Money often reaches a hotel before the guest does. A family pays an advance to confirm a holiday booking, a walk-in guest leaves a deposit at the desk, and a company transfers part of a group's stay ahead of time. Each of these payments is real money the hotel is holding on the guest's behalf, and each needs to end up in exactly the right place when the stay is settled.
When advances and deposits are written on slips or kept in a separate register, they are easy to lose track of. A guest is charged in full at check-out despite paying in advance, or a deposit is never returned. This guide explains how to collect, record, apply and refund advance payments and deposits so the guest's account always shows the true balance.
Advance payments and deposits are different
An advance payment is money paid towards the stay itself, usually when the booking is made or confirmed. It reduces the amount the guest owes at check-out and normally stays with the hotel unless the booking is cancelled under a refundable policy.
A security deposit is money held at check-in against possible extra charges or damage. It is not a payment for the room. If the guest settles everything else, the deposit is either applied to the final bill or returned in full.
Treating both as the same thing causes confusion. Record each one with its purpose, so that staff and guests know whether the money is a payment towards the stay or an amount being held.
Decide when to ask for an advance
An advance policy should say which bookings need one, how much and by when. Common triggers include peak dates, long stays, large groups and non-refundable rates. Some properties ask for the first night, others for a percentage of the total.
Write down what happens if the advance does not arrive by the deadline. The booking might be released, held for a short time, or kept with a reminder. The booking changes and cancellations guide covers how releases and refunds should be recorded when plans change.
Set a clear check-in deposit rule
If your property asks for a deposit at check-in, decide one rule and apply it to every guest it covers. State the amount, the accepted payment methods and whether an advance already paid counts towards it.
The deposit should be collected before the key is handed over. If a manager decides to waive it, for a regular guest or a company account for example, that waiver should be recorded with a reason rather than agreed verbally. Without a record, the next shift cannot tell whether the deposit was waived or simply forgotten.
Record every payment on the guest's account
Every advance and deposit should be recorded as a payment on the guest's account with the date, amount, method and reference, such as a UPI transaction ID or card slip number. A payment written only on a booking note is invisible at check-out.
Advances taken at booking should move automatically onto the guest's folio when the guest checks in, so the desk sees the full picture without searching through old records. The guest folio guide explains how charges and payments combine into the balance.
Apply the money at check-out
At departure, review the folio with the guest. Room nights and services appear as charges; advances and deposits appear as payments already received. The balance due is the difference.
If the guest paid more than the final bill, the hotel owes them a refund. If they owe more, they pay the remaining amount. Either way, the invoice should show the full charges and taxes, with advances shown as payments received rather than as discounts. The check-out process guide covers the full settlement review.
Refund deposits carefully
A deposit refund should be recorded against the original deposit, with the date, method and who approved it. Refund to the same method where possible, such as back to the card or UPI account that paid, unless your policy and the guest agree otherwise.
Never refund cash from the drawer without recording it. An unrecorded refund leaves the cash short at shift close and the deposit still showing as held on the guest's account. Where the hotel keeps part of a deposit for damage or unpaid charges, post those charges to the folio first so the reason is visible.
Reconcile advances and deposits regularly
Advances and deposits are money held for guests, so they need regular review. At least weekly, list:
- advances received for bookings that have not yet arrived;
- deposits held for guests currently in house;
- deposits that should have been refunded after departure;
- advances on cancelled bookings waiting for a refund decision.
Each item should have a clear next action and owner. The payment reconciliation guide explains how to match recorded payments to money that actually reached the bank.
How NivaasCloud helps with advances and deposits
NivaasCloud records advances against reservations and applies them to the guest's folio automatically at check-in. A property can set a check-in deposit amount in its settings; check-in then asks for the deposit or an authorised waiver, and the waiver is recorded. Payments are recorded by kind — advance, deposit, settlement and refund — and deposit refunds are linked to the original payment, so the folio shows exactly what was received and returned.
Explore billing on the billing and folios feature page, or book a NivaasCloud demo and walk through a booking with an advance, a deposit and a refund.
Common questions
Is a hotel advance payment refundable?
It depends on the rate and the cancellation policy agreed at booking. Many flexible rates refund advances if the booking is cancelled in time, while non-refundable rates keep them. State the terms clearly in the booking confirmation.
Should the security deposit appear on the invoice?
The invoice shows the stay's charges and taxes. A deposit is a payment held, not a charge, so it appears as a payment on the folio and is either applied to the balance or refunded.
Can a hotel keep part of a security deposit?
Only for charges the guest is actually liable for, such as damage or unpaid services under your published policy. Post those charges to the folio first, explain them to the guest and refund the rest.