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Hotel Financial Security: Are Your Vendors Real?, by Peter Goldmann
Mr. Goldmann

Security & Safety

Hotel Financial Security: Are Your Vendors Real?

By Peter Goldmann, President, FraudAware Hospitality

Despite the constant barrage of news about corporate theft and fraud, there are still far too many situations in which hospitality companies unknowingly pay criminally-minded individuals or phony companies posing as legitimate vendors.

How is it possible that "legitimate" companies have a private mailbox at the local UPS Store, a private residence, or even a prison address? Or that invoices a month apart with consecutive numbers both get paid? Or "invoices from a "vendor" whose address happens to match that of a company employee get paid?

To avoid such frauds your company must have in place tight controls for the...

Vendor Master Set-Up

The Vendor Master set-up process requires appropriate-and continuously enforced-segregation of duties.

Details: The individual or department authorizing a vendor should be in a department other than that of the team processing invoices and generating disbursements.

When establishing segregation of duties for the Vendor Master set-up, Christine Doxey, Vice President of Account Management at Apex analytix, a leading recovery audit consulting firm urges companies to include employees who are responsible for the business process and those who are provided with systems access.

Caution: Even where it may appear that segregation of duties exists, ensure that system access is controlled to allow use only by individuals authorized to process specific transactions.

In addition to the red flags of fraud mentioned above, says Doxey, any of the following details appearing in your payables process could indicate that your Vendor Master set-up process is vulnerable to financial abuse...

Additional controls to consider for the Vendor Master set-up process include:

Essential final step: Require vendors to complete a vendor profile form that provides information that further increases your ability to verify their legitimacy.

With a vendor profile, the vendor is required to provide certain documents that include sales tax certificate, city business license, names of key officers (to screen for conflict of interest), physical business address, daytime phone number, and other confirmable data. Example of a vendor profile form...

Continuous Monitoring

The process of continuously monitoring vendor transactions includes a review of the controls as noted above for the Vendor Master set-up process. The review should include selecting a sample of vendors as well as reviewing the supporting documentation for the validation of new vendors or changes of address.

All system-generated audit reports must be reviewed - not only for segregation of duties, but to determine if a vendor address has been fraudulently altered and then immediately changed back to the original address.

Important: Review invoice attributes throughout the process to determine if specific vendors may be perpetrating fraudulent activities. Common suspicious attributes...

Critical added control: Vendor Master clean-up. As part of its continuous monitoring process, the company should periodically review all duplicate vendors and initiate a vendor master clean-up procedure.

The clean-up process will alleviate duplicate vendors that have been set-up for the same vendor at the same address.

Example: There could be a slight difference in spelling or the use of abbreviation.

Key: It is much easier to control a smaller vendor master than a large one.

The Power of Real-Time Continuous Monitoring

Continuous monitoring on a real time basis quickly identifies potentially fraudulent vendors and determines whether your Vendor Master set-up controls are working properly. If there is a concern about a specific vendor, raise the issue with your internal controls or internal audit department after performing an evaluation of internal controls within the procure-to-pay process. If a control weakness is identified, immediately adjust the control and increase the sample size of the test. To choose the right continuous monitoring software vendor:

Peter Goldmann is the Developer of FraudAware/Hospitality, the first on-line fraud awareness training course for hospitality managers, supervisors and line employees. He is is the publisher of the monthly newsletters, White-Collar Crime Fighter and Cyber-Crime Fighter. His company, White-Collar Crime 101 LLC also is the developer of FraudAware/Hospitality, a customizable Web-based fraud awareness training course for managers, supervisors and line employees. He is a member of the Association of Certified Fraud Examiners, and The International Association of Financial Crimes Investigators. Mr. Goldmann can be contacted at 203-431-7657 or pgoldmann@wccfighter.com Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

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OCTOBER: Revenue Management: Measuring All Hotel Revenue Streams

Natasa Christodoulidou

Revenue Management, also known as yield management, may be defined as the process of analyzing, anticipating, and impacting consumer behavior to maximize the profits from a fixed perishable resource, primarily hotel guest rooms and airline passenger seats (Christodoulidou, Berezina, Cobanoglu, 2012). Revenue management, including overbooking and dynamic pricing, has been an enormously important innovation in the service industry (Netessine & Shumsky, 2002). For example, a number of airlines overbook their reservations for a particular flight by 14% since on average they expect a 10% to 20% no shows on flights. The Marriott hotel chain credits its revenue management system for generating additional revenue of about $100 million per fiscal year. READ MORE

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Coming Up In The November Online Hotel Business Review

Feature Focus
Architecture & Design: Original, Authentic and Localized
Corporate hotel developers once believed that their customers appreciated a homogenous design experience; that regardless of their physical location, they would be reassured and comforted by a similar look, feel and design in all their brand properties. Inevitably this led to a sense of impersonality, predictability and boredom in their guests who ultimately rejected this notion. Today's hotel customer is expecting an experience that is far more original and authentic - an experience that features a design aesthetic that is more location-oriented, inspired by local cultures, attractions, food and art. Architects and designers are investing more time to engage the local culture, and to integrate the unique qualities of each location into their hotel design. Expression of this design principle can take many shapes and forms. One trend is the adaptive reuse of existing facilities - from factories to office buildings - as a strategic way to preserve and affirm local culture. Many of these projects are not necessarily conversions of historic properties into grand, five-star landmark hotels, but rather a complete transformation of historic structures into mixed-use, residential, and hotel projects that take full advantage of their existing location. Another trend is the addition of local art into a hotel's design scheme. From small sculptures and photography to large-scale installations, integrating local art is an effective means to elevate and enhance a guest's perception and experience of the hotel. These are just a few of the current trends in the fields of hotel architecture and design that will be examined in the November issue of the Hotel Business Review.