Internal controls in your hotel are critical and they need to be designed to keep your assets safe and your money where it belongs – with you and not in someone else’s pockets. I have seen this go wrong way too many times and I also talk to many hoteliers that are oblivious to this level of control or they just don’t see the importance of it.
In this piece I am going to lay out the requirements for a three-way match in your purchasing and accounts payable area. Put this in place and you will never pay a bill twice again and you will never pay for something that you didn’t actually receive. I have lived through both scenarios and it’s totally preventable if you follow this corner stone control.
The three-way match is nothing new. It’s been used for hundreds of years in many different businesses. It works best in bigger operations, but it can be designed easily to work in any size hotel regardless of the set up in accounting. Contrary to some people’s thoughts you don’t need extra staff, and the expense involved is negligible.
Start using purchase orders
Order 3-part NCR carbonless forms online. These are pennies each and readily available. I just googled “hotel 3-part ncr purchase orders” and there are a ton of options. I recommend the forms because they are pre-numbered and convenient to use. You can use a PC system or an app but I’m not going to discuss that in this article.
Once you get the forms, create a logbook on a spreadsheet or use a paper ledger book. Record the sequential numbers and create a space for three additional pieces of information: date, issued to whom (what department) and returned. This way you keep track of the forms.
Once you have the forms issued to the different department managers in your hotel, establish the following policy:
NO items will be paid for from this business unless there is a purchase order prepared in advance.
You communicate this to all managers in writing as well as verbally. This applies to all goods and services in all departments. For food you may want to consider creating a market list and perhaps the same for housekeeping. These work well for frequently purchased items that repeat.
Now that you have your forms and the policy established you can designate a day of the week when you will accept purchase requests. People must bring their departmental purchase requests to you using the 3-part forms with the particulars of what they need: items, quantity, price and extension. This is your opportunity to manage the budget and question the need for items and their intended use. Do we really need 36 cases of toilet paper this week? Do we really need to buy the most expensive filters for the HVAC units? Do we need a year’s supply of mop heads? If you have ever wondered how to stem the spending in your hotel, this is it.
So, let’s imagine that you approve a bunch of purchase orders – now the items can be ordered. Part one of the form is retained by the department, part two is sent to the vendor and part three is sent to the person designated to be the hotel’s receiver.
Next the items are received. The receiver must be independent of the department that originates the purchase request. For example, the maintenance department cannot receive their own requested items, this must be segregated. Many smaller hotels have the maintenance department receive all goods except for their own items and these are received by the housekeeper or front desk.
Now that you have your system, you can effectively use the three-way match to control your purchasing and accounts payable. The three items that must match before you make a payment are the purchase order, the receiving or packing slip and the invoice.
Another policy to create in your hotel:
No item will be paid for unless there is evidence of a purchase order, a matching receiving slip and an invoice.
The items listed above must be attached to the check and presented for signature.
The final part of the internal control is payment and review. Make sure each check you sign for your business includes the three independent pieces and you can rest easy knowing you have control over your cash disbursements because you use the three-way match.
If you want some assistance with your hotel internal controls send me a note and let’s talk. You don’t have to put up with chaos and there is help.
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