An updated version after I received complaints about the old slide not being easy to understand.

2. Cash Control & Credit Control
Threats, Principles, Methods &
Benefits

3. Welcome to a
new learning
session!
Knowledge is Money.

4. Cash and credit, are two modes of
settlement, at the final (departure)
stage of the Guest Cycle.
Both modes involve an element of risk
for the hotel employees.

5. Threats & Risks: a short-list
Cash mode
• No proof of ownership
available
• Counterfeit/ fake currency
• Torn, damaged or soiled
currency
• Error in counting
• Lock may be compromised
• Password may be hacked
• Password written
somewhere may be stolen
Credit mode
• Skipper guest
• Scanty baggage guest
• Undisclosed joiners in the
room
• Guest leaving without
paying, unknowingly
• Guest spending more than
house limit
• Forged vouchers/ identity
(impersonation)
• Guest bribing staff to obtain
illegal benefits

6. Threats & risks need to be controlled;
To prevent losses in revenue
To stop skippers
To minimize walk-away guests
To eliminate inconvenience and dissatisfaction to the
guests
To avoid expensive and time consuming legal cases to
recover losses in revenue/ income
To avoid the expensive and threatening law suits
brought against the hotel and its managers/ employees
by unhappy guests claiming overcharging, fraud or
forgeries
To avoid charge-back claims on credit card bills by the
guest after departure
To protect hotel’s goodwill in the market

8. Control is a very crucial function for the
management. The manager has 5
basic functions;
1. Planning,
2. Organizing,
3. Staffing,
4. Leading, directing & motivating,
5. Evaluating & controlling.

9. Organization/Company Control
1. Clear organization chart, reporting hierarchy.
2. Clear responsibilities through “Job
Description” for each post.
3. Constant supervision to prevent short- cuts.
4. Physical & technological security measures.
5. Clear cut procedures. Regular training given.
6. Continuous up dating of procedures.
7. Staff rotation, compulsory off days/ breaks

11. 1. Clear organization chart, reporting
hierarchy
• There should be only one boss for every
employee.
• The levels in the power structure must be
clearly defined so that each employee knows
who is below, equal and above them.
• Relationships between employees of different
departments should also be clear in order to
prevent disputes & fights.

13. 2. Clear responsibilities through “Job
Description” for each post.
• People work best when they know what they
are expected to do and how.
• Clear responsibilities also protect employees
against harassment from their immediate
supervisors/ managers.

15. 3. Constant supervision to prevent
short- cuts
• Employees think that it is okay to take short-
cuts, and compromise on quality; if supervisor
never or rarely keeps an eye on them.
• Constant supervision and monitoring also
makes the supervisor responsible for the
performance of their subordinates.
• They can’t simply say that they didn’t/
couldn’t see anything.

17. 4. Physical & technological security
measures
• CCTV cameras at strategic points in the hotel.
• Computer access through personal log-in id
and user-set password.
• Electronic log of all actions of all the
employees.
• Voice recording over house phones
• Hidden IP cameras
• (see the chapter on safety & security for
more)

19. 5. Clear cut procedures
• Written “Standard Operating Procedures” save
a lot of confusion, time, money and troubles.
• Staff knows exactly what is expected of her, in
a step-by-step sequence.

21. 6. Regular training given
• Even the most experienced employees need
training for technological advancement in the
field.
• Training also helps the employee to avoid
falling into a rut, i.e. boring, mind-numbing
routine.
• Training allows employee to learn from other
employees.
• Organization may also get valuable feedback
and insights from old employees.

23. 7. Continuous up dating of procedures
• All procedures can be improved after using it
for sometime.
• The best person to recommend these
improvements are the employee using them
and guests receiving services from such
employees.

25. 8. Staff rotation, compulsory off days/
breaks
• Security principle suggests to suspect all.
• Dishonest employees are often experienced
and highly skilled. They are hard to catch.
• Often, more than one employee is needed to
plan and perform malpractices.
• Sending people away for vacations at random
may break that chain/ nexus.

26. Examples of cash & cash equivalent
• Currency notes
• Coins
• Foreign currency
• Traveller’s cheque
• Personal cheques
• Money orders

28. Cash Control: Introduction
• Cash is a company's most liquid asset,
which means it can easily be used to buy
other assets, order services, or satisfy
obligations.
• For financial reporting purposes, cash includes
currency and coin on hand, money orders and
checks, made payable to the company, and
available balances in checking and savings
accounts.

29. Unattended cash means...
• temptation
• /tɛm(p)ˈteɪʃ(ə)n/
• Learn to pronounce
• noun
• the desire to do something, especially
something wrong or unwise.

31. Why Cash Control?
• To calculate the total amount of incoming
cash.
• To calculate the total amount of outgoing
cash.
• To estimate the amount of cash available for
business, at any particular point in time (cash
flow).
• To safeguard liquid assets.

32. Cash Control: topics
• Define fraud & internal control
• Principles of internal control
• Cash receipts, or incoming cash
• Cash disbursements, or outgoing cash
• Bank reconciliation statement
• Recording & reporting of cash
• Cash management (safe storage & transfer)

33. Cash is most
vulnerable to fraud.

34. Fraud
• Dishonest act by an employee, that results in
personal benefit to the employee, at the cost
of the employer (company or organization).

35. Factors that Encourage Frauds
Opportunity
Rationalization
or Justification
Financial
Pressure

36. Chanakya's observations
on Corruption
• “ Just as it is not possible not to taste honey or
poison placed on the surface of the tongue,
even so, it is not possible for one dealing with
the money of the king, not to taste the money,
in however small a quantity”
• Chanakya is a famous historical philosopher of
India.

38. Internal Control: Legal Aspect
• All organizations must have an internal control
system, and regular independent external audit.
Government sends its own group of auditors, to
all organizations, for verification of accounting
records, and tax liability assessment.
• Not just employees, even the owners of “Limited
liability company” themselves could encourage
fraud, for personal benefits and later on, declare
themselves bankrupt. That is cheating the small
shareholders. E.g. Satyam Computers scam

40. Methods of controlling cash receipts
• Record each cash transaction immediately
• Keep cash locked at all times
• Provide receipt for each payment
• Deposit cash at pre-determined time or volume
of collected cash in the cash drawer
• Avoid keeping large sums at either POS or front
desk cashier.
• Check for genuineness of cash
• If possible, have a bank in hotel premises

41. Methods of controlling cash receipts-II
• Hand-over and take-over of cash between
cashiers of two shifts must be recorded and
authenticated with signature.
• Deposit money in the bank by evening. Don’t
keep cash in hotel overnight.
• Maintain security van for transfer of cash
• Cash van must be accompanied by armed guards
• Route, van driver and security guards must be
rotated at random; to prevent any planned
sabotage.
• Surprise is an important aspect of control to catch
the crooks red-handed.

42. Benefits of Internal Control
• Safeguard assets
• Accurate & reliable accounting records
• Increased efficiency
• Protection from legal trouble
• Boosts morale of honest employees

43. Elements of Internal Control
• Controlling work environment responsibly.
• Evaluation of risk factors.
• Apply control activities, including
technological control system.
• Establish secure Information &
communication system.
• Constant monitoring of the system.

44. Principles of Internal Control
A. Establish Responsibility: only one person will
perform an accounting task at a time. E.g. One
shift, one cashier.
B. Segregation of Duties: in an accounting process,
related steps must be performed by separate
employees. E.g. Cashier and night auditor must
be different.
C. Documentation: all financial documents must
be pre-numbered, responsibility assigned to one
person and that person becomes responsible for
every numbered document. E.g. For one KOT
book, one waiter made responsible.

45. Principles of Internal Control-2
D. Signature: In financial world, signing a
document is the proof of involvement in
producing, processing or closing that
document.
E. Voiding: It is possible to mark some
documents as “void” because of errors, guest
refusal to pay etc. The principle of “voiding”
is that all copies of that document must be
attached together. Voiding can’t be done
without authorization of the manager, if any
copy is missing.

46. Every transaction must be recorded.
Every step in a transaction must be
recorded by a different person, on a
separate document.

48. Audit trail is established through cross-
referencing of documents. Cross reference
means entering the number of K O T on F&B bill
and vice versa.

49. Physical Control Measures
• Safe Vaults
• Safety Deposit Locker
• Locked Stores
• Locked Inventory Cabinets
• Password-enabled access to computer
• Fingerprint scanner
• Iris Scanner
• CCTV
• Sensors (Clothing sensors (in shopping malls) are
placed on garments, using special prongs, that are
designed to avoid damaging the fabric. They are also
designed to be difficult to remove, without the proper
tool, or without damaging the garment.)

50. Physical Control Measures-2
• Cash Counting machine
• Fake Note Detector
• Time Office Punching machine
• Alarms (for break-ins or alert)

52. Under the table, hold-up, panic
alarm, to alert police.

53. Safety Vaults

54. Locked
Cabinets

55. Locked
Stores

56. Bio-metric
or
fingerprint
scanner for
computer
log-in.

57. Iris or retina
scanner for
access into high
risk areas

58. Currency counting
& fake note
detection machine

59. Safety
Measures

62. Independent Internal Verification
• Night Auditor fulfills this responsibility of
verifying all financial records in a hotel.
However, night auditor should only point out
the mistakes, not do the corrections.
(On the basis of segregation of responsibilities
principle.)

63. Human Resource: Internal Control
• All employees with access to large amount of
cash or valuables, must sign a bond (legal
agreement) with the hotel.
• Employee shift time, work area must be
rotated regularly & randomly.
• Compulsory weekly off-days, and annual
vacations, for staff handling financial work.
• Compulsory police verification before hiring
staff for sensitive positions.

65. Causes of Frauds
• Mis-use of position & authority.
• Non-separation of important duties.
• Collusion between two responsible/ senior
employees.
• Exploiting loopholes in the system by
experienced staff.
• Mis-use of access to privileged information.
• Unsupervised employees.
• Unclear organizational hierarchy, where two
employees report to each other. No boss!

66. Hierarchy Hotchpotch!

67. Limitations of Internal Control System
• Cost of control can’t exceed the benefit of
control. Spending more than you save is waste
of money and time!
• Human beings always make errors,
unknowingly. Allow that safety margin to all,
but not more than a limited number of times.
• Size of business could also make control
difficult. Small companies are more
susceptible to fraud.

68. Cash Receipt (Incoming) Control
• Only one person at a cash counter.
• Lock cash drawers. Use cash voucher for every cash
receipt.
• Separate employee at each duties. (Receive, record,
hold, deposit, bank reconciliation statement)
• Document integrity in audit trail. (attach different
records from different positions and departments,
then reconcile (match) them. (Cross reference)
• Archive (safely store) all financial records, for future
claims and disputes.
• Deposit all incoming cash to Head Cashier office.
• Don’t keep large sums in cash drawer for long time.

69. Cash Receipt (Incoming) Control
• Match the cashier’s summary with cashbook
for omission and commission errors.
• Rotate the driver & security guard of cash van.
• Bank is safer than hotel for storing cash.

71. Cash Disbursement (Outgoing) Control
• Never make payments from incoming cash drawer.
Keep the two money trails separate.
• Withdraw from bank and then pay petty cash
amounts from it, separately.
• Use VPO for all payments made on behalf of a
guest. Limit it as much as possible.
• Pay through a/c payee cheques, for larger
amounts. Fill the cheque summary at the end of
the cheque book and tally with bank statement.
• Obtain payee’s signature on payment voucher.
• Match the cash book and cheque book entries,
with bank passbook statement.

72. Bank statement shows both deposits and withdrawal.
Incoming
cash

73. The hotel’s internal cash recording
documents (cash sheet, cashier’s
summary, cash book etc.) must
match with the entries in the
hotel’s bank account passbook.
The error can be made by the bank
employees, too!

75. Reconcile means to sort
out the differences.
Literally here!

76. Reconciliation Statement

77. Credit Control

79. Why sell on credit?
• Hotel rooms are highly perishable. If not sold
today, the revenue is lost for ever.
• To balance this risk, hotels accept booking for
rooms and banquets, without asking for upfront
payment.
• New hotels have to offer liberal credit to attract
first time guests.
• In high competition situation, hotels may offer
credit to please the guest.
• During off season, the hotels are under extra
pressure to arrange working capital required.
• It is highly inconvenient to hotel as well as the
guests; to settle every transaction immediately
and separately.

81. Credit Purchase (Charge Privilege)
• Credit: A facility given by a hotel to a guest
(resident & non-resident) to buy goods and
services many times, on a charge account, and
pay once in a lump sum, later.
• Resident guests pay at departure.
• Some resident guests settle through credit
mode and hotel receives payment after check-
out. (Credit card, BTC, TA Voucher, MAO, PSO)
• Non-resident guests pay once in 30 days.

82. Why charge (Credit) purchase is
allowed by hotels.
• Convenience of guests
• Reduce workload of processing payments for a
large number of transactions
• Market growth
• Recognition/ appreciation of regular
customers

84. Why Credit Control?
• To balance credit facility and working capital
need of the hotel.
• Hotel guest bills, on charge purchases can
quickly reach up to lacs of rupees. Any
negligence, or delay, and the hotel will lose
revenue that would be difficult to recover.
(Skippers & Walk-Out)
• Guests also tend to challenge entries in their bill,
after checking out of the hotel (called as ‘charge
back’), and that is embarrassing and damaging
to goodwill of hotel.
• After check-out, guests are difficult to handle.
• Charge privilege is only for genuine guests,
approved by Credit Control manager.

85. Credit Control Team
• Chief Accountant
• Hotel Financial Controller
• Credit manager
• Secretary
• Credit Assistants

86. Role of Credit Control Department
• Make a credit policy draft.
• Investigate the financial standing of the guest.
• Set a credit limit for every account, depending
upon type of reservation and mode of payment.
• Monitor credit accounts constantly for unusual
accumulation of credit (high balance accounts).
• Get full payment, on time, every time.
• Try to recover payment, in case of any delay.

87. Who is allowed credit privilege?
• Guest with guaranteed reservation.
• Bill to company Executives
• Guests paying through credit and charge card
Non- guaranteed guests, scanty baggage and guests
paying through cash mode, are never allowed
credit. Instead, they are asked for pre-payment.
Such guests are called PIA (paid-in-advance)

88. Objectives of Credit Control Measures
• Prevent skippers and walk- outs
• Prevent delay in settlement of account
• Prevent guest dissatisfaction.
• Convey which credit cards and foreign
currencies are not accepted, at check- in, not
at check-out.
• Inform guest before they exceed their credit
card floor limit.

89. When does Credit control fail?
• When guests and staff, are not given clear
instructions.
• When staff do not communicate on time, and
enough.
• Failure to follow standard operating procedures,
to save time or to please the guest; for instance,
not checking the black list of past skippers &
walk-outs, the credit card authorization denial
from bank, proof of guest identity, taking a
picture etc.
• Experience may sometimes lead to over-
confidence and arrogance.

90. Methods of Credit Control
• Establish House Limit at check-in, for each a/c. PMS
makes this quite simple.
• High balance report made daily to identify risky a/c
(Night Audit Report).
• Ask for part payment to guests near or over house limit.
Put on “No Post Status” in PMS, till they pay.
• In serious matters, hotel may try ‘Lock Out’ (change the
code of the lock in the room, with luggage inside).
• Upon payment, release “No Post Status”.
• Guest identity verification at POS before allowing credit.
All vouchers must be signed by guest.
• Onus to prove genuineness of BTCTA VoucherCredit
cardMAOPSO lies with bona-fide guest.

91. Methods of Credit Control-2
• Keep scanty baggage & walk-in guests on APC (all
payments in cash) basis. Bell boy to report light or
low quality baggage.
• Mark on GRC as “scanty baggage”. Inform all outlets.
• Check credit card for expiry, floor limit and
ownership. Obtain bank authorization and guest
signature.
• Do not accept third party credit cards.
• Follow “luggage pass system” at departure.
• Ask for recent charges at departure, to prevent any
late charges.
• After departure, shift all unsettled accounts to city
leger, handled by Accounts department.
• Follow SOP, every time.

92. Scanty
baggage
guests may
only carry
a handbag
or low
quality
bags.
Some may
stuff their
bag with
useless
things.

93. To fool the hotel staff, skippers may leave
a few less expensive items, or toothbrush,
bathroom slippers etc., lying in the
bathroom, or room closet.

94. Methods of Credit Control- 3
• Train room maids to report walk-outs, to avoid
sleeper room situation. Skippers leave a few items
to fool the hotel that they are still staying.
• Train HK maids to detect undisclosed joiners at
night.
• Room service & Banquets to report unusually large
quantities of F&B orders.
• Skippers tip very generously (too big an amount),
and recipient employee must report to Controller.
• Ask for weekly settlement from all long- stay guests.
• Communicate the hotel credit policy at reservation,
check-in and display in the hotel rooms.

96. A very large order could be a sign of a possible skipper.

97. A surprise inspection of the hotel
accounting department is ordered by
the hotel owners to uncover employee
negligence, inefficiency and
corruption.

99. Internal control surprise inspection
checklist: Guest accounts
• Number of sleeper rooms found
• Late charges after departure
• PIA (pre-paid) account with charge purchases
• Disputed accounts
• Delinquent accounts (>60 days old)
• Skipper accounts
• Tour operator vouchers
• Employee accounts with outstanding balance
• BTC accounts

101. Internal control surprise inspection
checklist: Advance deposits
• Folios are complete with advance recorded.
• Advance deposit folio kept securely
• Refunds of “no-show” accounts processed
immediately
• Advance paid vide cheques deposited to hotel
account immediately.

103. Internal control surprise inspection
checklist: Credit card procedures
• Credit card imprinters are dated correctly
• Authorization codes from bank obtained
• Cards aren’t expired
• All imprints, vouchers are clear and legible
• Guest signature obtained
• Processing clerk has signed in the right place
• Credit card bills transmitted correctly and on
time

105. Internal control surprise inspection
checklist: Cheque mode
• Employee signature, folio number,
endorsement (customer/ payer) signature and
payee details are correct and available
• Cheques received are deposited the same day
• Cheque cashing policies are correct and
followed
• Cheque register is updated daily/ immediately

107. Internal control surprise inspection
checklist: Front Office accounting
• System updates and night audit done everyday
• Trial balance confirmed everyday for all revenue
centres
• Paid-outs & allowances are authorized and
recorded on the appropriate folios
• Correction vouchers verified
• Copies of all vouchers available in physical form
• Tax calculations are correctly posted
• Service charges only as per law; and hotel policies

109. Internal control surprise inspection checklist:
Guest folios and registration cards
• Guest registration cards and room folios are
opened and completed accurately, timely.
• Folios & GRC are time-stamped, in & out.
• Continuation folios have ‘to’ (folio number) &
‘from’ (folio number) clearly written.
• Alphabetical and numerical filing of records are
current and correct.
• Numerical sequence of unused folios is in order.
• Voiding of folios have been done after following
the proper procedure.

111. Internal control surprise inspection
checklist: Security & safety
• Cash drop facilities constructed correctly.
• Cash deposit witness log-book is maintained &
signed.
• In-house cash bank is secure, when not in use.
• Night auditors clearance is secured.
• Safe deposit boxes log-book is maintained.
• Keys of unused safety locker boxes are
available.

113. Internal control surprise inspection
checklist: Security & safety
• Cash van driver is licensed and police background
verification done.
• Cash drawer is locked when not in use.
• Hotel safe combination numbers changed at
regular intervals.
• No terminated employee has the safe
combination numbers.
• Unused room keys are secured and available at
front desk.
• Storeroom is protected and monitored.
• CCTV log-book is updated.
• Linen inventory is strictly controlled.

115. Internal control surprise inspection
checklist: Folio accountability
• Unused folios boxes aren’t opened.
• The count of unused and used folios tallies
with the print order quantity.
• Is the store of unused folios in a safe room?
• How long will the supply of folios last?
• Missing folios or sheets count

117. When default happens?
• Up to 30 days, hotel can wait. (current)
• After 30 days, make a telephone call. (due for
payment)
• After 45 days, write a letter, demanding
immediate payment. (overdue)
• After 60 days, write a strongly worded letter,
possibly threatening with legal action.
(delinquent)
• After 90 days, proceed with legal action.
• The account may have to be marked as “Bad
Debt” , after 90 days.

118. Risk can never be eliminated.
But, it can definitely be reduced.
It is better to be safe, than to be sorry!

120. Compilation & Presentation
Praveen Jha
Senior Faculty
IHM Hajipur
Vaishali, Bihar