Cash Handling Procedures in Hotel Management - Coursework Example

Executive Summary The hotel management has to look towards developing a process through which expenses are accounted and a process is developed through which better control is managed. This report looks towards looking into a number of issues like capital budgeting, cash handling and cash control process, and managing the operational and cash flow budgeting process. This thereby requires that the management looks towards developing ways so that cash management policies and the process through which cash is handled are improved. This can be achieved by creating accountability and ensuring that all the expenses irrespective of the amount are accounted. Along with it proper reconciliation of the expenses should be done where the expenses are verified. The management also has to look towards developing policies through which better budgets ar prepared and all the inflows and outflows are accounted so that proper cash management is developed and the business is able to ensure that a liquidity crunch is not created. Table of Contents Introduction 3 Cash Handling Procedures 3 Cash Control Procedures 5 Operational & Cash Flow Budgeting 7 Capital Budgeting 8 Conclusion 9 Recommendations 10 References 11 Introduction Finance is the life blood of business and requires to be managed properly so that the business is able to use its resources in the most effective manner. Organization have to look towards managing finance so that the business doesn’t get engulfed in a financial crunch and is able to have the required finance through which the different finances can be managed. The report looks towards examining the manner in which finance manager present in the hotel has to look towards managing its finances. This aspect will look into the manner in which budgets need to prepared, proper forecast has to be made and the manner in which the entire cash handling procedure has to be managed so that effective cash handling policies can be developed. The report is aimed at the Chairman of the hotel so that the actual scenario is brought to the knowledge of the concerned person and alternatives through which the entire process can be improved are provided. This report looks towards looking into a number of issues like capital budgeting, cash handling and cash control process, and managing the operational and cash flow budgeting process. The report is limited to the fact that it considers the manner in which decisions are taken and the actual ground prevailing situation through which better decisions can be taken. This thereby looks towards evaluating the different directions through which effective developments can take place and the business will be able to gain effectiveness. Cash Handling Procedures The hotel management has to look towards finding out a mechanism through which cash handling process is developed as the expenses are paid out of the cash drawer and are not accounted correctly. Further, the process used is incorrect as the manager feels that the expenses over a longer period of time will remain the same but it doesn’t provide any conclusive evidence required the manner in which the expenses have been made (Caplan, 2005). The entire process can be improved and cash can be better handled through the following process Accept Cash & Endorse Cheque: The foremost important aspect which has to be looked at is ensuring that all the expenses are made in cheques. This will help the management to keep track of the expenses as following the method will ensure that the management can check every details and parties to whom expenses have been made. Further, this will help to monitor the expenses and the income can be collected in cash but will require proper vouchers so that misappropriation of funds are totally controlled. This will reduce errors and prove and effective check through which expenses is monitored. Managing the Cash Drawer: Care has to be taken to manage the expenses through the cash drawer as the authorized person has to clearly depict the different directions where the expenses were made. In addition to it the management has to ensure that fixed cash based on daily expenses is provided to the petty cash manager and is accounted for all its operations. Taking steps and being strict to monitor the expenses will provide the conclusive evidence through which better cash handling becomes possible. Reconciliation: This aspect will require that all the documents are properly filed and all expenses are accounted through the correct method. This will also require proper verification and determining whether the expenses are used in the correct direction or not. This will help to fix responsibilities and will help to improve the overall effectiveness through which better control can be monitored and effectiveness gained (Cost Classification. 2013). Cash Control Procedures The hotel has to look towards developing a process through which proper cash control methods are developed so that the chances of misuse of funds are reduced. This will require development of different methods as the hotel has already witnessed problems as the process in which the funds were utilized were faulty and has thereby resulted in creating problems in the manner the funds have to be managed. This will require the following so that effectiveness is gained and the funds are managed correctly and in the correct direction Segregation of duties: The foremost important step which the hotel management has to take is through the segregation of duties where people within the organization are entrusted with different responsibilities. The hotel management has to ensure that a separate person is hired and looks into the process of record keeping and post the entries when the expenses take place. This will help to keep track of the expenses and will ensure that all the funds are used in the most effective manner. Along with it care has to be taken to ensure that proper authorization is received regarding the use of funds so that all expenses are accounted for and no errors or frauds are committed. This will further require reconciliation where the expenses are checked with the vouchers so that differences can be accounted for and appropriate handling of the cash becomes possible (Cost Classification. 2013). Asset Accountability: The hotel management has to look forward towards determining asset accountability by defining the roles and responsibilities for each employee. The asset accountability will be required for individuals where the person is accountable for the transactions and the manner the funds are used, cash accountability where the process in which funds are managed is effective and cash is properly managed, and lastly determining the entire process through which all documents and transfers are properly monitored and maintained so that maximum efficiency can be generated. Physical Security: This aspect will require that proper monitoring and physical layout is developed which will look towards developing the process through which better management of cash becomes possible. This will require that shortages and the direction in which expenses are made are properly accounted. Reconciliation: This aspect will require that all the documents are properly filed and all expenses are accounted through the correct method. This will also require proper verification and determining whether the expenses are used in the correct direction or not. This will help to fix responsibilities and will help to improve the overall effectiveness through which better control can be monitored and effectiveness gained. Operational & Cash Flow Budgeting Budgeting holds an important aspect as it will help the hotel management to determine the inflows and based on it plan their outflows. This will help to develop a process through which a match is developed between the inflows and outflows and will ensure that the funds don’t dry up. The hotel management has to look towards ensuring that the process which is developed facilitates the entire process and helps to ensure that cash is properly managed (Master Budget, 2013). This requires the following Estimating the Operational & Cash Inflows: The management has to look towards ascertaining the manner in which the business will be able to receive the cash inflows. The timings here is important along with the amount as it will help to prepare for the expenses accordingly. The management has to make a proper estimation of the cash inflows as errors on this area will create a deficit which will directly have an impact on the manner the business spends money (Cost Classification. 2013). Estimating the Operational & Cash Outflows: The management has to look towards ascertaining the manner in which the business will be making the different expenses. The timings here is important along with the amount as it will help to ensure that cash are managed well in advance so that the expenses can be easily met. The management has to make a proper estimation of the cash outflows as errors on this area will create a deficit which will directly have an impact on the manner the business spends money Cash Flow Budgeting: Using and developing the entire process which focuses on the inflows and outflows will ensure that the business is able to determine the path and the direction in which the expenses will be made and the manner in which the funds will be arranged for those. This will help to ensure that sufficient funds are kept aside for the daily activities and developing the budget will keep a check on the expenses and will help to carry out the daily functions in the most effective manner (Budget Variance. 2011). The effectiveness of the cash handling process will thereby increase as the hotel will be able to check the manner and different direction in which the expenses have been made. Capital Budgeting This is important that the hotel management looks towards a process of capital budgeting where the total budgets are differentiated into different heads like capital, cash, operational and so on. This will ensure that the business will be able to create different budgets and look towards working on the phenomenon through which proper cash management policies and handling policies can be developed. This will also ensure that the business is able to determine the process through which effectiveness will be gained and the business will be able to increase their level of operations (Austin, 2008). The management has to look towards ascertaining the manner in which the business will be able to receive the cash inflows. The management has to look towards ascertaining the manner in which the business will be making the different expenses. Using and developing the entire process which focuses on the inflows and outflows will ensure that the business is able to determine the path and the direction in which the expenses will be made and the manner in which the funds will be arranged for those. This will help to ensure that sufficient funds are kept aside for the daily activities and developing the budget will keep a check on the expenses and will help to carry out the daily functions in the most effective manner (Budget Variance. 2006). The process of capital budgeting will also look towards determining the manner in which the business is able to manage the funds from different directions and will broaden the overall horizon through which effectiveness will be gained. This will also ensure that the process of managing funds becomes effective and the business will be able to reduce the chances of misappropriation of funds. Conclusion The report presents the manner in which finance manager prseent in the hotel has to look towards managing its finances. This aspect presents the manner in which budgets need to prepared, proper forecast has to be made and the manner in which the entire cash handling procedure has to be managed so that effective cash handling policies can be developed. This will help to reduce the chances of misappropriation of funds and will increase the effectiveness through which the business is able to perform better. Recommendations The management has to look towards developing ways so that cash management policies and the process through which cash is handled are improved. This can be achieved by creating accountability and ensuring that all the expenses irrespective of the amount are accounted. Along with it proper reconciliation of the expenses should be done where the expenses are verified. The management also has to look towards developing policies through which better budgets are prepared and all the inflows and outflows are accounted so that proper cash management is developed and the business is able to ensure that a liquidity crunch is not created. References Austin, R. 2008. The credit crunch and the law. Corporation and Taxation law monograph series, Sydney Master Budget. 2013. Master Budget. Retrieved March 12, 2013, from http://www.accountingformanagement.com/the_master_budget.htm Budget Variance. 2011. What factors causes budget variance. Retrieved March 12, 2013, from http://www.ehow.com/info_7736257_factors-cause-budget-variances.html Budget Variance. 2006. Budget Variance Accountability Procedure. Retrieved March 12, 2013, from https://www.conman.ualberta.ca/stellent/groups/public/@finance/documents/procedure/pp_cmp_054525.hcsp Caplan, D. 2005. Management Accounting: Concepts & Techniques. Retrieved March 12, 2013, from http://classes.bus.oregonstate.edu/spring-07/ba422/Management%20Accounting%20Chapter%205.htm Cost Classification. 2013. Cost Classification for predicting cost behaviour. Retrieved March 12, 2013 from http://www.accountingformanagement.com/variable_cost_and_fixed_cost.htm Cost Classification. 2013. Cost Classification: Chapter 18. Retrieved March 12, 2013 from http://www.principlesofaccounting.com/chapter%2018.htm Read More