The Money Drawer- A Section One Story: Cash Management

I have been around the hotel business long enough to know this much. Every time I hear someone say, “I’d trust him with my life,” I get a little nervous. That kind of trust is beautiful in a foxhole. In a hotel cash drawer, it is expensive.

This is a story about a small property in a town I will keep to myself, and an owner I will call Marlene. She is a real person, just not by that name, and the hotel is real too, or it was. It got sold three years ago at a price that made everyone wince.

Marlene bought the place in 2014. Eighty-four rooms, a tired but loyal corporate base, a breakfast room that smelled like waffles all day, and a flag on the sign that I will not name either. She had run a dental practice for twenty years, sold it for good money, and decided she wanted to do something different with the second half of her life. Hospitality. The romance of the front desk. You know the type. I love her type. I really do.

When she bought the property, the GM came with the building. Wendell had been there since they broke ground. He wore a name tag with his title spelled out in full, “General Manager, Stagecoach Inn,” and he meant it. Wendell ran a tight house. Or what looked like one. Front desk neat, lobby smelled like cinnamon, breakfast hot, parking lot patched, and the books, well, the books always closed on the second business day of the month. Marlene loved Wendell. Wendell loved Marlene. That was the problem.

Here is the thing about hotels. The cash side is small. People hear “hotel” and they picture those big credit card numbers at the front desk. And it is true, most of what comes in is electronic. But the cash that does come through, the walk-in who pays in twenties, the deposit on the banquet, the petty cash drawer, the change banks at the desk, in a small property all of that can run between two and four thousand dollars on any given day. Multiply that by 365. It adds up. It always adds up. And in a small hotel, one or two people end up touching all of it.

At the Stagecoach Inn, that one or two people was Wendell. And later, his son.

Donny showed up in the spring of 2019. Wendell explained to Marlene that his boy had a hard time getting his life going, was great with people, and would make a perfect night auditor. Marlene didn’t think twice. Donny got the keys, the PMS login, the safe combination, and the petty cash drawer. He shadowed his dad for three nights and was on his own by the end of the first week. Nobody at that property had run a real shift handover in years. The two front desk associates on the day side counted their banks alone, in the back office, at start of shift. The shift-to-shift count that the policy manual calls for, the one where the outgoing and incoming associate count together at the same time? Not happening. Wasn’t even a memory.

The petty cash drawer, well, that was a beautiful thing if you wanted it to be. Two hundred dollars, unlocked most of the time, a pad of vouchers in the top drawer. Wendell signed his own vouchers. The reasons on the line read like a grocery list. “Supplies, $42.” “Guest comp, $35.” “Office, $28.” No receipts attached more than half the time. Replenishment happened when the drawer ran dry, by a check that Wendell wrote himself and Wendell signed himself, and the check went to “Cash.” Marlene had told him once, in passing, that maybe the check should be in his name. He nodded and told her he’d take care of it. He never did.

Daily deposits. Some days they happened. Some days they didn’t. The deposit slip was prepared by Wendell, the cash was carried by Wendell or by Donny, and the receipt got stapled to a folder in the back room that nobody read. Sometimes the deposit was a couple of hundred dollars short of what the night audit cash report said it should be. Wendell would explain that one of the night auditors had used the cash to make change for the breakfast room, or that a guest had wanted a refund. Always a story. Always a reason. Marlene took the explanation home with her and never wrote it down anywhere.

The safe combination had not been changed in seven years. The original supervisor who opened the property still knew it. So did her ex-husband. So did the maintenance guy who retired in 2017 and now lives in Florida. The authorized access list was a piece of paper from 2013 with a coffee stain on it and four names that no longer worked at the hotel.

This is what I mean when I say expensive trust.

Donny’s con was simple. Cute, even, in the way these things are when you study them after the fact. A guest would walk up to the desk in the evening, ask if there was a room available, and pay cash. Donny would check them in, hand them a key, and run the transaction through as a paid stay. The room showed paid in the PMS. Then, sometime after the guest checked out the next morning, Donny would go back into the system and adjust the room to “house use, no charge.” The cash went into his pocket. The room was occupied, the room was cleaned, the housekeeping report matched. The only thing that did not match was a number deep inside a report Marlene never opened.

He pulled this off, on average, twice a week. About $180 a hit. For eighteen months. You do the math. I did, and I had to do it twice because the first time I got it wrong on the small side. Roughly $28,000 from Donny alone, before he got bold and started running it three times a week. We will get to that.

Wendell, by the way, did not take a dollar of this. I want to be fair to the man. He just made it possible. He created the perfect environment for it. No separation of duties, no review, no surprise counts, no real reconciliation. Because he loved his son and would not have looked even if a flag had been waving. The pattern on the variance log would have shown it inside a month. There was no variance log.

The whole thing came apart on a Thursday morning in November of 2020. Marlene’s CPA, getting ready to extend the corporate return, asked her a question I would love to be in the room for someday. He said, “Marlene, why does your house-use room count look like a hotel three times your size?” That was the loose thread. She pulled it. The CPA pulled it harder. By the following Monday they had the GM on a call with a forensic accountant, and by the end of that week Donny was in handcuffs and Wendell was clearing out his desk in tears.

The number, when it landed, was not just Donny. It was layered. Petty cash leakage of about $9,000 over four years, almost all of it impossible to prove because there were no receipts and no real vouchers. Cash deposit shortages, pieced together from the bank statements, of another $14,000. The phantom room scheme came in north of $40,000 by the time the police were done with their work. And the hotel’s franchisor, when they got wind of it, opened a quality and compliance review that cost Marlene another $22,000 in consultants and audits, plus a year on a brand watchlist that nobody wants to be on. The lender adjusted her covenant terms. The insurance carrier paid some of it, but only after a fight, and her premiums tripled for the next renewal.

She sold the hotel two years later. The buyer, a smart operator I happen to know personally, bought it at a discount that reflected exactly the kind of carnage you can imagine. The first thing he did was hand his new GM a thirty-page document that included a Petty Cash Voucher template, a Petty Cash Reconciliation Log, a Shift Reconciliation Report, a Cash Over and Short Incident Report, a Variance Log, an Authorized Access List, and the Internal Control Review program he ran top to bottom in his first ninety days. He changed the safe combination on day one, and again forty-five days later when an old supervisor finally turned in her keys. By the end of his first quarter, the Internal Control Review self-audit had flagged seventeen things that needed to be tightened. None of them were as bad as what had happened before. But every single one of them, if left alone for long enough, was on the road to it.

Here is what I want you to take from this story.

None of the controls in Section One of this manual is about distrust. They are about humility. The humility to admit that any one of us, given the wrong week and the wrong pressure and the wrong drawer, can become the story we would never tell at the dinner table. A petty cash voucher signed by two people instead of one is not an insult to your front desk supervisor. A shift bank counted by two associates at the start of every shift is not a personal accusation. A safe combination changed when an employee leaves is not a failure to honor their service. These are the small, boring routines that protect everyone in the building, especially the good people. And there are far more good people in our business than bad ones. The boring routines are what let the good ones stay good.

Marlene did not fail because she trusted Wendell. She failed because she replaced controls with trust. Those are not the same thing, and the difference, in her case, was about $87,000 and a hotel.

If you are an owner, a GM, a controller, or a brand new desk supervisor reading this, take Section One off the shelf this week. Read it. Sign the acknowledgment. Pull the variance log and look at it for ten minutes. Run last month’s petty cash vouchers and ask yourself how many of them have a real receipt stapled behind them. Count somebody else’s bank with them at the start of a shift, just to see how it feels. And if you have not run the Internal Control Review on Section One in the last twelve months, run it. Take the eight policies, walk the property, and answer the questions honestly.

You will find out something interesting. It does not feel like distrust at all.

It feels like a hug with a clipboard.

About This Book and the Manual Behind It

Hotel Franchisees’ Guide to Everyday Internal Controls is a companion to the Hotel Financial Coach Finance & Accounting Policies Manual — twenty sections, one hundred and forty-four numbered policies, and roughly fifty supporting forms, all built on USALI, U.S. GAAP, and the COSO internal control framework.

The manual is the working document. The book is the way you actually understand it — one chapter per section, one true story per chapter, each one walking through what goes wrong at a real property when the controls in that section are missing. Cash. Accounts receivable. Payroll. Night audit. PCI. Brand compliance. All twenty.

The operating arm of the manual is the Internal Control Review — a twelve-month rotating self-audit that puts every section on a calendar and keeps it there. The First Hundred Days Implementation Checklist gets your property from day one to the start of your first ICR rotation, in five phases, with a signed artifact at every milestone.

The central idea is simple: most of what goes wrong at a hotel goes wrong because nobody was looking at a calendar. The manual is the calendar made permanent. The ICR is the calendar made annual. The book is the calendar made memorable.

If any of this sounds like your property, send me an email. I’m happy to point you in the right direction.

David Lund
The Hotel Financial Coach

At Hotel Financial Coach I help hotel leaders and teams with financial leadership coaching, webinars and workshops. Learning and applying the necessary financial leadership skills is the fast track to greater career success and increased personal prosperity. I significantly improve individual and team results with a proven return on investment.

Call or write today and arrange for a complimentary discussion on how you can create a financially engaged leadership team in your hotel.

Contact David at (415) 696-9593.
Email: david@hotelfinancialcoach.com
www.hotelfinancialcoach.com