from a specific department.
Credit Control
The various measures taken by a hotel to ensure that guests settle their bills in full at the agreed time is called
credit control, also referred to as credit management. It is necessary to achieve a healthy balance when
allowing guests and other customers to enjoy credit and pay later. The hotel will benefit from extra sales
because corporate clients and agencies value credit facilities, and guests do not prefer paying cash for charges
as they are incurred. But the hotel also has to bear the costs to potential bad debts (people defaulting on
payment) and higher finance costs. Credit control may involve a range of measures, such as:
• Setting limits and restrictions on granting credit as a matter of credit policy
• Assessing the creditworthiness of individual guests (credit risk assessment)
• Agreeing credit terms with individual guests (deciding how much credit each guest should be allowed
and on what payment terms)
• Taking steps to avoid walk-outs or skips (guests leaving without settling their accounts)
• Being diligent in chasing and collecting payments according to the agreed credit terms to minimize
late settlements
• Keeping records and circulating reports of walkouts and late payers to minimize the risk of repetition
The decision on whether to offer or grant credit to a guest will come down to the following considerations:
• Volume and value of business offered by the guest. Offering credit facilities is risky and costly to
administer, so the potential returns need to be worth it.
• Extent of credit grant. This is the range to which valued guests want or expect to have credit facilities
made available for them, and whether they will take their business elsewhere if such facilities are not
offered or granted.
• Creditworthiness. This is the extent to which the hotel can be reasonably certain of getting paid by
virtue of the guest’s integrity, credit record, and/or available funds. Credit is generally offered to

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guests who have guaranteed bookings with the hotel (rather than walk-in or change guests); guests
whose accounts will be settled by their employees (with whom the hotel has established credit
agreements); and guests who pay by credit card.
• Assurance of payment. This is the willingness of the guest to offer via deposits or guarantees, credit
card imprints, willingness to sign contracts, etc.
• History of payment. Credit facilities can be withdrawn from guests who routinely fail to pay on time,
who dispute payments, or whose payments routinely fail to go through (e.g., if cheques or credit card
payments are not honored due to lack of funds.)
Credit management is the responsibility of the credit manager or hotel accountant, but it also requires specific
measures to be taken by the various departments of the hotel at the phases of the guest cycle.
Guest Cycle Phase Measures
• Inform guests that non-guaranteed and late bookings may have limited credit facilities.
Pre-arrival • Ensure that the correct room rate is quoted, so guests can plan to have funds available.
• Request prepayments and deposits where required.
• Ascertain, confirm, and record the method of payment.
• Take a deposit, pre-payment, or credit card imprint (especially for walk-in or chance
guests).
Check-in
• Verify settlement arrangements (e.g., agency vouchers, corporate credit accounts, etc.).
• Inform guests clearly of acceptable payment methods, charges for which they will be
responsible, and any credit limits that apply.
• Require all departments to verify guests’ credit status before allowing them to charge
services to their accounts.
• Monitor posted charges and guest balances against authorized credit limits, and issue
During occupancy
high balance reports of guests whose accounts are near to or in excess of credit limits.
• Inform guests politely but firmly when credit limits have been reached and when interim
settlement is required.
• Ensure that last-minute charges have been posted.
• Ensure that guests check and sign accounts to be billed to companies.
At checkout • Observe all protocols for verifying and checking payments.
• Record and issue receipt of all payments made.
• Balance the guest account.
• Transfer corporate and agency payables to the ledger account to be invoiced.
After departure • Chase late payments.
• Report on late or defaulted payers.

References:
Association of South East Asian Nation (ASEAN). (2013). Toolbox for Front Office Operations. Conduct a night audit. Trainee manual.
Victoria, AUS: William Angliss Institute of TAFE.
Bhakta, A. (2012). Professional hotel front office management. Manila, PH: Tata McGraw-Hill Education (Asia).
Carev, D. (2015). Hotel sales and the front office operations. Zagreb, HR: VPŠ Libertas.
Confederation of Tourism and Hospitality (2009). Front office operations. London, UK: BPP Learning Media Ltd.
Saudi Commission for Tourism and Antiquities (2009). Front office trainee manual [PDF]. Retrieved from
https://scth.gov.sa/TourismInvestment/Takamul/Documents/GuideLine/FrontOffice.pdf on 04 February 2019
Tutorials Point (2016). Front office management [PDF]. Retrieved from
https://www.tutorialspoint.com/front_office_management/front_office_management_tutorial.pdf on 17 January 2019

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