Not only does Evention simplifies cash/dueback management and gratuity distributions and on a daily basis, but the application can also be leveraged by accounting at month’s end to dramatically simplify the end of month process.  This article highlights some of the methods utilized by hotel accounting to reduce time spent with month end closing

Evention SecureDrop

Evention SecureDrop – Month end processing

Cash Deposits, Cash Clearing, and Cash Variance by day or by month

Depending on the process and general ledger setup for a property, it may be required to view the cash clearing report for an entire month.    Evention allows accounting to simply run a report over any date range so that the total deposit (cash, checks, travelers checks, foreign currency, telechecks, etc.), duebacks, cash clearing, and cash variance can be reported for each department by day or by month. 

Run the Evention Cash Clearing Summary over any date range!

Over/Short totals by month

In many cases, it is required to record the total variance (over/short) by day or by employee as part of closing the month.  Evention allows accounting to do this with easy be simply running the Over/Short Report for the entire month and then by specifying a 1 cent threshold.  All variances are immediately available for month-end reporting.

Managed your over/shorts at end of month

Unpaid Dueback reporting and posting to the general ledger

Dueback tracking is another common headache at month’s end.  In many cases, the total “unpaid” duebacks must be posted to the General Ledger and a corresponding record detailed the employees owed money must be archived.  Evention makes this dueback reporting instantaneous by allowing accounting to run a Dueback report and simply filter to the status required for reporting.  In fact, the manual archiving can be eliminated as the Evention reports are available for complete historical reporting.  

Unpaid dueback reporting and posting to the general ledger

Human Resources – Accountability for over/short violation management

Not only is accounting responsible for managing the tracking of the cash variances and over/shorts.  When cash violations come into play, Human Resources typically plays a key role.  However, the management of these violations can be extremely challenging as communication is required between accounting, outlet managers, and human resources.  Evention SecureDrop dramatically simplifies this process by allowing each department to manage each employees report while also providing comprehensive reporting that allows quick reconciliation.

Over/Short report provides instant visiblity to status of all cash viloationsEvention Tips & Gratuities

Evention Tips & Gratuities

Evention Tips & Gratuities – Month end processing

Posting Unpaid Gratuity Liability

Evention ensures accurate gratuity payroll each pay period but a common scenario is that an incomplete pay period may still be “open” at end of month.  For example, for a weekly pay period starting Sunday, August 28^th, 2011, three days still remain before it closes on September 3, 2011.  A controller could simply run the Evention Gratuity versus Revenue report for the last four days of August to determine the total unpaid payroll liability at month’s end. 

Automatically determine your unpaid gratuity or wage liablity

Determine amount of service charge to post to “House”

In addition to employee payroll, it is very common for the house to receive a share of the service charge.  To determine the “house gratuity share”, accounting can simply run the Evention Gratuity versus Revenue Report for the entire month.  The “Service Charge Margin” column provides an instantaneous result for the total amount of service charge “paid” to the house.    

Evention provides an instant view of the service charge house margin

Evention strives to simplify every aspect of the management related to gratuity payroll, cash management, and banquet scheduling.  If you have any month’s end or other tips to share with the Evention team, please let you Evention account representative know.  We greatly appreciate all of our customers’ feedback!

To begin, outlined below is a high-level summary of the “standard” cash management and cash journaling process seen across most properties in the hospitality industry along with some of the challenges at hand.

In analyzing the above process, a number of opportunities are available to streamline and improve this process which has basically remained static over the last 20 years.

Revenue Saving Opportunities

Foremost in most controllers’ minds especially as we still are navigating through the economic recovery, opportunities to improve revenue are critical.  With cash management, two simple items can provide immediate returns:

• Eliminate Bag Fees – Many banks charge fees for variances between reported and actual verified amounts.  Tightening down the accuracy of the reported amounts or negotiating this fee with your bank can help immediately provide savings.
• Build process to effectively push the cash violation forms “out the door” – Operational efficiency is key in many properties where shorts notifications must be presented to employees within 72 hours to recover the variance.  Ensuring you have this process in place can result in further savings each week.
• Time savings is dollar savings – If employees are spending 5-10 minutes at the end of their shift counting banks or writing out drop amounts, the hotel in many cases is paying an extra 5-10 minutes per employee per shift.  Providing tools to simplify or reduce this time can generate immediate labor savings.

Analyze current process

To truly improve your cash management process, it is necessary to understand the existing process and its corresponding issues and inefficiencies.  Building up metrics will provide valuable insight in this analysis.   The following questions provide some initial framework:

• How much time is being spent by cashiers, managers, audit, accounting, and HR each shift/day or at the end of month?
• What fees are being charged for inaccurate drops totals/reports?
• Can the bank do more for you – potential eliminating the need for some of your internal resources or time?
• Are you managing duebacks well?  What is the total unpaid amount at the end of each month?
• Can you improve processes such as enforcing employee bank counts, simplifying the audit process, or reducing balancing tasks at the end of the month?
• Is their accountability for over/shorts so that variances can be reduced or eliminated?
• What is the total in shorts by property, department, or employee?  Can these amounts be reduced through improved management?

Empower the managers

With the cash management process flowing through many departments and hands, it is vital to provide team members with the tools they need to more efficiently manage the process.

• Simplify process to manage cash violations – Do your managers still have to manually fill out cash violation forms for each over/short violations.  Can you standardize, simplify, or automate this to save time and improve accountability?
• Provide a process where employees must count banks – Being lax on the “bank count” policy benefits nobody in the end.  Put a mechanism with accountability in place to ensure banks are being counted.  This reduces “borrowed banks”, minimizes discrepancies, and puts critical structure around the management of the cash banks.
• Create useful reports – Having accurate reports available to management can provide tremendous benefits across the board.  It may take time to create a reports daily to show duebacks (unpaid, cleared) or show over/shorts trends or issues but the effort can be worth it.  Accurate reports provide a mechanism to eliminate mistakes and to reduce time researching or sifting through paper trails.

Secure and control your data and information

As mentioned above, providing data and reports to employees/managers is important.  However, just as important is limiting data to only those resources that need access to the information.

• Limit access to data based on role – Does your general cashier have access to the POS and PMS reports?  If so, this opens the door to knowing what “should have been dropped” by employees and can provide unnecessary temptation.  Review your system access and limit the reports to only those that should have access.
• Should employees have visibility to drops sheets – A common practice in many hotels is to have a “drop sheet” next to the vault where drop amounts are recorded and sometimes witnessed.  Is this sheet necessary and if so, is the information recorded truly required?  Having employees see what others are making in tips may unwittingly give knowledge to what employee are tipping out or what cash they may have on hand.

Reevaluate the process and think outside of the box

As you analyze your cash management process, it is important to ask questions and determine if processes can be changed.  Every hotel is unique but opportunities exist for improvement:

• Can you leverage your bank more to limit internal processes?  For example, if the bank picked up 5 days a week, could that minimize the need for a general cashier role?
• In terms of the general cashier, is there an opportunity to consolidate this role through technology, bank services, or dividing the work up among other employees?
• Can you eliminate the unpaid duebacks that you find on the books at the end of each month?
• Can you utilize a machine to count the cash instead of a manual process or a pick-up?
• What can be implemented to allow the property to recover and reduce all over/shorts?  Can you establish a process to send short violations to employees, HR, controller, and manager immediately to better manage violations?
• Are there methods that can be implemented to eliminate bank fees for inaccurate counts?

In summary, cash and dueback management is a daily task that all properties must manage.  To manage it well and save time, to improve revenues, and to ensure accuracy, it is vital to take a step back to analyze your process and identify opportunities for improvement.  Successfully refining this back-office management can enhance operational efficiencies, limit risks, and even boost the bottom line. 

Written by Mike Baldinger – Evention LLC

With the recession hopefully now in the rearview mirror as we enter 2011, its effects are still shaping the hospitality industry. A surprising result is that consumer behavior has changed and the use of cash has actually increased as consumers have shunned credit cards in attempt to avoid the recent debt mistakes according to a recent survey from the National Foundation for Credit Counseling. Hotels and restaurants are of course not strangers to cash – in fact they are keenly aware of the challenges involved in tracking cash and are dealing with this management with reduced accounting staffs.  Food and beverage sales, business centers, spas, garages, and the front desk deal with large volumes of cash spread among countless employees of different roles.  How is this cash managed efficiently and accurately with limited resources that are now commonplace across the industry?

Challenge 1 – Tracking and reporting cash tips

To analyze this subject, it is helpful to look at the flow of cash in a property.  In most cases, the cash starts at the point of sale with a common example being a restaurant server receiving a cash payment for a meal and a corresponding tip.  Servers obviously receive both cash and credit card tips, but cash is strongly desired as it can be reported minimally by the employee to evade the full tax penalty.  At this point the first challenge has been identified – cash by its nature (especially a cash tip) is extremely difficult to track and although tracking is required by the IRS, by the property, by and the employee.  In most cases, the minimums are reported.

Challenge 2 – Tracking starts with a manual process

Once cash is in hand, a server must reconcile the cash with the hotel at the end of their shift.  After tipping out other employees, a server may find himself in a position where either money must be returned to the hotel (a drop) or the hotel may owe that employee money (a dueback).  The server then needs to drop this excess cash in a vault and note the amount being returned to be reconciled later.  In the case of a dueback, this amount is often noted at an “IOU” to the hotel to be paid out later.  The typical process requires hand-written notations in both cases (drops or duebacks).  This presents the second challenge as the process of tracking cash typically starts off on paper.  This is an arcane process and one of the few processes in a hotel that is completely paper driven.  Such manually driven processes simply are unacceptable in 2011.

Challenge 3 – Auditing cash records

Once the hand-written records are recorded, the manual process continues with the challenge of cumbersome audits and verifications.  Accounting can spend hours each day and even more at month end to reconcile the employee drops and due backs against the amounts recorded in the POS and PMS.  Each employee and department must be carefully audited so that the massive amounts can be tracked to the corresponding general ledger postings.  Finally, tracking overs and shorts must be carefully managed as well over multiple days.  Accounting, human resources, and employee managers must all work together to manage this carefully (often using cash violation forms) as variances of cash simply cannot be tolerated.  Tracking is a challenge and in many union environments, the hotel only has 72 hours to recover manage an over/short.

Challenge 4 – Duebacks

In some properties, duebacks (money owed to the employees) can be paid out through payroll checks at the end or the pay period. However, many hotels do not have this luxury as the employees expect to receive the cash at the end of their shift from a manager or the next day from a general cashier.  Again, a challenge of tracking presents itself as managers buy duebacks and the money is eventually cleared by a general cashier role.  Furthermore, duebacks must be tracked with extreme precision to ensure duebacks are cleared only once and to be able to replenish the vault via check requests accurately.  The simple task of knowing what duebacks are still outstanding or have already been paid out becomes difficult and many duebacks fall through the cracks costing the employees or the hotel money.  Money lost to inefficient tracking is an unfortunate consequence of the manual cash management process.

In summary, cash is an integral cog in the daily operation of a hotel and massive amounts can change hands constantly.  With something as sensitive as cash, it is shocking to see such manual methods being utilized. Countless back-office hours are spent managing banks, over/shorts, variances,  duebacks, cash violations, cash clearance, and G/L postings.  Enormous opportunities exist to improve these processes saving accounting staffs hours each day in time and frustration.  With a trend towards increased business in 2011 and increased cash use, the problem is only going to become more challenging and pose a greater risk for the hospitality industry.

Evention is proud to offer a complete cash management solution catered to the hospitality industry which automates the delicate process of cash management with automation.  To learn more, please visit us at http://eventionllc.com/SecureDrop

Information provided by Evention LLC:

Evention streamlines complex payroll and cash management by automating the entire process from the calculation of gratuities to the management of employee drops, duebacks, and banks. We pride ourselves on offering game-changing solutions to streamline back office processes (gratuity distributions, cash management, and banquet forecasting/scheduling) that eat up countless hours of productivity in hotels. 

The media has been abuzz over the last year with lawsuits alleging violations in tip distribution to restaurant and hotel employees.  Famous chefs including Mario Batali, Joe Bastianich, and “Iron Chef” Masaharu Morimoto have all been affected.   It appears that legislators have taken notice by slapping a law on the hospitality industry effective January 1, 2011.   The sweeping changes are complex enough that the state has given hotels and restaurants until the end of February (an implementation period) to comply but all changes must be retroactive to the beginning of the year.

A key issue at stake is the distribution of tips and service charges.  If a customer dines at a restaurant and tips the server, the money tipped may flow through a complex path of distributions to employees involved in the food service (bartenders, servers, barbacks, hostess, bussers, food runners, and captains).  Additionally, “service charges” may be applied (often to events or large parties) and portions of these charges historically may or may not be paid out to the employees.

Prior to the passing of the new law, employees had a lot of say in how the tip was distributed.  A server may decide to tip out a portion to support staff and the restaurant had limited control.  Properties also didn’t always fully disclose that a portion the service charge or and administrative charge may be retained by the house. Going forward in 2011, the restaurant can dictate both the system and the percentage allocated to each employee type or job.  Additionally as part of the new policy, any “administrative charges” must be distributed to employees unless there is full disclosure to the client that states otherwise.

As part of the tip/gratuity distributions methods that can now be instituted, tip pools can be mandated by the restaurant or hotel.  Employees may react to such policies differently.  For example, a high-end server that feels the rest of the team is not pulling their weight may balk at this as being unfair, but the new law does gives the restaurant the authority to enforce such policies even if the servers oppose.  Some in the industry see the tip pooling practice as a means to ensure fairness, inspire teamwork, and create self-policing between employees.  Tip pooling practices vary widely and gratuities can be distributed by points, hours worked, percentage of sales, and a variety of other methods.  The complexities of the pools can baffling for an outsider and the pools can also be very difficult for the manager to accurately manager and document.

Putting the complexities aside, the new law does empower the employer is many aspects.  Alternatively, the new requirements also create a number of challenges for the hotels and restaurants:

• Charges for the administration of a banquet or event must “be clearly identified as such and customers shall be notified that the charge is not a gratuity or tip”.  This must be clearly stated to the customer in writing in 12-point font!  Additionally, “combination charges” where part of the administrative fee is kept by the house and the rest is distributed to the employees “must be broken down into specific percentages or portions, in writing to the customer”.  In summary, if an administrative charge is applied, it must be distributed to the employees unless it is explicitly disclosed to the customer that the charge will not be distributed as gratuity.
• Charges defined as “gratuities” to the customer must be distributed in full to the employees that performed the service.
• Additionally, the Labor Department requires that employers must keep detailed records of the gratuity charges and maintain those records for at least six years.  “Such records must be regularly made available for participants in the tip sharing or tip pooling systems to review”.
• Employers have an implementation period that expires March 1, 2011.  Any payments owed under the Wage Order must be retroactively paid form the beginning of the year.

With the recent news reports citing the disputes regarding tip distribution in the industry including the many current law suits, the new law is a going to be both opposed and applauded depending on the audience.  The fact is that the law has now arrived and failure to comply can lead to new lawsuits so it likely that everyone will be rushing to comply.

Information provided by Evention LLC:

Evention (http://www.eventionllc.com) streamlines complex payroll and cash management by automating the entire process from the calculation of gratuities to the management of employee drops, duebacks, and banks. We pride ourselves on offering game-changing solutions to streamline back office processes (gratuity distributions, cash management, and banquet forecasting/scheduling) that eat up countless hours of productivity in hotels.

Note that the Hospitality Wage Order can be accessed currently via http://www.labor.ny.gov/sites/legal/laws/pdf_word_docs/hospitality-wage-order/hospitality-wage-order.pdf

Written by Mike Baldinger, Evention LLC

http://www.eventionllc.com

Economic conditions are improving, rev pars are increasing and forecasts are up.  Projections from PricewaterhouseCoopers  point to an earlier than expected recovery for 2011.  Are you starting to wonder how operations will keep up with the skeleton crew now in place?  

As business improves many hotels find themselves in a precarious situation where there is a reluctance to hire new staff to meet potential new demand.  At the same time, the existing staff is already overworked as they multitask and try to keep pace.  To further complicate matters, as the industry picks up, many “key employees” may start to look towards greener pastures leaving behind not only a void in labor but also greatly reducing intellectual capital.  This trend sets up the scenario in the industry where many will struggle to keep pace as the combination of increased business and employee turnover runs its course.

The good news is that there are options to prepare for the turn-around without increasing your staff.  Technology and improved business processes enable a property to increase efficiency and productivity by leveraging solutions that reduce manual labor and/or increase profitability.
To evaluate the potential opportunities, it is critical to analyze the existing practices to look for processes that are repetitive, wasteful, or likely to increase as business volumes rise. 

Questions that may help with this analysis include:

• Are employees printing reports out of one system only to enter that data into another system or report?  Is this manual process wasting time, creating errors/inaccuracies, or raising the possibility of an audit red flag?
• Is communication between departments (or properties at a greater level) inefficient and could it be improved by centralizing data?
• Are the systems that you are using inefficient and at risk of not being able to keep up with increased demand?  
• Do you have custom developed solutions that were developed by someone that is no longer at the property?  Is there a plan in place to maintain these and will they continue to work with the increased load of data?
• Are the gaps with these systems supplemented by manual labor that will only increase with more volume? 
• Are the systems you already have in place being leveraged to their full extent and are you maximizing their value?  
• Is there information “hidden” in your various systems that could guide decisions to improve your operations?

After analyzing your risks, inefficiencies, and opportunities for improvement, you can use this knowledge to determine some of the best methods for leveraging technology to your benefit.

Cloud and the rise of Software as a Service
With the beginnings of positive forecasts and increasing RevPars, we know that business is returning but ownership is still trying to cut costs, limit budgets, and minimize new spending.  With these opposing forces in play, the emergence of cloud technologies may help to satisfy both sides.  Even since the pre-recession days, the cloud and software as a service (SaaS) have rapidly advanced in hospitality.  Leaders such as Nice Price, CIO/CTO at Mandarin Oriental are embracing the cloud. In an interview with the Hospitality Upgrade, Mr. Price labeled international hospitality as the “poster child for cloud computing.”  Low upfront costs, minimal additional IT infrastructure, and easy access across multiple properties are major benefits.  The SaaS model allows hotels to implement new technologies while avoiding large capital expenses.  If voids have been found in the analysis of your properties processes, cloud based solutions may offer a low cost solution that can grow and evolve with your business.

Integration
As cloud technologies have emerged, integration capabilities have also improved as systems are now more readily created to “talk” to one another.  This is critical in hotels as multitudes of different technologies are utilized for everything from POS, Event Management, Gratuity/Tip Management, Time & Attendance, PMS, Guest Tracking, Payroll, etc.  The systems all serve their individual functions very well but traditionally it has been difficult to have data flow between systems and manual processes have evolved for reports or even to post from one system to the next.  This is no longer acceptable and vendors are changing their technologies to allow for integration to save time and increase accuracy.  Leveraging these integration capabilities can dramatically increase productivity for your back-office staff.

Maximize value
Before purchasing any new technology it pays tremendous dividends to ensure you are maximizing the value of the systems you already own or utilize. “Shelfware” is software that was purchased with the best of intentions but never fully implemented.  Unfortunately this is a very common occurrence within hotels.  Additionally, with software now being offered as Software as a Service, properties may not be fully aware of new capabilities (often added on in continuous version upgrades) that they can now utilize to their benefit.  Talk to your vendors to analyze the systems you have in place and put together a plan to fully maximize these technologies to take complete advantage of their value.

Metrics and Analytics
In many cases, technology is often narrowly viewed as a tool to perform a specific task.  Charges are posted to POS, events are booked in the event management system, guests are checked into the PMS, etc.  What is often ignored is the data that is at the properties fingertips and the metrics that can be provided can hold tremendous value.  Reports are often available or can be created to give properties valuable insight to aid in directing operational improvements.  Better catering to VIP guests, accurately forecasting labor requirements, and finding dollars that are slipping through the cracks are examples of potential improvements that can be exposed through improved analytics.

Communication
Communication remains a major challenge in hospitality even as technology has improved.  In many cases departments are managed in silos.  When communication does occur it is often in one direction versus being cooperative.  Emails, spreadsheets, reports, and voicemails are sent from one person to the next creating a process that allows for limited feedback, problem solving, or cross-departmental improvements.  However, many systems now allow multiple users to interact with the same applications collaboratively.  Imagine a process where a guest checks out and disputes a charge in a restaurant.  Instead of the process ending there and the hotel taking that loss, payroll is immediately updated to enabled the recovery of the service charge paid for an invalid charge.   With systems that can talk, processes that were not possible in the past can easily be implemented with limited staff to improve the bottom line

In conclusion, the cyclical hospitality industry appears to be on its way out of a trough with a projected increase in business volume around the corner.  Numerous opportunities exist to leverage technology to meet this increased demand.  Labor is the biggest cost in the hospitality industry and it is critical to increase it carefully while leaning on software and hardware advancements to increase efficiencies, improve profitability, and enable better business decisions.

Written by Mike Baldinger, Evention LLC

http://www.eventionllc.com

First, to define gratuity distributions, there are typically two ways to manage money earned as a tip or gratuity.  In many cases, employees simply keep the tips they earn less tips outs (a portion of a tip transferred to another employee) to support staff.  However, to build an incentive for team work and to enable fairness in spreading the largest tips or service charges, many properties utilize tip pooling.  In both methods, tracking the gratuity and tips from the POS or Event Management System through to payroll can be extremely laborious.  Tip pooling adds a complexity of applying business rules to dictate the methods for the distributions.  Tip pools can be based on shares, point, or hours worked and pools can range in scope from bi-weekly and weekly pools down to daily, meal period, or event based pools.

Gratuity practices vary widely across North America, but in general the methods applied are dictated by region, labor agreements, and competition.  In larger cities, collective bargaining agreements between the local union and the hotels provide specific guidelines, but even these agreements are open to interpretation.  Properties within the same brand just blocks apart from one another can find themselves with different gratuity methods simply based on past practices and understanding of labor contracts.  Because many of these employees’ salaries are heavily weighted on gratuity versus wages, the method utilized for distributions of gratuities dramatically affects an individual’s compensation.

The amount of money being handled through such a manual process can be astounding. With banquet gratuities in particular, service charge rates continue to rise (some properties charge upwards of a 24% service charge) and employees want to make sure they receive their fair share.   A surprising fact for many outside the industry is that only a portion of the service charge is distributed to the employees while the house retains a cut.  All parties involved closely monitor the overall split between the house and employees and then the detailed distributions within the employee pool.

 In most cases, accounting, human resources, payroll, food and beverage managers, and service employees find themselves dealing with a common set of issues related to gratuity payroll:

• “Key Employee” leaves property or goes on vacation – In many cases, the management of complex tip pools is delegated to one or two “key” individuals at a property.  Because of the common nature of managing the distributions in spreadsheets, rules are often not documented, and the knowledge is left in the hands of these “experts” that can ensure the process is handled with accuracy.  When this person leaves temporarily or permanently, a void exists and a risk of inaccurate payroll dramatically increases.  
• Spreadsheets have errors with formulas or data entry – As spreadsheets are often utilized as the tool, it must be realized that they are often fraught with errors.  Studies conducted by universities, KPMG, PricewaterhouseCoopers, and others highlight the error rates of corporate spreadsheet.  According to an article from Ray Panko, at the University of Hawaii, spreadsheets are often not tested and are in many cases misused.  In fact, studies have found that 91% of financial spreadsheets contain errors -http://www.decisionsciences.org/decisionline/Vol37/37_5/dsi-dl37_5class.pdf.  Even with relatively simple business rules where tips are not pooled, the opportunity for error is high which is not acceptable under the context of payroll.  
• At the of a pay period, discrepancies exist between accounting and the outlets – In many cases, the personnel managing the payroll run into the situation at the end of the week where the total amounts to be processed do not match with accounting.  Often, this is a result of utilizing data form different systems or that was gathered at different times.  No matter where the causes originated, managers often find themselves dealing with the frustration of “balancing” between different sources which can involve frustration and a great deal of time.
• Reports and business intelligence are non-existent – Because tip pools can be complex, it is often difficult to prove to the employees that the distributions occurred accurately and fairly.  Did the managers get more than their share?  Did payroll account for all special rules?  Did an employee working substituting in a different role get the appropriate distribution?  Because of the complexity and the inability to prove accuracy easily, distrust in payroll often evolves.  After checks have been received by the employees, managers often find themselves answering question and question to explain the gratuity breakdown.  In most cases, reports are not available to provide visibility so a very inefficient practice of “proving payroll” becomes a weekly routine.
• Security issues exist within spreadsheets – Because the employees managing the gratuity and tip process are typically in accounting or food and beverage, they are mainly concentrated on accuracy and completing the payroll efficiently.  With time constraints and other pressures, security often becomes an afterthought.  With payroll data often stored in network locations with limited security, the risk of fraud, inappropriate access, or foul play exists.  Furthermore, with limited audit trails, the source of security issues can also be difficult to track.
• Money is lost or unfairly distributed for payroll adjustments – Due to a number of reasons, it is often required to adjust past payroll after employees have already received their checks.  This may be a result of a mistake by payroll, an employee forgetting to clock/sign-in, or due to refund having to be issued to a client.  No matter the cause, many properties find it difficult to reclaim overpayments and the money will often be paid out to the employees at expense of the house – costing thousands of dollars annually.  In other cases, the “adjustment” will be added to the next pool of gratuities which is not fair to the employees as the employees and shares for one pool could be very different from the week requiring the adjustment.

Although many issues exist with the typical gratuity and tip process, the good news is that many opportunities are available to simplify and improve the procedures.  Improving the process can build trust with employees, save countless hours of time and frustration, enable managers to be out on the floors with customers, and can limit exposure to lawsuits or grievances from the employees.  In addition, costly mistakes can be avoided.

• Tip # 1 – Apply a cross departmental approach – A common practice in hospitality is to manage processes in silos.  Each department (accounting, payroll, banquets, human resources, and outlets) may be managing a part of a process and even using similar sets of data but communication and sharing of reports and best practices is often limited.  It is extremely valuable to take a step back and look at the gratuity distribution process as a whole from start to finish.  Are reports being generated that could simply be shared or consolidated between departments?  Can steps be eliminated by using methods established by other managers?  Would adding a step early on in the process reduce time later in the progression?  Taking the time to analyze the entire process across departments can yield huge dividends for all involved.
• Tip # 2 – Empower the managers – Hours are spent each week by payroll and managers answering employee questions about payroll.  Developing a set of reports to include with paychecks can dramatically reduce this requirement allowing the managers to focus on their core job while utilizing the reports to “prove” the tip pool was distributed accurately.
• Tip # 3 – Document – Documentation of the gratuity practices is typically neglected.  This opens the door to misinterpretation, misunderstanding, and also increases the risk of knowledge loss due to a “key employee” leaving.  Rules for gratuity distributions and adjustments to past payroll should be described in detail with examples and effective dates so that they can be shared with employees to build confidence and validate the process.   Although it may be a less than desirable task to accomplish, the dividends of clearly documenting the rules and process improve trust and consistency while reducing discrepancies, disagreements, and potentially lawsuits.
• Tip # 4 – Build a consistent process – With a documented process in place, consistency can also increase.  Defining a consistent and common source of data for all involved is important as is defining when to acquire or update that same data.  Is accounting receiving totals from the G/L at the end of the week while banquets is pulling a different set of data from Delphi?  The consistency applies to all parts of tip management from ensuring the audit is performed correctly prior to payroll to defining how to track and manage adjustments.  In all cases, the process should be structured to eliminate time bottlenecks and to prevent money such as recover of adjustments from slipping through the cracks.
• Tip # 5 – Build trust in the process with the employees – With managers that have tools at their disposal to show a consistent and repeatable process, employee trust grows.  Not only does this eliminate having to spend time to explain the payroll process to skeptical employees but it also improves employee morale as they can focus on their job and feel confident that they are being paid appropriately.  Having documentation as described in step 3 and further foster a feeling of trust with the employees.
• Tip # 6 – Secure and control your data – Security is too often neglected until a major issue occurs.  Make sure that that documents are controlled and that only employees with appropriate permissions have access.  Additionally, a process should exist to capture the final amounts submitted for payroll in a separate source.  This prevents the possibility of inaccuracy or fraud by knowing that data submitted has been tracked via a consistent and auditable process.

In summary, gratuity calculations and distributions are challenging to manage consistently and correctly each pay period with the multiple variables associated including manager turnover, data entry mistakes, spreadsheet errors, adjustments, time constraint pressures, lack of training, and a host of other items.  The process however can be managed with increased accuracy and confidence if management takes the time to evaluate the existing methodology, identify the gaps, and update the procedures to minimize the risks involved.

Written by Mike Baldinger, Evention LLC

http://www.eventionllc.com

• The narrowly passed McPier law which may have stopped the downward spiral of shows leaving Chicago,
• “Taxes” being collected as profits by online travel companies rather than going to the appropriate municipalities
• The possible reoccurrence of the “Right to know” law requiring hotels to virtually picket against themselves.

McPier Law – a rescue for the Chicago hospitality market?

McCormick Place and Navy Pier have made local and national news recently as large conventions have abandoned Chicago for cities including Orlando and Las Vegas as the costs of windy city shows grew out of control.  Chicago was once the only location in the US that could host the largest events and as competition grew in other cities, Chicago seems to have lost sight of customer service as it became engrained in a cycle of raising rates and increasing fees.  Famous examples of the atrocities charged to customers included four cases of Pepsi costing $345 dollars at a booth and being charged for an electrician to just plug in a simple power cord.  As these practices increased, customers began to look elsewhere and Orlando and Las Vegas were more than happy to take them in.  

Chicago lost two of its biggest shows with five more major conventions threatening to leave.  The McPier law was proposed to dramatically reduce these exorbitant costs and lobbying efforts by the union did their best to block the bill.  In fact many believe a $75,000 campaign donation from the teamsters caused Governor Quinn to veto the McPier law even after he was told by these five shows that they would stay in Chicago if he signed the bill.  Luckily for the city, the house and senate overturned the veto and the McPier law was passed, hopefully stopping a snowballing trend of conventions from leaving Chicago.  With the new law in place, customers can assemble parts of their booths with small power tools, drop off supplies with their cars, and even plug in their own power cords!  The effect has been dramatic with shows returning to or staying in Chicago.  Even new prospects for the city may now be in play.  Could locally based McDonald’s exhibit at McCormick?  Time will only tell if the law will turn things around.  Just one of the larger shows can deliver roughly $200 million in direct expenditures so the effect of this law is dramatic for the city.     

 As of late October, recent Phase 2 reforms at McCormick Place were announced to further bolster Chicago as a competitor in the market.  Some of the more interesting changes include:

• Free Wi-Fi in the convention center including the exhibit halls
• Parking rates will be reduced in lot B to $14 (from $19)
• Refinancing of MPEA debt opens the door to future expansion of the Hyatt Regency McCormick Place
• Electrical service providers can now compete for business in the convention center
• Exhibitors can bring food into McCormick Place for their employees

Are Online Travel Companies playing fair or profiting from “taxes”?

Another surprising hospitality secret has been brewing under the noses of each and every consumer that has booked a hotel room through an online travel company (OTC) over the last few years.  OTCs include Orbitz, Expedia, Travelocity, and many more.  Anyone that has booked with an OTC has surely noticed that “taxes and fees” are tacked on to the purchase.  What most consumers don’t know is that the OTC allegedly keeps a cut of the taxes according the recent lawsuits. 

To further explain the issue, we will present a simple example.  Let’s say that an OTC buys a room at a hotel for $60 a night but charges the room out to a customer at $100 per night.   The customer with the quoted $100 finds himself/herself ultimately paying $115 after “taxes and fees”.  The lawsuits allege that the OTC charges the tax based on the $100 but only pays the tax back to the municipality based on the $60 price.  Essentially they purportedly pocket the difference – profiting from the “tax”!  

With the current economy struggling, municipalities are looking to reclaim this lost tax revenue.  The fear in the hospitality industry is that the OTCs may be successful in lobbying for the Internet Travel Tax Fairness Act (ITTFA), exempting them from paying past and future instances of this tax/fee.  If this happens, the municipalities who desperately need the cash may target the next group involved – the hotels.

Consumer protection versus hotels advertising their own strikes

 The proposed “Right to Know” law basically states that if a hotel is on strike for 15 days or more, the property must notify every potential customer.  These notifications must be made not only by the hotel reservations agent, but also must be administered on websites, travel literature, and through 3^rd party booking agents (travel agents, online travel partner websites, etc.). If passed, this law’s measures would transfer great power to the hotel unions as it basically would force a hotel to broadcast a strike (effectively picketing on behalf of the union).  For obvious reasons, the hotels want to kill this law as it would greatly tip the balance of power towards unions that are willing to strike.  The other side of this argument is that the consumer does has the “right to know” if the hotel they’ll be staying at is on strike as it may result in poor service.  With union agreements at a standstill in Chicago for more than a year now, any change in the balance of power could dramatically affect the future of the industry.

Chicago draws over 30 million visitors to the city each year, generating $8.7 billion dollars in revenue.  All sides of the above arguments must be heard but we hope decisions are made to revitalize the industry that is a vital cog in the health of the overall economy.

Written by Mike Baldinger, Evention LLC

The confusion is wides spread with lawsuits in restaurants, hotels, and even the US. Open Tennis Tournament.  Some recent articles describe some of the complexities involved and the battles brewing between the employees and employers:

• Complex tip pools with a “point system” and flat rates cause more headaches in NYC – http://tinyurl.com/2fqfzev
• Tip distribution lawsuits spread to the U.S. Open Tennis Tournament – http://tinyurl.com/yfxl3z3
• The AHLA reports that tip pooling lawsuits are increasing and the department of labor in increasing enforcement - http://www.ebglaw.com/showarticle.aspx?Show=12628 
• The WSJ reports additional law suits in NYC are being filed against high-end restaurants – http://tinyurl.com/2fclyfk