Hospitality Financial Leadership – Top 10 ‘MUST DO’ Separation of Duties and Controls

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In your hotel internal controls are a mission critical element you must have up and working well to adequately safeguard your assets. If you forgo these controls, you leave yourself wide open for – and I hate to use this word – fraud.

That is right. People who work for you are much more likely to steal from you if you do not protect what is yours with proper and effective controls. That fact is just the reality of being in business and the world is full of horror stories of those who trusted too much.

As Theodore Roosevelt said, “Risk is like fire: If controlled it will help you, if uncontrolled it will reach up and destroy you.”

All of this might sound dirty and daunting, but it need not be. Here I am going to lay out the top 10 controls you can and should have in your hotel.

Everything in business is a tradeoff. We trade our efforts for better results. Put these to work for you and keep more of what is yours.

When it comes to controls it is important to always remember the necessity of the separation for the control to be effective. Even in small operations this is possible, you just need to be creative and pay attention to the details.

Number 1 – Incoming Mail

Make sure someone in a neutral position is the one who receives and opens the mail. Someone who has no accounting responsibilities. Ensure they make a list of the payments received each day. A copy of this list along with the checks are what you send to the accounting department. This way the payments are recorded separately and can be verified. Skip this step and the person who receives the money in the mail has a free hand to mess with your money.

Number 2 – Vacations

It is mission critical to ensure your managers all take their vacations annually. While they are away, make sure a responsible person performs their duties and these are not left for the vacationer to complete upon their return. This helps ensure you have a level of redundancy, and it should give you a view as to what they do.

Number 3 – Surprise Float Counts

Most hotels entrust their front office staff with a cash float. When the float is issued there should be a “float contract” signed, dated and witnessed. The contract needs to include the name, date and the size of the float. It also needs to include a sentence that states the float is company property and subject to an independent count on a regular basis. When you decide it is float count date, do not tell anyone and simply meet your employee before their shift and count your cash.

Record the count on a count sheet or deposit sheet with name, dates and signatures of both the counter and float holder. If the float count ends up short you need to find out why and deal with the situation appropriately.

Number 4 – Use of Purchase Orders

Using purchase orders is not just something reserved for the big hotels. If you entrust the purchase of goods and services to your managers, then they should be using purchase orders. You do not need a computer system either. You can find three-part NCR forms online. So, order some today. With purchase orders in place the idea is nothing gets ordered until the PO is approved by you. Once approved and ordered, one copy goes to receiving, a second to accounts payable and the third stays with the person/department placing the order. Ensure the PO includes the vendor name, description and price with an extension to the total. The PO is to be matched when order is received and when payment is made. This way you know by reviewing the backup from accounts payable that the item you are paying for was planned and approved.

Number 5 – Three-Way Match

Hot on the heels of the use of purchase orders is the three-way match. The three-way match ensures you are not paying for something you did not receive or approve of. The process is the number one control for purchasing and you can read the full story here in a prior article.

Number 6 – Daily PMS Balancing

Ensuring the receipts match revenues and you are keeping all of your income, and especially making sure it makes its way to the bank, is just common sense. But so many do not do this, or they leave it up to someone else. Read the 7 daily revenue audit must do’s here.

Number 7 – Wire Payments

Treat the use of wire payments as a form of payment with the highest possible restrictions. The use of online wire payments is convenient and can be very secure as long as the transactions and the use of the tokens are properly controlled. Watch out for regular payments that just happen without individual scrutiny and approval.

Number 8 – Balance Sheet Reconciliations

Having your entire balance sheet reconciled each month is not a luxury nor is it something to forget about and have your accountant look after. If that is your MO then I am willing to bet you there is a bomb sitting there just waiting to blow up in your face. Many times, the balance sheet is a forget about thing for hoteliers. Just wait until you sell your hotel then the crying starts when you realize the books do not balance. The shortage will come out of your proceeds. A regular monthly review of your accounts and their overall position of your business is what is required. Do not be sleeping at the switch!

Number 9 – Charge Backs

Credit card charge backs are a fact of life. The proper, timely handling of chargebacks is critical to ensure your losses are as little as possible. Here is a Pro Tip: Send me an email and request a complimentary copy of my daily credit card balancing tool.

Number 10 – Use of Credit Cards for Purchases

Last, but certainly not least, is the use of credit cards for the purchase of goods and services for your hotel. While convenient for sure, the use of credit cards needs to be tightly controlled and monitored. If you are simply paying the balance of your credit card each month, I guarantee the users are helping themselves to what is possible with the card. Make sure each credit card item is matched with a legitimate expense. Make sure real receipts are matched with credit card line items. Things like gas and groceries are so easy to manipulate.

Well, there you have it. My top 10. And remember internal controls in your hotel are not just for the brands and big companies. You can create a set of policies that work for you, helping you ensure your assets are being properly controlled. Learn more about my policy manuals and a free offer here.


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