CHECK-OUT AND SETTLEMENT

 Checkout and settlement describe the activities associated with the final stage
of the guest cycle (i.e. departure).

Check-out and Account Settlement:

 The major activities, which are conducted at departure, include:
1. Resolving outstanding guest account balances
2. Updating room status information
3. Creating guest history records

Guest account settlement depends on an effective front office accounting system

that maintain accurate guest folios, verifies and authorizes a method of
settlement and resolves discrepancy in account balances. Most front office
requires a guest to specify during registration an eventual method of settlement.

Departure Procedure:
 At checkout, front office clerks shall:
1.Check for mails, messages, and faxes
2.Check for safe deposit box, or in-room safe keys
3.Departure Errand Card to be prepared by the bell boy
3. Post all outstanding charges
4. Verify account information
5. Inquire about additional recent charges
6. Present the guest folio for guest signature
7. Verify the method of payment
8. Process the account payment (i.e. zeroing out the account)
9.Take a feedback from the guest regarding his stay
10. Update the room status

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Check out affords the front office yet another chance to make a positive
impression on the guest. The front desk agent should check for any messages,
faxes or mail awaiting guest pick up. The front desk agent should also verify that
the guest has cleared his or her safe deposit box or in-room safe and returned
the key.
To ensure that the guest folio is accurate and complete, the front desk agent
should process any outstanding charges that need posting. In addition, the front
desk agent should ask the guest if he or she incurred any recent charges and
make the necessary postings to the guest folio.

Traditionally, at check out, the guest is presented a final copy of his or her
account folio for review and settlement. During this time, the front desk agent
should ask how the guest intends to settle his account, regardless of which
method of settlement the guest specified during the registration process. A guest
may establish credit by presenting a credit card at check-in.
After determining how the guest will pay, the front desk agent should then bring
the guests’ account balance to zero. This is typically called zeroing out the
account. A guests’ account balance must be settled in full for an account to be
considered zeroed out. As long as the hotel has received full payment or is
assured of full payment, the account will be settled with a zero balance. If an
account is to be paid by company, it must be transferred to a city ledger and
billed through the account receivable system.

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 Presentation and Settlement of Bill

A departing guest can settle his bill by a number of ways. Mainly they can be
grouped into two: cash and credit.

I. Cash Mode:
The cash mode includes payment of bill in Indian rupees and acceptable foreign
currency such as dollars and pounds etc. This also includes payment by
travelers cheques which can be of Indian rupees or foreign currency) against the
bill and issues him with a cash receipt. If the guest has paid in foreign currency
and there is any balance amount to be given back to the guest then the same is
given in Indian rupees. An encashment certificate is also issued to the guest.
A cash payment in full at check-out will bring a guest account balance to zero.
A guest may have had a credit card imprinted at registration, even though he or
she intended to settle the account by cash. The front desk agent should destroy
the guests’ credit card voucher imprinted at registration when the guest pays the
account in full with cash.

Foreign Currency Transactions:

The tourism industry in any country is a prime source for the generation of
foreign exchange. Governments would, therefore like to keep a close tab on the
flow of foreign currency. The stipulations for a hotel are:
1. The hotel should have a license called ‘Restricted Money Changers License’
to exchange foreign currency.
2. Someone must be authorized to deal in foreign exchange transactions,
normally the front office cashier.
3. Exchange is done only in local currency
4. Exchange rates must be displayed prominently at the exchange points.
The rates are governed by the RBI which updates them on a daily basis
5. Foreign currency exchange can be only extended to resident guests.

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Procedure for accepting Foreign Currency:
The front office cashier has to follow certain procedures as stipulated by the RBI
while receiving foreign exchange. The procedure is as follows:

1. Request the guest for his/her passport and determine the credentials
such as name and photo identification, place of issue, date of issue, and
date of expiry of the passport.
2. Confirm that the guest is a resident of the hotel.
3. Check if the foreign exchange is accepted by the Government. Normally
transactions are done for dollars, sterling pounds, euros and yen.
4. Receive the cash or Travelers Cheque.
5. Calculate the total amount of local currency to be paid by multiplying the
foreign currency total amount by the exchange rate displayed.
6. Fill in details in the Foreign Exchange Encashment Certificate which
comes in serially numbered books for better control.
7. Request the guest to sign the Travellers Cheque if it is the instrument of
exchange. Make sure that the signature tallies with the earlier signature
on the TC.
8. Request the guest to sign the Foreign Exchange Encashment Certificate
and compare the signature with the passport.
9. Give the total amount of local currency with the original Foreign Currency
Encashment Certificate to the guest.
10. Attach the second copy of the Foreign Currency Encashment Certificate
to the notes or Travellers Cheque.
11. Leave the third copy of the certificate in the certificate book.
12. Fill in details in the Record of Foreign Currency Transactions. This is a
control sheet of all foreign currency transactions in a shift.

Settlement of bill through Travellers Cheques: Travellers Cheques are issued

by various banks in various denominations, for example, Rs.50/-, 100/- or
Rs.500/- etc. Suppose a person wants to buy travellers cheque worth

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Rs.10000/- in the denominations of Rs.500/-, he will fill up a form, be required
to deposit Rs.10,000/- in the bank and he would be issued with 20
nontransferable travelers cheques of Rs.500/- value each. A certain amount of
commission may have to be paid by him to the bank.

There are two spaces for the buyer’s signature. At the time of purchase he has
to sign at one of the places in the presence of the issuing authority. i.e., the
bank manager or his representatives. He is issued with counterfoils, also called
as record slips. Other details on the travelers cheque are, (a) number of the
cheque, (b) a date column, (c) the amount of cheque is printed on the face of the
travellers cheque, and (d) the signatures of the bank authority etc. Travelers
cheque is as good as cash.

Difference between an Ordinary Cheque and a Travellers Cheque

Ordinary Cheque Travellers Cheque

1. For issuing a cheque a person 1. No need of any bank account for
should have a bank account purchasing and encashing of
(either current or saving). travelers cheques.
2. Any amount can be filled in the 2. Have a fixed amount printed on
cheque as they are blank its face and available in different
3. Only one signature is needed of denominations.
the holder 3. Two signatures are required
(one in the presence of issuing
authority and second in the
presence of encashing
4. Ordinary cheques are valid only authority)
for 3-6 months 4. Valid for indefinite period of
5. These cheques can be crossed time unless dated.
for account payee 5. No such provision.

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 6. No slip/list of lost, damaged or
stolen cheques is issued by 6. Many banks issue a stop list or
bank. stolen and damaged cheques.
7. Cheque may bounce as the 7. No such possibility as the
balance in account may be less amount is already printed on
than the cheque amount. the face of the cheque.
8. Not safe as someone might force 8. Quite safe because the second
the owner to sign the cheque. signature has to be put in front
of the encashing authority.

At the time of settlement of bill the cashier of the hotel presents the bill to the
guest and if the guest intends to settle his bill by travellers cheque, the cashier
asks him to countersign at the specified place on the face of cheque and tallies
his signature with the first signature. A travellers cheque cannot be encashed if
the second signature does not tally with the first one.

The cashier should also ensure that the travellers cheque is not predated. Once
the date is put on the travellers cheque it is valid for only six month, otherwise,
the cheques are good until used and there is no time limit for their encashment.
The cashier should confirm the identity of the guest by asking for his passport
or driving license etc. form safety and security point of view. Ensure that the
cheque is not damaged, mutilated or changed in any way before accepting it.
Check the exchange rate (in case of foreign currency travelers cheque) before
converting into Indian Rupees. Any balance shall be paid in Indian Rupees. An
encashment certificate shall be issued to the guest.

Travellers cheques are a very safe and convenient way of transporting currency.
There is no danger even if they are stolen, snatched on a gun point etc. as they
will be encashed only when they will be signed by the holder in the presence of
the encashing authority and the second signature tallies with the first signature.

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The advantage of travellers cheques is that it has double check system because
of two signatures and chances of it bouncing like an ordinary cheque are not
there.

A foreign travellers cheque must be treated like foreign currency and the
necessary records and statements and certificates must be maintained like in
case of foreign currency and required records should be sent to Reserve Bank of
India by the hotel.

2. Credit Mode.

Credit mode of payment includes (i) Airlines vouchers (ii) Company Account
Payment, (iii) Travel Agency Vouchers (iv) Credit Card Payment, (v) Personal
Cheque payment by the guest.

(i) Airlines vouchers: Some airlines give MAO (Meal and Accommodation
Order) and PSO (Passengers Service Order) to the layover passengers
travelling from one destination to another. The passengers are provided
with specified meals and the accommodation by the hotel on the basis of
the same for which the payments are made by the airline.
(ii) Company accounts: Directors and other top executives of various
Corporate Companies keep travelling from one place to another very
frequently. The companies issue authorization letters to their executives
on the basis of which they get services such as accommodation etc. from
the hotel. At the time departure the guest signs his bills and checks
out. The hotel sends this signed bill to the company which makes the
payment.
(iii) Payment by Travel Agency Voucher: Generally a travel agent who sells
a package to a tourist collects the money from the tourist in advance
which includes accommodation and the other service charges. Travel
agency voucher indicates that the guest has prepaid to the travel agency

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 amounts for accommodation etc. and the recovery of such amounts are
made from the travel agent and not from the guest. The travel agent
sends copy of voucher to the hotel at the time of booking and gives the
record copy to the traveler who submits his copy to the hotel at the time
of arrival. The receptionist should tally both the copies. Most of the
travel agents voucher includes the services to be offered to the guest.
The front office cashier should take the following steps in this case:
a. Receive the travel agency voucher and see what billing instructions
are mentioned in the folio. Read billing instruction very carefully as
sometimes the travel agent might instruct the hotel to collect the
payment from the guest directly.
b. Read the voucher carefully and determine whether it has been
issued from a bonafide agency as issued by the accounts
department of the hotel.
c. See that all the expenses / charges are covered by the voucher.
d. If the voucher is from a foreign travel agency, get it authorized by
the Lobby Manager.
e. Ask the guest to sign on the reverse of the travel agency voucher.
f. The guest should sign the folio at the time of check-out.
g. Attach the voucher and the folio(s) together.
h. The hotel sends the original voucher along with the guest bill
(including all department vouchers) for payment.
i. Usually within a month the travel agent makes the payment of the
bill to the hotel.
(iv) Settlement of Bill through Credit Card: It is one of the most
commonly used methods of bill settlement by a guest. It is a small,
convenient to carry plastic card issued by banks.

Every credit card has an authorized amount by the bank as an

authorized limit called the floor limit. If the amount of guest bill is
within the authorized limit then at the time of departure the guest has

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to sign a credit card voucher. At the time of arrival, when the arriving
guest indicates that he will use credit card for the bill settlement, he is
requested by the receptionist to produce his credit card. The card has
the name of the guest, the number and validity date embossed on it and
the receptionist makes sure the following:
a. The hotel accepts the company’s credit card.
b. The card is not an expired card (he checks the expiry date)
c. The card is not a stolen card (he consults the stop lists /black list /
cancellation bulletin sent regularly by the credit card company). In
case the card is stolen or an expired one the receptionist, after
informing the guest, should take and cut it with a cutter or scissor
and then send to the credit card company to avoid any further
misuse of the card. For this he may be rewarded by the credit card
company.
d. Floor limit: The limit up to which the guest can be given the credit
If the bill amount exceeds the credit limit of the card, the cashier
must take permission from the Credit Card Company for the over-
limit amount. This is called as over-limit authorization number.
The limit varies from company to company. Sometimes the color of
the card, like green, white and golden, etc indicate the credit limit.
e. He should check the validity of the card by passing it through a
special magnetically charged validation machine called the
magnetic strip reader. This process is also called as “Card
Approval” process. Once satisfied, the receptionist shall pass it
through an imprinter along with charge slip and take the impression
on them. In case of scanty baggage guest or an unknown guest the
receptionist should request the guest to sign some blank charge slip
in advance. At the time of departure the guest is presented with the
bill along with the charge slips, which he signs. Ask him to produce
his credit card and check his signatures. Make a “charge record”
which should have the total amount in Indian rupees payable by the

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 guest, credit card number, the name of the card holder, the name of
the hotel, date of charges, the bill number etc. Three copies of
charge records, which sometimes is also called as billing statement
are made (one copy is hotel’s copy, also called as service
establishment copy, second copy is for credit card company and
third copy called as card holder’s copy is returned to the guest ( a
copy of the bill may be attached with this charge record in case guest
requests for it)
In order to avoid any dispute at a larger stage the hotel must retain
all the original bills of the guest till the payment is cleared. The
payment of the bill is made to the hotel by the credit card company
which in turn collects the payment from the guest directly by
sending a monthly statement. This monthly statement not only
contains the hotel’s bill but the details of his other purchases at
other places also.
f. Reserving Credit: The front office may reserve a specified amount
of pre-authorized credit in a guest’s credit card account to ensure
payment for
goods and services.

(v)Payment by Personal Cheques: Normally payments by personal cheques are

not accepted. Inform the guest politely that payments by personal cheques are
not entertained. In case of further insistence from guests, ask them to contact
the lobby manager for an authorization. On the receipt of the authorization from
the Lobby Manager, give the application for payment by personal cheques.
Check the details of the cheque and make sure that it has been marked ‘A/c
Payee Only’ and is duly filled. Compare the signature on the cheque with that
on application form. Enter details in the front Office cashier’s report. Settle the
bill.

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(vi) Combined settlement method: A guest may elect to use more than one
settlement method to bring the folio balance to zero. For example, the guest may
make a partial cash payment and make the remaining payment by credit card.
In this case, depending on which combination, front office clerk shall proceed by
preparing different kinds of vouchers.

2. Sales minded cashiers!

 As guests tend to depart from the hotel, the cashiers shall approach them in
the following way:
a) Provide them comment cards and encourage them to use these very cards
b) Thank the guest for choosing the hotel and wish him/her a safe trip
c) Ask the guest whether he/she is considering returning to the property on any
return trip to the area. Cashiers might sometimes accept future reservations!

III- Check Out Options:

 There are a lot of innovative ways to check out apart from the traditional way.
Below are two commonly used check out options (apply usually only to guests
who have provided valid credit cards at registration):
1. Express check out: This is usually convenient for guests who decide to check
out very early in the morning. In fact, at night, bellboys (for example) shall
slip the guest folio under the expected departure guestroom. When the guest
wakes up, he/she shall sign the gust folio, and the credit card voucher, leave
the room, give back the room key to the bellboy, and depart.
2. Self-check out: Guests might check out using self-check out terminals
situated at public areas or in their rooms if in-room check out systems are
integrated with front office main frame.

3. Late check out:

Late check out refers to the situation where guests check out after the hotel's
established check out time. Late check out shall not be considered as a guest

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right, rather a privilege which might be honored by the front office manager upon
room availability whether free of charge or charged a late check out fee.

Unpaid Account Balances:

No matter how carefully the front office monitors a guests’ stay, there is always
the possibility that the guest will leave without settling his bill. After departure
charges or outstanding balances represent unpaid account balances.
 Unpaid account balances occur because of the following reasons, most of which
are because hotels do not operate fully-automated systems:
a) A departing guest honestly forgetting to settle his/her account
b) Late charges (being one of the most important reasons)
c) Skippers
 In order to minimize late charges, front office clerks shall:
a) Post transactional vouchers as soon as they arrive at the front desk
b) Survey front office equipment, voucher and folio racks for non-posted charges
before the front office clerk checks a guest out
c) Ask departing guests whether they have incurred any charge purchase or
placed long distance telephone calls, which do not appear on their final folio

Account Collection:
 Guest accounts not settled at checkout by cash payment in full, regardless of
the credit established, are transferred from the guest ledger to the city or the
non-guest ledger for collection. At that time the guest account is transferred from
the control of the front office to the hotel’s accounting division. Typically city
ledger accounts include :

a) Credit card billing to authorized credit card companies

b) Direct billing to approved company and individual accounts
c) Travel agency accounts for authorized tours and groups

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d) Bad check accounts resulting from departed guests whose personal checks
were returned unpaid
e) Skipper accounts for guests who left the hotel without settling their accounts
f) Disputed bills accounts for guests who refused to settle their accounts
because of a discrepancy
g) Guaranteed reservation accounts for billing and tracking no show guests
h) House accounts for non- guest businesses and promotional activities
i) Late charge accounts for guests who checked out before some charges were
posted to their accounts
j) House accounts for non-guest business and promotional activities

 In order to receive all their city ledger accounts, hotels shall devise effective
and efficient account receivables billing procedures. To do so, every property
shall try to find answers to the following questions:
a) When are outstanding accounts balances payable?
b) How many days shall separate each two consecutive invoices?
c) How to contact the departed guests whose accounts is not yet paid?

 After coming with answers to the above mentioned questions, hotels, then,
shall depending on the amount of money to be collected, and the geographical
distance that separates the hotel from the guest billing address, opt for one of
the following collection schedules:
a) Aggressive (short cycle) collection schedule
b) Lenient (long cycle) collection schedule

Account aging:
 Account aging refers to the method(s) of tracking past due accounts based on
the dates the charges were incurred. To illustrate, credit card payment accounts
usually have ages of maximum one month. However, some other non-guest
accounts (ex. late charges, disputed bills, bad checks and skippers accounts)

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might have ages measured in months, and even years. Below, is the terminology
associated with each account age:

Less than 30 days accounts  Current Accounts

More than 30 days accounts  Overdue Accounts
Older than 90 days accounts  Delinquent Accounts

Front Office Records:

 The major two front office records that are stored at departure are guest history
records (which are stored alphabetically) and guest folios (stored numerically)

Guest History Records:

 Guest history records are collections of personal & financial data about guests
who have stayed at the hotel. Maintaining guest history records helps the hotel
better understand its clientele and determine guest trends when they develop.
Moreover, these very records might serve as a source of mailing list or to
identify guest characteristics that are important to strategic marketing. In
addition, they serve to develop and place advertisements that appeal to the
types of clientele the hotel attempts to attract. Finally, guest history records
point out the need for a new, supplementary, or enhanced services.
 Moreover, even though guest history records are stored in the front office
department, they are handed to marketing department, whenever needed. In
fact, marketing department might make use of guest history records to create
a program to reward frequent guests with a free stay after a certain number
of visits, or as an indicator to watch out for future repeat guest reservations
in order to increase the hotel’s repeat business market share.
 Guests tend to remember the friendliness, convenience, and special services
that distinguishes one property from another. This is called competitive
advantage.

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