Chapter 10
Preparation and Review
of the Night Audit
Copyright © 2007 by John Wiley & Sons, Inc. All
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Chapter 10 Focus Points
Importance of the night audit
Night audit process
The daily flash report
Reading the night audit
Copyright © 2007 by John Wiley & Sons, Inc. All
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Importance of Night Audit
 Night audit - the control process whereby the
financial activity of guests’ accounts are
maintained and balanced.
 The night audit will provide the necessary
“objective overview” to evaluate the hotel’s
financial activity.
Ability to monitor hotel revenues
Effect of marketing plans on related goals
Provides “day-to-day” monitoring, not just end of period
review
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Role of Night Auditor
Duties of the night auditor.
Checking in late check-ins
Checking out early check outs
Processing reservations
Performing the duties of security guard
Monitoring fire safety systems
Performing cashier duties for banquet functions
Acting as manager on duty
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The Night Audit Process
The night audit process
The night audit process is a series of financial checks
and balances that need to be performed on the
various departments and front office staff.
The process to post room and tax
charges.
The process of assembling guest
charges and payments.
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The Night Audit Process (cont’d.)
The Night Audit Process
 Reconciling departmental financial
activities.
• The importance of this process as a necessity
to insure that all posted guest charges and
reported departmental balance.
• The origin of departmental balances.
• Review Figure 10-2 p. 265 – Departmental
Totals.
• Review Figure 10-3 p. 267 – Cashier’s Report
Copyright © 2007 by John Wiley & Sons, Inc. All
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The Night Audit Process (cont’d.)
Procedure to reconcile account receivable.
City Ledger is an accounts receivable - a collection of
guest accounts of persons who are not registered
with the hotel
Contents of accounts receivable:
 direct billings
 master credit card accounts (Visa, MasterCard, JCB)
Verification of these totals against departmental totals
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The Night Audit Process (cont’d.)
Run trial balance
The first step in determining if posted guest charges
and reported departmental charges balance
Figure 10-4 – Trial Balance. – p. 268
Importance of training front desk clerks in the posting
process
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The Night Audit Process (cont’d.)
Preparation of the night audit report
The goal of preparing the night audit is to provide
financial feedback for an immediate opportunity for
managers to react and respond to variances as well
as accurate guest folios and accurate city ledger
folios.
Importance of departmental totals
Concept of bank deposit
Concept of accounts receivable
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The Night Audit Process (cont’d.)
Cashier’s report – lists cashier activity of cash and
credit cards and PMS totals
Manager’s Report is a listing of occupancy statistics
from the previous day, such as occupancy
percentage, yield percentage, average daily rate,
RevPAR, and number of guests.
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The Night Audit Process (cont’d.)
Formulas for Balancing (pp. 274-275) the
night audit report.
Guest Ledger
City Ledger
Bank Deposit
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Components of the Night Audit Report
Components as well as origination of
figures found in Figure 10-5 – Night Audit
Report pp. 270-273
Columns titled actual, budget, and goal %.
Room and tax – this figure originates as a total of
posted daily guest room charges; it is a cumulative
total from the PMS room total feature.
Copyright © 2007 by John Wiley & Sons, Inc. All
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Components of the Night Audit Report
(cont’d.)
 Total restaurant sales and sales tax – the origin
of this total is by meal period in the various food
outlets in the hotel. The dollar figure can be verified
against the daily sales reports with accompanying
cash register tapes or point-of-sale audit trail tapes
from each of the food outlets. The corresponding
tax total is obtained by the sales tax figure on the
daily sales reports
Copyright © 2007 by John Wiley & Sons, Inc. All
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Components of the Night Audit Report
(cont)
 Tips for restaurant, room service, banquet, and
lounge employees – the origin of this figure is service
fees paid to food and beverage employees. The dollar
figure can be verified against paid out slips (tips paid
immediately to service employees from the desk clerk’s
cash drawer) and room service guest checks and credit
card vouchers (charged tips).
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Components of the Night Audit Report
(cont)
 Room service – the origin of this figure is a total of sales
by meal period for room service. The dollar figure can
be verified against the daily sales reports with
accompanying cash register tapes or point-of-sale audit
trail tapes from the room service food facility outlet. This
figure is reported separately from restaurant sales to
reflect marketing and merchandising campaigns.
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Components of the Night Audit Report
(cont)
 Banquet sales – the origin of this figure is a total of
guest checks that tally the individual banquet charges
per meal category. The completeness of the total
reported can be checked against daily function sheet.
The dollar figure can be verified against the daily sales
report of the banquet department. This figure is used to
evaluate the effectiveness of the food and beverage
manager in controlling relate expenses. It is also used to
evaluate the effectiveness of the director of marketing
and sales in generating business. Finally it is used to
indicate cash flow.
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Components of the Night Audit Report
(cont)
 Banquet Bar and Total Lounge Sales – the origin of
this figure is from the point-of-sale cash registers in
these areas. The dollar figure can be verified against the
daily sales report and cash register tapes or audit trail
tapes. This figure is used to determine how well cost
control efforts have been maintained in this department.
It is also used to determine the success of certain
marketing and merchandising campaigns.
Copyright © 2007 by John Wiley & Sons, Inc. All
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Components of the Night Audit Report
(cont)
 Room Rental – this figure originates from meeting and
function room rentals. The night auditor can verify the
completeness of total rentals by cross-referencing the
function sheet listings. The dollar figure is verified
against the room rental departmental daily report. This
figure is used to determine if room rentals have been
maximized during slow banquet sales by the marketing
and sales department.
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Components of the Night Audit Report
(cont)
 Valet – this figure must be closely monitored because
the hotel pays cash to the off-premises dry cleaner of
laundry service when clothing is returned. This total
represents costs plus mark-up posted to guest folios
from transfers. The dollar figure can be verified against
the valet or dry cleaning/laundry journal.
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Components of the Night Audit Report
(cont)
 Telephone Charges – the origin of this figure is from
telephone charges reported for local and long distance
telephone calls that have been posted to the guest
account through the PMS interface with the call
accounting system. The dollar figure can be verified
against the telephone charges printout received through
the call accounting system. This figure allows
management to determine the profitability of this service.
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Components of the Night Audit Report
(cont)
 Gift Shop Sales and Tax – the origin of this figure
represents sales and tax from this department. The
dollar figure can be verified from the gift shop daily sales
report and cash register tapes or point-of-sale audit
tapes. Management uses this information to examine
profitability of this area and to predict cash flow.
Copyright © 2007 by John Wiley & Sons, Inc. All
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Components of the Night Audit Report
(cont)
 Vending – the origin of this figure is from sales from
various vending machines in the hotel. The dollar figure
can be verified from the departmental vending daily
report. Management compares inventory usage with
cash collected to monitor the integrity of cash collection
and reporting activities.
Copyright © 2007 by John Wiley & Sons, Inc. All
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Components of the Night Audit Report
(cont)
 Spa – the origin of this figure is sales posted to guest
folios and cash sales in that department. The dollar
figure can be verified from the departmental spa daily
report and vouchers posted to the guest folios.
Management needs this information to examine
profitability of this area, to predict cash flow, and to
determine the effectiveness of marketing and
merchandising campaigns.
Copyright © 2007 by John Wiley & Sons, Inc. All
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Components of the Night Audit Report
(cont)
 Parking – the origin of this figure comes from sales
received in cash, business checks, debit cards, credit
cards, and transfers for guest parking. The dollar figure
can be verified from departmental parking garage daily
report and transfer slips posted to guest folios, parking
tickets, cash register tapes, and monthly parking permit
renewals that accompany the daily report.
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Components of the Night Audit Report
(cont)
 Total Revenue and Total Write-offs – these figures
represent all the cash and charge transactions for the
day that reflect all the previously reported figures.
Management will compare the actual and budgeted
figures to determine how well operations have met
financial goals.
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Components of the Night Audit Report
(cont)
 Cash Sales and Accounts Receivable Balance
Explain the Total Cash Sales figure.
Explain the Today’s Outstd A/R figure.
Explain the Total Revenue figure.
Explain the Yesterday’s Outstd A/R figure
Explain TOTAL OUTSTD A/R
Explain CREDIT CARD REC’D A/R figure
Explain Cash Rec’d A/R
Explain Bal A/R
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Components of the Night Audit Report
(cont)
 Credit Cards and Cash Applied to Accounts
Receivable – these figures represent payments that
have been received for application toward outstanding
accounts receivable (credit card companies, direct billing
accounts, and city ledger accounts). Management
monitors this figure to determine cash flow.
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Components of the Night Audit Report
(cont)
 Analysis of Accounts Receivable – These figures are
maintained to determine the source of the account
receivable. Various sources will allow the controller to
monitor cash flow. The controller will be able to
determine the effects of various discount rates on the
profit and loss statement. The controller will also use this
information to age accounts
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Components of the Night Audit Report
(cont)
 Bank Deposit and Amount Transferred to Accounts
Receivable – The total bank deposit figure represents
cash, Visa, MasterCard, and JCB. The analysis of bank
deposit provides sources of bank deposit (cash sales,
credit cards and cash from accounts receivable). The
total bank deposit figure must match the total cash sales
plus the cash received and applied to outstanding
accounts receivable (cash received on accounts
receivable minus total paid-outs). The total of actual
cash and credit card payments received (from the
cashier’s report) will match the total bank deposit figure.
The amount transferred to accounts figure will match
today’s outstanding accounts receivable (today’s
outstanding accounts receivable).
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Components of the Night Audit Report
(cont)
 Cashier’s Report – This figure provides a cumulative
total of the cash, credit card vouchers, and checks from
credit card companies (from outstanding accounts
receivable). This is the amount of cash the desk clerk or
cashier is responsible to produce in the deposit. It
provides differences between actual and machine total.
Copyright © 2007 by John Wiley & Sons, Inc. All
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Operating Statistics
 Operating Statistics – these figures provide a quick summary of
the activities of the day and the succession meeting financial budget
targets. Management will be able to take quick action to catch
unprofitable trends.
 Rooms Available – these are the number of rooms in the
hotel which were operable for sale; if a room was out of
order because of redecorating, plumbing, etc., then it is
not to be included in this figure; sometimes students think
if a room was occupied by a stay-over, it was not available
for sale.
 Rooms sold, rooms Vacant, and Rooms Out-Of-Order –
these numbers are cross referenced by assessing the
housekeepers module (refer to Figure 10-6) p. 281.
 Rooms Comp – this figure is reflected in the guest
registration card and folios.
 Occupancy Percentage– this figure is determined by
dividing the number of rooms sold by the number of rooms
available and then multiplying that figure by 100. (Refer to
Figure 10-7) p.
282
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Operating Statistics (cont)
 Double occupancy percentage – this figure is
determined by dividing the number of guest minus the
number of rooms sold by the number of rooms sold, then
multiplying that figure by 100. (Refer to Figure 10-7) p.
282
 Yield Percentage – this figure is determined by
multiplying the number of rooms sold by ADR and dividing
that figure by the number of rooms available times the
rack rate and multiplying that figure by 100. (Refer to
Figure 10-7). p. 282
 RevPAR – this figure is determined by multiplying the
times occupancy percentage by the average daily rate.
(Refer to Figure 10-7). p. 282
 Room Income – this figure is obtained from the total room
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rate postings.
Operating Statistics (cont)
Number of Guests – this figure corresponds to the
registration module.
Average Daily Rate – this figure is computed by
dividing the room income by the number of rooms
sold. (Refer to Figure 10-7). p. 283
No-shows – this figure is complied by tallying the
number of reservations with a confirmed status that
did not show; guaranteed reservations are not
included in this figure.
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The Daily Flash Report
Daily Flash Report – a management tool to
keep track of departmental totals. Refer to
Figure 10-8. p. 283
 Room sales – review as major source of income and
provide most profit
 Departmental totals – such as food and beverage; watch
for income and corresponding effectiveness of food and
labor cost.
 Occupancy totals – feedback on marketing and sales
efforts
 Search for reasons for low occupancy
Copyright © 2007 by John Wiley & Sons, Inc. All
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Reading the Night Audit
 Room Sales – Budget vs. Actual to compare sales
efforts
 Restaurant Sales – Review individual meal periods
against goals
 Room Service – Review goal because it is a profit area
for hotel
 Banquet Sales – This assists with cash flow and needs a
careful watch
 Banquet Bar Sales – Provides additional income with
banquet sales
 Room Rental – This is a very profitable area to assist in
paying other non-incoming producing areas of the hotel
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Reading the Night Audit cont’d.
 Lounge Sales – This area assists in attracting visitors to
a property
 Valet – This is a service to the guest and the fee charged
for handling is profit for the hotel
 Telephone – these fees helps to recover investment in
the telecommunication investment and profit for the hotel
 Gift Shop – a percentage of the gross sales may be
returned to the hotel if this gift shop is outsourced to a
vendor
 Vending – a percentage of the gross sales may be
returned to the hotel if this service is outsourced
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Reading the Night Audit cont’d.
 Spa – a percentage of the gross sales may be returned
to the hotel if the spa is outsourced to a vendor
 Parking – a percentage of the gross sales may be
returned to the hotel if the parking garage or lot is
outsourced to a vendor
 Total Paid-Outs – this figure should be low; not many
people are authorized to receive paid-outs from the front
desk staff.
 Total Discounts – this figure will provide feedback on
“satisfaction guarantees” that have been used
 Total Write-Offs – this figure provides feedback on
accounts that were uncollectable
 Total Paid-Out and Noncollect Sales – this is a figure that
combines both areas and should be closely watched
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Reading the Night Audit cont’d.
 Total Cash Sales – this figure represents all non-credit sales;
usually low; if it were high, it could mean a security problem because
guests haven’t established credit
 Today’s Outstanding Accounts Receivable – total amount charged to
guests’ folios
 Total Revenue – Total of all cash and charge sales for the day
 Yesterday’s Outstanding Accounts Receivable – A large number;
represents a delay in receiving credit card payment balances
 Total Outstanding Accounts Receivable – Total of Today’s and
Yesterday’s Outstanding Accounts Receivable
 Credit Card Received Accounts Receivable – how much money was
applied to credit card balances
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Reading the Night Audit cont’d.
 Cash Received Accounts Receivable – Cash received
and applied to credit card balances
 Balance Accounts Receivable – Total of outstanding
accounts receivable (city ledger, direct bill, and credit
cards) Note: this figure must match Analysis of Accounts
Receivable
 Bank Deposit – Lists cash and credit card deposits.
Note: must match Credit Card Received Accounts
Receivable.
 Analysis of Bank Deposit – Provides overview of sources
of funds deposited
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Reading the Night Audit cont’d.
 Cashier’s Report – verifies total of each cashier for cash
sales, credit card sales, and sales applied to accounts
receivable
 Analysis Cash Report – summary of cash sales, credit
card sales, and sales applied to accounts receivable
 Manager’s Report – overview of staff’s financial efforts of
the previous day (actual vs. budgeted figures)
Copyright © 2007 by John Wiley & Sons, Inc. All
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