Paper: 07, Front Office Operation and Management

Module: 14 Billing methods and settlement: Modes of bill payment

Principal Investigator Prof. S. P. Bansal

Vice chancellor
Indira Gandhi University, Meerpur, Rewari, Haryana

Co-Principal Investigator Dr. Prashant K. Gautam

Director, UIHMT
Panjab University, Chandigarh

Dr. Ankush Ambardar

Paper Coordinator Assistant Professor
Department of Tourism & Hotel Management
Kurukshetra University, Kurukshetra

Dr. Ankush Ambardar

Content Writer Assistant Professor,
Department of Tourism & Hotel Management
Kurukshetra University, Kurukshetra
Tel

Prof. Manjula Chaudhary

Content Reviewer Professor
Department of Tourism & Hotel Management
Kurukshetra University, Kurukshetra

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 Items Description of Module

Subject Name Tourism and Hospitality

Paper Name Front Office Operations and Management

Module Title Billing methods and settlement: Modes of bill payment

Module Id Module no-14

Pre- Requisites Knowledge of modes of payment

Objectives To study the modes of payment and the process of bill

settlement

Keywords Credit card, Charge card, Bill to company, Travelers cheque

QUADRANT-I

Module 14 BILLING METHODS AND SETTLEMENT: MODES OF BILL PAYMENT

1. LEARNING OUTCOME
2. INTRODUCTION
3. MODE OF BILL SETTLEMENT – CASH
3.1 Local currency
3.2 Personal Cheques
3.3 Traveller’s Cheques
3.4 Foreign Currency
3.5 Bank Credit Cards
3.6 Bank Debit Cards
4. MODE OF BILL SETTLEMENT - CREDIT
4.1 Charge Cards
4.2 Corporate Accounts
4.3 Travel Agent Vouchers
5. SUMMARY

1. LEARNING OUTCOME
After completing this module students will be able to:
i. Understand the concept of bill settlement used in hotels.
ii. Various types of bill settlement.
iii. Know various types of credit cards and debit cards.

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 iv. Precautions taken while receiving payment through various modes.

BILLING METHODS AND SETTLEMENT: MODES OF BILL PAYMENT

2. INTRODUCTION:
One of the important phase of guest cycle is departure, which is even know as checkout procedure. The
main operations at checkout include settlement of bill, taking review of the guests of their stay and
looking forward for brand loyalty by providing personalized service at the departure. It is important as
it’s the last point of interaction between guest and the hotel staff. The most important functions of
checkout is to collect payment form the guest acceptable through various modes of payments.
Accounts to be settled at checkout can be divided into two main types namely own accounts and
company accounts, based on who is paying the bill. The guest may pay bill on their departure with
currency (local or foreign), traveler’s cheques, bank credit cards and charge cards. Company account
on the other hand are those accounts which are not settled directly by the guest but are settled by a
company or a travel agent. These accounts are transferred to the account department after the guest has
checked and signed the bill as being correct. The account department then sends the bill and invoice to
the company or travel agent for payments.

3. MODE OF BILL SETTLEMENT – CASH

A cash settlement is any form of settlement which can be paid into the bank on the same day as it is
received. A cash payment in full at checkout will bring an account balance to zero. The folio is zeroed
out and marked paid. If a guest indicates during registration that he will be paying his bill with cash,
front office should immediately be on the alert. Advance payment from the guest needs to be requested
in such case, as the guest could be a skipper, meaning the guest may leave the hotels without paying
bills.

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 NOTE: Currently, cash payments above Rs. 2, 00,000/- need you to request for a copy or number of
the Income Tax PAN card of the guest. The procedure for handling various cash settlements:

3.1 Local currency:

When the guest pays in local currency, the cashier accepts and counts the amount in front of the guest.
The cashier needs to take time to ensure accuracy. The amount needs to be retained and kept outside
the cash drawer till transaction is completed. While returning change to the guest, cashier needs to
count loud. A receipt of the transaction needs to be given to the guest. A cashier should perform one
transaction at a time and may politely ask the other guest to wait.

Source: http://im.rediff.com/money/2013/aug/27eco2-1.jpg

3.2 Personal Cheques:

Most of the hotels do not accept personal cheques from free individual travellers or walk –inns. Some
hotels accept personal cheques only during banking hours in order to obtain verification if desired. A
cashier generally should not accept a cheque without a cheque card. The cheque card shows the
amount in the account and denotes that the limit is sufficient to cover the bill. The signature on the
cheque card and the cheque leaf needs to be matched. It is important to match the amount in words and
amount in figures. The name of the hotel should be spelt correctly. Cheques drawn on foreign banks
and third party cheques should never be accepted.
4

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 Source: https://www.chequesnow.ca/wp-content/uploads/2011/01/XSKIPER-CPA.png

3.3 Traveller’s Cheques:

A TC or travellers’ cheque is an internationally accepted cheque for a certain sum of money in a

specific currency that can be exchanged elsewhere for local currency. Travellers’ cheques are issued by
various banks in various denominations of Rs. 500, Rs. 1000, etc. and are as good as cash. TC concept
became popular because carrying it is safe. A bank company issues travellers’ cheques according to the
individual deposits. The individual has to sign at one place on the travellers’ cheque in the presence of
the issuing authority- bank manager, etc. The receipt issued while purchasing the travellers cheque
from the bank contains the serial number of travellers cheques issued to the customer. The same has to
be kept safely and may be required at the time of filing a complaint of theft or loss.
While receiving payment from travellers’ cheque, one has to ensure that the cheque is not damaged or
mutilated. The identity of the guest needs to be confirmed with any one photo ID. The guest is
requested to sign in front of the cashier, so as to match the signatures done at the bank. In case of
foreign currency travellers’ cheque the exchange rate has to be calculated before accepting and if any
balance in local currency need to be given. An encashment certificate, as used while converting foreign
currency, should be signed by the guest and he should be given a copy of it.
5

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 Source: https://www.exchangerates.org.uk/images/travellers-cheques.jpg

3.4 Foreign Currency:

In order to accept payments in foreign currency, the hotel has to take authorization/license from the
RBI for the same. The cashier of the hotel is authorized to deal in any currency exchanges made by the
guests. Foreign currency is acceptable from in-house guests only, but if a non-resident guest requests
for foreign exchange the cashier needs to seek authorization from the management. Daily foreign
currency exchange rates are clearly displayed at the FO Cashier for information of the guests.
When a guest checks out on payment of foreign currency, the following needs to be done:
 Cashier needs to confirm room number of the guest and request for guest passport.
 Cashier should check the type of currency to be exchanged and determine its exchange rate as
per government banking regulations.
 Bill needs to be calculated in foreign currency and receive the currency accordingly.
 The amount is to be returned in local currency accurately.
 Cashier has to prepare foreign currency encashment certificate giving the amounts received, the
exchange rate and the amount of local currency returned, details of the guest, passport number,
nationality, etc are also entered in the certificate.

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
  The guest is requested to sign on the certificate and the same is compared with the signature on
the passport.
 The original copy of the Encashment Certificate is given to the guest.
 The second copy of encashment certificate is attached to the cash/ notes.
 The third copy is left in the book as record.
 The details need to be filled in the cashier report/ cash sheet.
 The details are even filled in the Foreign Currency Control Sheet.

Source:http://2.bp.blogspot.com/64VAD73HttY/UBONtYN9ynI/AAAAAAAAAEc/ho4oGZDGGg
A/s1600/FOREIGN+ENCASHMNT+CERTIF.jpg

3.5 Bank Credit Cards:

A credit card or plastic money is a card which is used to obtain goods and services and even cash, on
credit terms, without paying cash. The card is used worldwide because of its various benefits in terms
of usage, size. It is issued by mostly all banks. The card holder does not have to carry cash which is
prone to being lost or stolen and is beneficial for travellers. All credit cards are issued for a particular
period and have an expiry date. Credit payment can be extended to a guest depending on the credit
cards Floor Limit which is set by the credit card company. To confirm the credit limit of the credit card
and to confirm the validity of the card, the cashier must get authorization from the credit card company
through on-line authorization. Once the floor limit of the card is obtained and if the bill exceeds then
the rest of payment could be collected through cash. The total transactions of the card holder during a
7

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 month are presented by the credit card company to the card holder for settlement on a monthly basis.
Cardholder can pay the outstanding amount during a defined period or to pay a percentage of the
outstanding amount, thus agreeing to pay the balance amount later at a higher rate of interest than
usual. Settlement to be done through credit cards should be confirmed at the time of arrival. Details of
guest credit card should be requested to reduce any problem related to acceptance at the time of
departure.

Source: http://www.hospitality-school.com/wp-content/uploads/2010/01/hotel-credit-card-payment.jpg

Procedure for accepting settlement through credit cards:

 Check that the hotel accepts the credit card of the issuing company, e.g. SBI, American
Express, HDFC etc.
 Match the name and signature on the credit card are the same as those on the registration
card.
 Check for expiry date of the credit card.
 Swipe the card on the electronic data capture machine (EDC) and block an amount for the
stay on the credit card and the credit card company will issue an authorisation code that is
noted on the guest registration card for further reference.
 An imprint of the credit card has to be taken on a credit card voucher.

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
  The GRC and imprinted voucher with the guest’s signature will be placed in the guest folio
with the cashier till departure of the guest.
 The cashier has to prepare credit card company voucher with details of total bill and date of
settlement.
 The cashier need to ensure that the detailed imprinted voucher is signed by the guest and the
signature matches that on credit card of the guest. And the voucher containing the
authorised blocked amount will be destroyed by the cashier.
 After completing the guest account the top copy of the bill and the guest/cardholder’s copy
of the credit card voucher are given to the guest.

Precautions for handling credit cards:

1. Expiration date: The cashier need to check the expiry date of the card and request guest for any
other mode of payment pointing out the expiry of the card.
2. On-line Authorisation /verification: On-line computer services are been used for validation of
credit cards by most of the hotels. The required transaction data may be entered on a touch-tone
keypad or automatically input through a magnetic strip reader. The verification service
generates an authorisation code or a denial code for the transaction and the same status may be
communicated to the cardholder/guest.
3. Cancellation Bulletins/Hot List: The validity of the credit card can be checked through hot list
or cancellation bulletins issued periodically by the companies, where on-line authorisation is
not available.
4. Invalid Card: In case the credit card proves to be invalid, an alternate form of payment is
requested from the guest.
5. Floor limits: It is the maximum amount in credit card charges the hotel is permitted to accept on
behalf of the guest at one time without special authorisation from the bank company.

The different categories of credit cards are:

 Auto / Fuel Credit Cards
9

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
  Balance transfer Credit Cards
 Business Credit Cards
 Cashback cards
 Classic Credit Cards
 Co-branded Credit Cards
 Contactless Credit Cards
 Credit cards for Women
 Entertainment Cards
 Gold Credit Cards
 Lifestyle Cards
 Platinum Credit Cards
 Premium/Signature Credit Cards
 Prepaid Credit Cards
 Rewards Cards
 Silver Credit Cards
 Titanium Credit Cards
 Travel Cards

3.6 Bank Debit Cards:

A debit card is a plastic payment card that can be used instead of cash when making purchases. It is
similar to a credit card, but unlike a credit card, the money comes directly from the user's bank
account when performing a transaction. These are plastic cards with a magnetic strip on the reverse
side. These cards authorize direct transfer of funds from a guest’s bank account to the hotel’s bank
account for charges incurred rather than being billed to the guest on a monthly basis as in credit cards.
Some debit cards have a credit card logo embossed on them which indicates they are acceptable at
places where the credit card is accepted. Debit cards may also be used on the Internet either with or
without using a PIN. Internet transactions may be conducted in either online or offline mode. Debit

10

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 cards are processed similarly to credit cards while receiving payment for services provided by the
hotel.
The imprint of the debit card with validation machine is taken. Years back guest signature were taken
on the imprinted and completed voucher, but now a days signatures are not required if pin is used. The
cashier processes debit card voucher as a cash payment on the guest folio.

Types of Debit Cards in India:

 Visa Debit Cards. These debit cards are issued with the bank's tie-up with VISA payment
services providing the Verified by Visa platform for online transactions.
 Visa Electron Debit Cards.
 MasterCard Debit Cards.
 Contactless Debit Cards.
 RuPay Debit Cards.
 Maestro Debit Card.

4. MODE OF BILL SETTLEMENT – CREDIT

A credit settlements are such for which a hotel does not receive immediate payment on the day of
departure. These include

4.1 Charge Cards:

These are credit cards which are issued by private card organisations. Example American Express,
Dinner Club, Carte Blanchs, etc. When a guest settles their account with a charge card, the hotel does
not receive payment on the same day. Instead at the end of each shift the cashier will transfer all the
bills settled by charge card to the account department for them to follow up. At the end of week or
month the accounts department of the hotel sends statements of the total amount charged to the private
card organisations, together with copies of all the imprints on receiving the statement and imprints, the
credit card company will pay the amount to the hotel less its commission.

11

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 4.2 Corporate account/Direct billing or Bill to company/ (BTC):
Most of the hotels extend credit to guests by agreeing to bill the guest or the guests company for
charges incurred. The direct billing arrangement, is normally established through correspondence
between the guest or company and the hotel.
The company or guest will need to complete an application for credit approval from the hotel. The
Controller of the hotel will then perform a credit check to determine the credit rating and a credit limit.
The house limit of credit set by the hotel can vary depending on the amount of projected charges and
the amount of time allowed for charges to be paid and the credit rating of the company. Further, the
application is accompanied with a list of people/employees of the company who are authorized to use
the account. It is the responsibility of the company to monitor the authorized use of the credit. It is
observed that the company will settle only the room charges and possibly breakfast charges and the
incidental charges like telephone, laundry, etc. is paid by the guest themselves. The guest account is
divided into master account (settled by the company) and incidental account (settled by the guest). At
departure, the guest is supposed to sign the folio and the same is billed for collection from the accounts
department. On the other hand the incidental charge if any are to be paid at the time of departure. At
check out, the guest signs the folio and statement is directly billed for collection. Guest signs the folio
and accepts the responsibility to pay the bill should direct billing account not pay the bill. The front
office cashier needs to follow standard operating procedures to ensure trouble free payments.

Procedure for handling settlement at checkout for direct billing accounts:

1. At the time of check-in, cashier should request corporate and personal identification of the
guest.
2. It has to be checked that the individual is authorised by the company to bill to the account.
3. Check and verify that the company is listed in the company volume guaranteed rate (CVGR)
list of the hotel.
4. Any credit limit per employee or the services included in the agreement with the company need
to be assessed. The services not mentioned in the agreement will be billed separately to the
guest’s Incidental folio.

12

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 5. The cashier creates a Master and Incidental folio.
6. Master account- the account is settled by the company. The guest bill is shown to the guest for
inspection, verification and signature at checkout.
7. Incidental account- bill is settled by guest in cash or credit card, as previously confirmed at
check-in.
8. The cashier prepares a transfer voucher to transfer charges to direct billing account in city
ledger.

4.3 Travel Agent Vouchers:

Guests travelling through a travel agent need to carry a voucher issued by the concerned travel agent
for arrangements of various services like accommodation, food & beverage, etc made at the hotel and
the copy of the same is sent directly by travel agent to the hotel. The guest uses the services and the
payment to the hotel is made directly by the travel agent according to the already determined rates
agreed upon less the commission of travel agent for bringing business to the hotel. The payment period
for the travel agent to the hotel also depends upon the agreed terms and conditions. Airlines also follow
a system of vouchers that are issued to layover passengers in case of delayed flights or cancellations.
The payment is done by the concerned airline company. In case of travel agent and airline, two
accounts master and incidental are prepared because usually the travel agent or the airline settles bills
of rooms and some packages charges. The rest services not covered under the package have to be
settled by the guest covering under incidental folio.

13

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 Source: http://www.russianembassy.org.za/images/Consular_documents/voucher.png

Procedure for handling a travel agent voucher (TAV):

Master folio:
1. At arrival of the guest, the cashier need to check travel agent voucher and compares with the
hotel copy sent by the travel agent for accurate billing instructions.
2. The vouchers are to be verified by the guest at the time of check-out and the same is signed by
the guest to confirm receipt of services at the hotel as the payment has to be made by the travel
agent.
3. Guests will be given their incidental account/folio for settlement by cash, credit card, etc. and a
receipt issued at the time of departure.
4. Once the guest checks out, the master account and attached vouchers are transferred to the
accounts department city ledger. According to the terms and conditions, at the end of the week
or month, the vouchers and a statement of the total account is sent to the travel agent for
collection.
5. The travel agent settles the account less the commission charged by them.
6. Guest are presented with their incidental accounts/folios for settlement at the departure.
7. The settlement is usually done by cash, credit card or other already-approved and confirmed
method.
14

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 8. The copy of guest’s bill, with receipt, is given to the guest.

5. SUMMARY:
Bill settlement at the front office is one of the important function to be performed. It includes tracking
transaction from pre-arrival stage of guest cycle till departure of the guest. Most care has to be taken at
the time of check-out, considered the last stage of guest contact with hotel. The mode of payment has
to be identifies at the time of check-in of the guest and care has to be taken while preparing guest
account and precautions to be taken while collecting payment through any mode like local currency,
foreign currency, credit cards, debit cards, travel vouchers, corporate account settlement. A hotel
intends to accept all kind of mode of payment for promoting hotel sales both from house guests and
non-guests/city guests. Non acceptance may reduce sale of products and services. Correct measures
need to be taken while handling any mode of payment for any loses to the hotel or dissatisfaction of
guests. For any confusion related to accounts need to be communicated with senior staff members or
from accounts department of the hotel.

15

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment
 16

Tourism & Front Office Operations and Management

Hospitality Billing methods and settlement: Modes of bill payment