Page Three of the Aging

Russ read every aging report. Every Monday. For fourteen years. He underlined things in pencil on the paper copy he kept in the bottom drawer of his desk, even though it was identical to the digital one. He knew what he was looking at. The problem was, nobody else in that building wanted to know. This is a story about a trade group, a $221,000 write-off, a sales director on the wrong bonus structure, and a quiet controller who was right about all of it — and couldn't stop any of it. Read the full story here.

The first time an aging report scared me I was twenty-eight years old. I was a brand-new assistant controller at a property in southern Alberta and the senior controller, a man whose first name I will not write down out of respect, slid the Monday aging across his desk and asked me what I noticed. The number on the over-90 line was bigger than everything else on the combined report. I read it out loud. He took a long sip of his coffee, looked at me over his glasses, and said, “Son, that is not an accounting problem. That is a sales problem that the accounting people are going to spend the next year solving.” Then he poured himself a second cup and went back to whatever he was reading. He was right. He was always right.

I have thought about that morning a hundred times since, and every single time it has been because some property somewhere was about to lose more money than it could afford.

This story is about one of those properties.

Two hundred and forty rooms in a Sun Belt secondary market that I will not name, because the people I know there will figure it out anyway. A flag I will not name either, but the kind that comes with a meeting wing and a ballroom that opens with a folding wall. The hotel had been doing fine for years. Not fantastic, but fine. The kind of property that paid its mortgage, paid its franchise fees, paid the staff, and sent a small check home to its owners every quarter. That is harder than it sounds.

In the spring of 2017, they hired a new director of sales. Sienna. Twenty-nine years old, a closer, the kind of smile that bookings somehow felt obligated to return. She came in with energy that the property had not seen in years. Within two months she had filled the calendar deeper than it had been at the same point in the previous five seasons. Within three months everyone at the daily stand-up was applauding when her number went up on the board. Within four months the GM, Buddy, who had come up through banquets and never met a glad-hand he didn’t return, was telling his bosses that hiring her had been the best thing he had ever done.

Russ was the controller. Fifty-one years old that summer. Quiet in the way controllers can be quiet if you know where to look. He kept a paper aging report in a manila folder in the bottom drawer of his desk, even though it was identical to the digital one that came out of the system every Monday. He kept the paper one because he liked underlining things in pencil. When he met you in the hallway he would call you by your name. He knew the housekeepers’ names. He knew the engineers’ kids. He showed up at six forty-five, made coffee for whoever came in next, and went home at five-thirty. He had been at the property for fourteen years.

He reads every aging report. Every Monday.

And starting in November of 2017, he started noticing a name on the over-30 column that didn’t move. A line with the same dollar amount that drifted further to the right on the page.

It was a regional builders’ trade group. I will call them Southwest Builders Trade Alliance, because I am not allowed to call them anything else. Three hundred and forty members, mostly small construction companies, mostly licensed and insured. They held quarterly trade events. The first one had been booked by Sienna in August. Two hundred room nights, a banquet, a small expo on the side. Bill came to about $84,000 with the F&B included. Master account, direct billed, Net 30.

Net 30 came and went. Net 60 came and went. By late November, when Russ noticed the line, it was tipping toward 90. He sent an email to Sienna asking if she could touch base with their accounts payable. Sienna replied that the Alliance was a great client, the next event was already booked, and she had spoken to “Tom over there” who said the check was coming. The next Monday morning the line was still on the report.

What Russ did not know yet, and would not know for another five months, was that the Alliance’s treasurer, a man named Greg, was the brother-in-law of one of the hotel’s banquet captains, a young guy named Marcus who had been the one to recommend the Alliance to Sienna in the first place. Marcus had not done anything wrong, exactly. He had introduced two people to each other. Nobody had asked the question. There was no conflict-of-interest disclosure anywhere in the file. There was nowhere to be put.

The second event happened in February. Sienna had waived the deposit. She told Buddy it was “to keep the relationship warm” and Buddy nodded the way he nodded when Sienna made a request. The bill on the second event was $96,000. The first bill had not been paid. Russ had been sending statements. Russ had been emailing the contact. Russ had filed a hard copy of every statement in a folder he had labeled SBTA in pencil on the tab.

By the end of February, the over-90 number was $172,000. By April, with the third event already booked, the number was $251,000. Russ went to Buddy. Buddy told him the Alliance was good for it, they were going through a soft quarter, the construction industry was unpredictable, and to ease off until summer. Russ wrote a memo and put it in the folder. He had been quietly cc-ing himself on every email related to the Alliance for six months.

In May, the third event happened. Sienna was now on a bonus structure that paid out on revenue booked, not revenue collected. Russ had pointed this out to Buddy in writing. Buddy had not replied. The bill on the third event was $108,000. The Alliance paid $20,000 toward the oldest invoice the week of the event, which kept it just out of the formal write-off review trigger that Buddy was supposed to bring to ownership. The aging looked a fraction better. Buddy circulated a short note to the team congratulating the AR effort.

The Alliance filed for bankruptcy on a Tuesday in late June. Chapter 7. No reorganization. The trustee took control of what little there was. The hotel’s claim went into the unsecured pile. Recovery on those, if you have not been through one, is usually somewhere between zero and the cost of the lawyer you paid to write the claim.

The hotel’s exposure on the day of the filing was $317,000. Of that, $248,000 was over 90 days. Net of the $20,000 token payment, and net of a small recovery from the bankruptcy estate that came in eighteen months later, the property ate $221,000. That was real money. That was the difference between a small distribution to the owners and a phone call where the owners learned the property would not be sending them a check that year. It was also a number that would have been stopped at $84,000 if the credit policy in the manual had been followed even half-heartedly.

There was no signed Credit Application Form on file. There was no Direct Bill Authorization Form. There was no executed Corporate Rate Agreement. The credit limit had never been set. The only document anyone could find was a one-page contract for the first event, signed by Sienna and by someone at the Alliance whose title on the signature line was illegible. There was no personal guarantee. There was no aging trigger that anyone had honored.

When the owners hired a forensic accountant to help them understand what had happened, she did what good ones do. She pulled threads. One of the threads led to the AR clerk, a young woman named Alana. Alana had been making, on average, four hundred dollars a month disappear out of the cash receipts that came in the mail. She would post the larger payment to the older invoice and post the smaller one to “the same invoice next time.” She had been doing it for eight months. The total was about three thousand dollars, which is small enough to make you laugh next to the SBTA disaster. But the technique she used has a name. It is called lapping, and it is exactly the reason the manual says cash receipts and AR posting should never be done by the same person.

Alana resigned. Buddy was let go. Sienna left for what she called a better opportunity. Marcus disclosed the conflict, late, and was let go as well. The owners brought in a new GM who, on his first Monday morning, asked Russ for a printed copy of the AR Aging Report.

Here is what Section Two of this manual is about.

It is not about the dramatic write-off at the end. The dramatic write-off is the symptom. Section Two is about the small, polite, almost boring set of habits that catch a problem when it is still on page three of the aging. A signed Credit Application Form before the first stay. A Direct Bill Authorization Form on file with a credit limit set in writing. A Corporate Rate Agreement executed, not promised. An invoice mailed within forty-eight hours of checkout. A Monday review of the AR Aging Report by the GM. A Collection Contact Log that captures the exact sequence the manual lays out, day thirty, day forty-five, day sixty, day seventy-five, day ninety. A Write-Off Authorization Form that goes to ownership before any number gets erased.

And one more thing while I have you. The conflict-of-interest disclosure that good operators add to every banquet and sales role even when the manual does not yet require it. Marcus and his brother-in-law were not a story about fraud. They were a story about a missing piece of paper and a missing question. Most of the worst situations I have ever seen in this business came from a missing piece of paper and a missing question.

Russ stayed. He is still there. The new GM had him add the AR Aging Report to the daily flash, not just the weekly review. They run the Internal Control Review on Section Two every September now, ahead of the high season, and it has flagged something every year. None of those somethings have been a $221,000 something. That is not a coincidence.

Aging reports do not lie. People do.

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.