This paper aims to detail the structure of a risk department, which is valid for both a hotel and any company. The structure is analyzed taking into account the vertical and / or horizontal subordination, depending on the characteristics of the company or hotel in question. It offers a detailed detail of the entire collection management process, from the client's reservation, to the moment of final collection; stopping at each of the accounting aspects, and reviewing each and every one of the accounts that participate in it.
It makes a brief sketch of the process of contracting, reserves, income and debt cancellation.
Finally, it stops at the necessary interrelation between the Commercial, Reception, Risks and Administration departments.
Summary
The present work must like objective detail the structure of a risk department, which is valid as much for a hotel as for any company. The structure is analyzed considering horizontal the vertical subordination and / or, depending on the characteristics of the company or hotel at issue. It offers a detail detailed of all the process of collection management, from the reserve of the client, to the moment of the final collection; stopping in each one of the countable aspects, and reviewing all and each one of the accounts that participate in the same one. It makes a brief outline of the hiring process, reserves, income and cancellation of the debt. Finally one stops in the necessary interrelation between the departments Commercial, Reception, Risks and Administration.
The Risk Department is a financial analysis department that directs its efforts to carry out collections on all of the hotel's production, mainly credit production, which is why in other companies it is called the credit department. From the foregoing, it is derived that its achievements directly affect and constitute a determining factor in the Company's liquidity and solvency, and that its workers must have as a fundamental premise guarantee the minimum possible number of accounts receivable, with the most appropriate composition by age of the debt.
The main objective of this department is to help build a wide and growing profitable sales base.
Considering what has been stated up to now, an outline of the structure of the Central Risk Department of any Division can be made, considering the subordination level up to the Hotel level, which can be vertical or horizontal.
2. Accountant - He is in charge of receiving the communications of payments already made or in the process of being deposited, from which he makes the distribution by Hotels and prepares the transitory or collection stubs as the case may be.
3. Secretary - He is in charge of shipping by DHL and / or any other way of all the invoicing of the Hotels. As well as the preparation and organization of correspondence with agencies at the central level.
4. Central financial analyst - He is in charge of the claim of the outstanding balances of Cuban agencies and companies, in addition to supporting the head of the department in all kinds of claims.
5. Hotel Accountant - He is in charge of keeping the credit accounts updated from the transients received and / or other established procedures.
6. Hotel financial analyst - He is in charge of carrying out at the Hotel level the strategy outlined by the Head of the Central Department, as well as the claims at the Hotel level, taking care above all of the state of the composition of the debt by age and the average of the collection day.
Advantages of applying this structure:
- Standardization of information for all the hotels in the Complex. Decrease in telephone, fax, etc. expenses. Increased level of specialization by market. Improvement of the claims system. Decrease in deductions for billing errors.
This Department is directly related to the Hotel Reception, so much so that in many hotel chains it is known as the Reception Credit Department, hence its relationship with this Department is described below (Reservation, Billing)
Its radius of action are essentially credit customers, constituting the largest Group, the Agencies and / or TTOO of which we refer below:
The first contact of the Agency with the hotel, usually occurs through the Dept.
Commercial. It is through the contract that the prices by seasons, room types and regime are established and the hotel is in a position to receive the reservation (s) as agreed in it.
The Reservation request is made by the Agency through email, fax, telex, telephone or personal in the case that there are offices in Cuba. They can also do it through the GDS.
These Reservations are confirmed by the hotel according to the Quotas (number of rooms that are designated to each Agency in the contracting process) and to the Release (period that is limited for each Agency in which they must make their Reservations requests, generally it varies between 7.14 or 21 days); information that is also reflected in the contract.
When the Quotas, the Release or both are exceeded, the Agency before requesting the Reservation has to ask about the possibility of doing so, which is called an on-request reservation.
On Request means that the Agency does not have reservation security even if there is a contract, of course all this works depending on the occupation of the hotel and the seriousness of the Agency in question.
In the event that this mechanism works in a timely manner and there is availability in the hotel, when the reservation arrives, it is confirmed using the same means of communication, it is computerized in the Automated Reception System and potentially becomes the Booking of the hotel.
This Booking according to Booking, is confirmed with the tickets, so it must be checked daily 3 times, in the morning, at noon and at night, in order to have exactly the actual occupation against the Reservations.
Here it is necessary to make a parenthesis and begin to explain the payment conditions since the Departments of Reserves and Risks are interrelated based on what they define, which will offer a small outline of definitions and terms referring to this topic, and we will begin with the payment term.
The payment term is established by the contractor taking into account:
- Payment term Prior knowledge of the Agency Level of solvency and seriousness of the Agency Situation of political and economic stability in the country of the Agency
Considering the above, the Sol Meliá Cuba Division establishes the following payment terms:
- Prepaid. Credit up to 30 days.Credit limited by a security deposit pre-established by both parties.
We will stop at the first payment term: the Prepayment.
The Reservations Department is where all the collection management of the Prepaid Agencies begins. This Department will send daily to the Risk Department, a copy of the Booking Confirmation Models with Prepayments that have been made during the previous day.
Once we have all the information required for the follow-up of the prepayments, and duly ordered, we can start the management of the prepaid compliance claim, which is handled by the Risk Department in close coordination with the Reception Department.
The Risk Department and the Reception address will check this information for three-day entries, with the notifications received from the Prepaid Agencies, from which one of the following assumptions will be met:
A) That the agency has not made the prepayment.
- With this certainty, we will proceed to make the corresponding claim to the Agency. Risgo will always make the claim in writing, for the record, and will send it via e-mail or fax. In the claim you will specify the data and number to the Agency of clients, dates of arrival and departure, service to be performed, Amount to pay, and Reservation number, which will be the same as the Confirmation of Reservation with Prepayment. This Claim will indicate clearly and forcefully that it is the Second Notice, and the Agency will be reminded again that in case of not having received the Prepayment before the clients' entry, the Hotel will be obliged to charge them from their arrival. The document that we have generated for this claim, we will file it together with the documents that we already had previously, that is,A joint file will be drawn up for the List of All Kinds of Arrivals and the Confirmation of Reservation with Prepayment. The day before the arrival of the clients, the fulfillment of the Prepayment will be reviewed again, and in case it had not yet been carried out, Risks will send the claim letter again, indicating that it is the Third Notice. It will be checked that the File contains all the information, that is: reservation confirmation document with Prepaid, claim letter with second notice, claim letter with third notice and any other document inherent to management. All this will be attached to the List of All Kinds of Arrivals of the day. With the indicated documentation, we will inform the Hotel Management of what is happening,always in writing and attaching copies of the file and at the same time we will request the determination of the action to be taken. The determination made by the Director is attached to the file. It will be communicated instantly and always in writing to the Hotel Reception, which This has been the decision taken by the Director, thus avoiding that upon the arrival of clients there is no doubt about the procedure to be followed.For these exceptional cases in which the circumstance that credit is authorized to A Reserve that should have been prepaid, Risks will keep a file by TTOO, in which all the documentation that has been generated with reference to the prepayment will be kept, which will be kept on file while the invoice is pending payment.The determination made by the Director is attached to the file. It will be communicated instantly and always in writing to the Hotel Reception, which has been the decision made by the Director, thus avoiding the arrival of customers there is no doubt about the procedure to be followed.For these exceptional cases in which the credit is given to a Reserve that should have been prepaid, Risks will keep a file by TTOO, in which all the documentation will be kept that with reference to the prepayment had been generated, which will be kept on file while the invoice is pending payment.The determination made by the Director is attached to the file. It will be communicated instantly and always in writing to the Hotel Reception, which has been the decision made by the Director, thus avoiding the arrival of customers there is no doubt about the procedure to be followed.For these exceptional cases in which the credit is given to a Reserve that should have been prepaid, Risks will keep a file by TTOO, in which all the documentation will be kept that with reference to the prepayment had been generated, which will be kept on file while the invoice is pending payment.avoiding in this way that upon the arrival of the clients there is no doubt about the procedure to be followed.For these exceptional cases in which the circumstance that the credit is authorized to a Reserve that should have been prepaid, Risks will keep a file by TTOO, in which all the documentation that with reference to the prepayment would have been stored will be kept, which will be kept on file while the invoice is pending payment.avoiding in this way that upon the arrival of the clients there is no doubt about the procedure to be followed.For these exceptional cases in which the circumstance that the credit is authorized to a Reserve that should have been prepaid, Risks will keep a file by TTOO, in which all the documentation that with reference to the prepayment would have been stored will be kept, which will be kept on file while the invoice is pending payment.which will be kept on file while the invoice is pending payment.which will be kept on file while the invoice is pending payment.
B) That the agency has Prepaid correctly.
In the cases that the prepayments are made before the arrival of the clients at the Hotel.
The Risk Department will prepare the corresponding transitory document, whose copy will go to the Collection Section of the Hotel, who will have the obligation to indicate in each of the reservations that the Prepayment has been made, in addition to its automated entry in the current account of the TTOO
We must indicate that there is a form of prepaid confirmation that is based on the urgent confirmation of the Agency that will immediately proceed to execute the payment, but that due to procedures, it takes a few days to become effective in our bank account. To this end, they send us copies of bank transfers, copies of checks, etc.
This procedure constitutes for us an evident proof of the payment, so we proceed to credit the debit in the client's account and take it to a bridge account called Talones al Cobro, which exists in Accounting, where it will remain active until the notice of payment through the Bank, at which time the corresponding Transitory is prepared and the amount is canceled in the aforementioned Account.
Along with all of the above, Risks, when requesting a Prepayment by means of a claim letter, must take advantage of and simultaneously claim those possible previous invoices that are still pending payment at the time, with both arguments must pressure the TTOO to settle its debts.
The client appears at the Hotel Reception, showing the vouchers, in which the Agency records the number of pax, days of stay, regime and any other data of interest according to the Agency that issued it, this is computerized, the process of Check-In and the Proforma Invoice is issued, a very important document for the Risk Department to carry out its collection function.
From here and throughout the time that the client's stay covers, the automatic charges for the client's accommodation and consumption will occur, (remember that prior to all this, Reception has entered into the machine the contracts with the specificities, in case of any modification by Special Offers or others, will be modified in the System at every moment that they occur and that they inform in writing).
Every morning Check - In passes the Proforma Invoice, vouchers, Rooming List or Reservation and any additional documents, which make up a File.
We clarify that the Vouchers presented must correspond to the specifications requested in the reservation, therefore the Proforma Invoice obeys the data reported in Reserva-Vouchers, with the same stay, that is, entry the same day and for the same number of days - stay, you can have different plans that can be the following:
- Hotel name, number of people, stay, rooms and price reg. (Most important aspect).
Once the review is completed, he proceeds to fill out the shipping letters prepared by the Department of Risks for Markets and currencies, for each of the Pro forma Invoices, which he reviews for the Risk Market specialists, and the Chief of this Department. This whole process takes at most one day.
The original of the letter with the original documentation, is sent by DHL through a specific program that this Department must work on.
In addition, letters are sent to send invoices to the economic managers of Cubanacan SA, Sol y Son, Havanatur SA and other companies with a credit relationship with the Hotel.
Hotel billing leaves a photocopy of this documentation and forms the day's file.
At this time, we will stop, since there are two variants, of the day's record.
One consists of assembling the records for arrival days, made up as follows: Arrival list for the day; Photocopy of the delivery letters with pro forma invoices, photocopy of the vouchers, reservation templates and / or Rooming List corresponding to fra. reference. All of this as a whole is “handled” as an Invoice File; and finally, Photocopy of the Rooming List or Model of Denied or Canceled Reservations corresponding to the day.
The other variant, which from our point of view is the most effective, consists of the assembly of the files by agencies, that is, all the invoices that are sent by Markets (Countries) and agencies are archived, guaranteeing that they remain in this file only the invoices pending collection, and appending to the received payments those that have been paid, which considerably facilitates the claim of payment arrears.
In addition, the so-called File of the day, which is preceded as an initial sheet, by the list of expected arrivals that is obtained daily and which billing considers consigning the data of the number of invoices to the Group of pax that the invoices add, creating the file of the day, shaped like this:
- Record of the day List of expected arrivals, with incorporated data, Photocopy of the Rooming List or Model of Denied or Canceled Reservations corresponding to the day.
Along with this file, when the original of the Proforma Invoices comes out, a copy or "cardboard" comes out, which is detached and kept in a separate filing cabinet for each day of the month, on the Dates of the day of departure, waiting of the Check-out Invoice.
As can be seen, the proforma invoice, with the collection of all the stays, is sent immediately after the client's entry, so that the collection is managed even before this invoice is part of the pending, upon the client's departure from the hotel. The proforma does not affect the Production charges, it constitutes a pre-invoice of what will be the Final invoice or Check-out Invoice (which does affect Production) at the end of the stay.
The aforementioned is in correspondence with the clause of the Contract, where for those Agencies with a Payment Term of up to 30 days, this period begins from the arrival of clients at the Hotel and not upon departure.
The Agencies with Guarantee Deposits must pay in such a way that their debt does not exceed the amount of this deposit, if it is exceeded, the same mechanism established when the prepayment is not received in the established time is established.
When the Check-out Invoice is produced, the Production charges for this Customer - Invoice are closed and it is charged to the Pending, that is to say, the total invoiced goes to accounts receivable.
This Check-out Invoice marries the “cardboard” of the Check-in that is in the filing cabinet by day of departure as previously explained, but there are differences, it is extracted from this filing cabinet and goes to the Reception filing cabinet by number consecutive invoice where they are kept for 5 years according to the accounting rules of mintur.
If there are differences, contracts, offers, unforeseen departures and all other possible causes must be reviewed. All this will be clarified in writing in the Check-in / Check-out file.
The Dept. of Risks will permanently check the credit accounts, that is to say the pending one, leading to effects and Payment conditions
Now, we can continue with the rest of the payment terms.
Payment method - This condition is closely linked to the Payment Term, since it is evident that for the Prepayment, the form will be prior to the arrival of the clients at the Hotel as explained above; for the period of 30 days the payment will be later, the simultaneous payment method will be valid only for direct clients.
Payment Currency - The payment currencies are dependent on the markets. Considering that the entire Computer System is mounted in the United States dollar (USD) and that this currency is currently the universal exchange standard, it has been tried by all means that most contracts are signed in this currency, although given the number of Agencies with Contracts in Spain, Germany and Canada, we have been forced to use the respective currencies of these countries. In summary, the payment currencies used are:
- USD, euros and Canadian dollar.
International Payment Methods - In the Cuba Division, the best known international payment methods are used (Personal Check, Bank Check, Simple Payment Order, Documentary Payment Order, Remittance and Documentary Credit.)
Collections can be received through the following channels:
- Through our accounts abroad. By Stubs (Simple or documentary payment order). Through the BFI or FINTUR. Cash payments directly at the Hotel (Cash, bills of exchange and / or Checks.)
The first three Collection channels generate transitory accounts, which is the internal document prepared by the Risk Department, through an automated System. This document affects the Cash of the Day document and reduces the Accounts Receivable by the credited amount.
The Transitory Document is issued in two parts, one for Administration and one for Reception.
Operative according to type of transitory.
Collections from abroad: THE total money from the relationship that is downloaded from the Internet will be distributed among the different hotels to which the payments of the different agencies correspond.
This information is saved in the Excel file in which it is supported. In addition, the file image supports are kept with the details of the payments that arrive by this route.
A Transitory file will be opened, in which a complete copy containing the Administration Transitory will be filed, along with the Receiving Transients.
A copy of all Transitory Receipts will be delivered to the collection manager of each market, along with a copy of the Administration Transitory. With this document it will lower pending, updating the accounts receivable through the document Receiving Box.
Remittances: They are those checks that we receive from the Agencies and that we cannot make effective in Cuba as a result of the North American blockade, and that therefore will be sent to the C&C Headquarters in Palma de Mallorca, which will be in charge of managing the collection of the same.
Collection and / or revenue notices are currently received daily from the C&C office, ensuring that the status of collections portfolios at each hotel show outstanding credits in real time.
Collections by BFI: This account will process all those deposits that have been made in current accounts of each Hotel in the BFI, therefore the code of this account will be used.
We can find two situations:
- Checks delivered by the Hotel Central Cashier to the BFI. Bank statements delivered by the Bank.
The checks delivered by the Hotel to the BFI are the checks that the Agencies located in the country and with accounts in the BFI, deliver directly to the Risk Department, as a result of a reconciliation and payment agreement.
These checks are delivered to the Central Cashier, who deposits them at the BFI. Once the same gives us the proof of your deposit, we proceed to prepare the corresponding Transitory, from which the Administration is delivered to the Central ATM and the Reception (s) to the Risk Manager of the market for its introduction into the machine, where the box is debited and the Pending is credited.
Collections
The collection staff has the fundamental task of registering and controlling the collections of credits to Agencies, TTOO and Companies and the claims that arise from incomplete payments.
Their work is nourished by the documentation originated in the Reception area, such as invoices, bonuses, reserves, etc. and of the Transitory ones.
Accounts Receivable from Companies and / or Agencies are presented as:
- Current Account of the Agency or Company. Less Payments Account for each Agency and / or Company
Other accounts used:
- Pending Deductions.Customer Claims.
Current account of the agency or company: All invoices pending collection.
Unpaid account: Reflects invoices whose amount was not fully paid. (Differences in payment).
Pending deductions: Reflects the invoices paid less by the Agencies or Companies, which must be produced, for having been invoiced erroneously, above the correct value until the Director approves the production.
Customer claims: Reflects the invoices paid less by the Agencies or Companies, due to claims made to the Hotel, until the Director approves their transfer to Accounting to be charged to the corresponding expense account.
Each of the Accounts described above has a code that serves as an identifier to record any accounting movement.
The accounting procedures through which the Risk Department updates the credits can be summarized through the following diagram:
Consequently, with the main objective of the Risk Department, its main function is to guarantee the base of contracted agencies that best make their payments, for which it is essential to constantly claim late payments.
In this way, it has been demonstrated that in order to have an efficient cash flow that guarantees expanded reproduction, the closest collaboration between these four departments is necessary, and only in this way can the main objective of the Risk department be fulfilled, which, as we outlined at the beginning, It's about helping build a broad and growing profitable sales base.
Bibliography:
Santandreu, Eliaseu- Credit Manager's Manual. McGraw Hill Publishing. 2000
Foundations of Admon. Financial. Parts I and II.
