December is the make-or-break month for hotels in Kenya.
Revenue spikes, but so does fraud.
In December:
- Occupancy is high, making room fraud easy
- Cash volumes increase
- Staff work longer shifts, increasing control fatigue
- Events are many, giving room for unrecorded income
- Food & beverage consumption doubles
- Management is busy, leaving room for internal collusion
- Temporary staff (high-risk) are hired
December exposes:
- True process weaknesses
- Peak leakage points
- Staff behaviour under pressure
- Real sustainability challenges
If your hotel faces issues such as F&B shrinkage, room rate manipulation, supplier fraud, poor reconciliations, or weak operational discipline, we can help you audit, restructure, and automate your processes so you can maximize profitability, especially during high-demand seasons.
Key Insights for Accountants, Auditors & Hotel Owners
Hotels are some of the highest-risk and most leak-prone businesses in Kenya, yet also among the most profitable when controls work. In hotels, money leaks in small, quiet streams: food and beverage shrinkage, manipulated room rates, inflated supplies, lost revenue from events, and staff-related fraud.
A hotel without strong internal controls becomes a charity for staff, suppliers, and inefficiencies.
This is especially true in December, when occupancy peaks, restaurants are full, events are booked, and fraud risk is at its highest.
This is our audit framework combining field-tested insights and structured audit methodology for the Kenyan hospitality sector.
- 1. Understand the Hotel Operations Workflow
Every hotel runs as a collection of mini-businesses. Before the audit, map out each department clearly.
Key operational areas:
- Front Office: reservations, check-in/out, room allocation
- Housekeeping: room status updates, linen, amenities
- Food & Beverage (F&B): restaurants, bars, room service
- Events & Conferencing: bookings, LPOs, invoicing
- Stores & Procurement: food, beverages, consumables, housekeeping items
- Finance & Cash Office: collections, M-Pesa, credit customers, deposits
Understanding who does what and who can override what determines the precision of the entire audit.
A clear operational map = an audit that hits the real risk areas.
- 2. Identify High-Risk Leakage Points in Hotels
Hotels lose money primarily through:
- Unrecorded room sales and manipulated rates
- Cash skimming at the front desk
- Inflated procurement invoices
- Staff consuming food and beverages without recording
- Unauthorized discounts and complimentary items
- Ghost guests during peak seasons
- Events billed but not fully receipted
- Split bills and manual price overrides
- Audit Room Revenue – The Heart of Hotel Profitability
Room revenue (Accommodation) is the biggest source of income and the easiest to manipulate.
Audit tests:
- Compare occupied rooms vs revenue posted
- Review discounts, complimentary nights & rate overrides
- Reconcile rooming lists vs PMS (Property Management System)
- Verify walk-in rates vs actual rates charged
- Check late check-outs, no-shows & cancellations
- Audit corporate contracts for rate compliance
Red flags:
- Same staff always handling discounted bookings
- Frequent “system errors” at night shift
- Overwritten room rates
- Occupied rooms marked vacant
During December, hotels are fully booked. This is when:
- Fake discounts peak
- Staff sell rooms off-the-record
- Ghost bookings appear
- Manual receipts increase
A December hotel without controls is a free-for-all.
- Audit F&B; the Biggest Source of Shrinkage
Food and beverage departments statistically leak 5–20% of revenue without controls.
Audit what matters:
- Food cost % vs industry benchmarks
- Bar stock count vs sales
- KOTs/BOTs (Kitchen/Bar Order Tickets) vs POS
- Spoilage records and approvals
- Buffet management controls
- Complimentary meals & staff meals
- Cash vs M-Pesa reconciliation per shift
High-risk items:
Alcohol, juices, meat, seafood, bottled water, energy drinks.
If F&B is leaking, the entire hotel is leaking.
- Audit Procurement & Supplier Relationships
Procurement fraud in hotels is sophisticated and often collusive.
What to verify:
- Procurement cycle: requisition → LPO → delivery → invoicing → payment
- Consistency between LPOs, delivery notes, invoices & store receipts
- Price variances vs market rates
- Fake invoices
- Goods paid for but not delivered
- Unauthorized suppliers
- Staff–supplier collusion
- Quality vs quantity delivered
Most hotels lose money not at the bar or restaurant, but at the store door.
- Inventory & Stores Audit
Hotels hold large amounts of stock: food, beverages, toiletries, linen, detergents, and chemicals.
Audit areas:
- Monthly & ad hoc stock takes
- Variance analysis vs POS & consumption reports
- Wastage and spoilage
- Stock adjustments and approvals
- Controls over housekeeping stores
- Beverage stock movement and reconciliation
High-risk stock categories:
- Wines & spirits
- Laundry detergents
- Toiletries & amenities
- Meat, chicken, fish
Pilferage thrives where stores are loosely managed.
- Cash, M-Pesa & Bank Reconciliation
A hotel touches money every minute. Daily reconciliation is mandatory.
Hotel Audit focus:
- POS vs cash office timings
- M-Pesa Paybill/Till vs POS
- Guest deposits vs folios
- Bar and restaurant cash drops
- Daily banking vs daily sales
- Discounts and complimentary tracking
- Cash refund policies
Read also about High Court Clarification on VAT Credit Priority: What SMEs Need to Know
Red flags:
- Staff holding money overnight
- ‘Unbanked’ December sales
- Incomplete cashier shift reports
In December, one missing banking day can mean millions lost.
- Payroll & Staff Audit
Hotel fraud is often internal and behavioral. Hotel audit comes in handy.
Check:
- Ghost workers in housekeeping, kitchen, and security
- Overtime vs occupancy patterns
- Tips distribution vs guest feedback
- Staff consumption vs recorded stock
- Access rights to PMS, POS & store systems
- Night audit manipulations
Patterns like “stock variances only on X’s shift” tell powerful stories.
- Strengthen Internal Controls for Sustainable Operations
After identifying control gaps, recommend:
- Restricted access to PMS/POS
- Mandatory night audits
- Daily variance reports for rooms & F&B
- Tiered approval workflows
- CCTV in key areas (stores, cash office, kitchens)
- Weekly stock audits
- Clear discount & complimentary policies
- Strict segregation of duties
A controlled hotel is predictable. An uncontrolled hotel bleeds silently.
- Leverage Technology to Reduce Fraud
Modern hotel systems solve most leakage problems.
You may want to see the Accounting Short Courses in Kenya: December Intake Ongoing
Key tools:
- PMS/POS integration
- Stock management systems
- Real-time occupancy dashboards
- M-Pesa integration
- Digital procurement platforms
- Biometric attendance systems
Automation reduces manipulation, increases visibility, and supports data-driven audits.