Free of charge item policy

PURPOSE

To establish proper procedures for accepting and recording merchandise provided free-of-charge.

POLICY

1. Merchandise provided free-of-charge by vendors for various reasons should be controlled by recording receipt and issuance.

2. Accepting merchandise free-of-charge should not be encouraged.

PROCEDURE

1. Free-of-charge merchandise should be received with delivery slips or invoices to record the receipts. Free-of-charge merchandise should not be stored in a separate place nor should it be consumed by a limited group of staff, whether for business purposes or for personal use.

2. Vendors providing free-of-charge merchandise have objectives of promoting sales or penetrating a market, and are willing to do business with the hotel in the future. Therefore, before accepting the delivery, hotel management should consider the purchasing standards, the purpose of use, and effectiveness of the merchandise provided free-of-charge.

3. In the case where free-of-charge items are added by the supplier to an order of the hotel (same products as ordered), total invoiced amount should then be divided by the total of goods received (including free-of-charge items) and the unit cost for inventory record purposes should be revised.

4. A third party may provide hotel supplies or equipment carrying advertisements of the third party or provide these items for free for the purpose of promoting its sales. In the former case, an agreement or memorandum should be prepared and maintained by the Financial Controller. When displaying advertisements of a third party on the hotel's equipment or supplies, or when free merchandises are large in quantity, approval of the General Manager should be obtained beforehand. In the case of a promotion, a proposal from the vendors should be filed by the purchasing department. In both cases, a receiving report is prepared, and receiving and issuing are recorded in accordance with standard procedures. Departments requesting free-of-charge merchandises are not charged any costs. When receiving cash in exchange for running advertisements, such revenue should be recorded as "Other revenue" instead of reducing expenses.

5. Hotel may request existing vendors to donate free-of-charge merchandise for employee benefits such as giveaways at the annual Christmas party. The request for such merchandise should be handled by the Purchasing Manager, and a letter of request should be written by the General Manager rather than the Purchasing Manager or the Financial Controller. The Personnel Manager or the Department Heads should not negotiate directly with vendors. The storage and use of this type of free merchandise does not need to be recorded, but a list of merchandise received should be prepared for the hotel’s records.