Xero - Managing Bonds

HirePOS can manage customer bonds separately from normal invoice payments when exporting transactions to Xero.

A refundable bond is different from payment of a hire invoice. The invoice payment reduces the customer's Accounts Receivable balance, while the bond represents money being held temporarily on behalf of the customer.

For this reason, we recommend configuring a separate Customer Bonds Held account in your Xero Chart of Accounts.

Important: The information in this guide describes a recommended HirePOS and Xero workflow. Accounting and tax requirements can vary between businesses. Confirm the appropriate account and tax treatment with your accountant or bookkeeper.

Create a dedicated account in Xero for refundable customer bonds:

Xero identifies a Current Liability account as a CURRLIAB account. This is separate from a Bank account and from Xero's Accounts Receivable account.

The purpose of the Customer Bonds Held account is to show the total value of refundable bonds currently held by the business.

In the HirePOS > Xero Exporter, click the Options tab and enter the code you used for the Xero "Customer Bonds Held" account into the "Xero Bond Code" field.

Your normal HirePOS payment accounts should continue to represent where money is actually received or refunded.

Examples include:

• ANZ Bank

• Commonwealth Bank

• EFTPOS Clearing

• Cash Clearing

• PayPal

• Other payment clearing accounts

The payment account answers:

Where did the money go?

The Customer Bonds Held account answers:

Why are we holding the money?

Keeping these two concepts separate makes bank reconciliation considerably easier.

A customer has:

• Hire invoice: $1,000

• Bond required: $500

• Total paid: $1,500

The customer transfers the full $1,500 into the ANZ bank account.

HirePOS records this as two separate payment transactions:

Although the customer made one $1,500 payment, HirePOS separates the invoice payment from the bond for accounting purposes.

The normal $1,000 payment is exported to Xero against the invoice.

The accounting effect is:

Debit ANZ Bank $1,000
Credit Accounts Receivable $1,000

The Xero invoice is therefore fully paid.

The $500 Bond Received transaction is exported separately.

The accounting effect is:

Debit ANZ Bank $500
Credit Customer Bonds Held $500

The bond is not treated as additional invoice revenue and does not increase the customer's Accounts Receivable credit balance.

After both transactions have been exported, the ANZ account in Xero contains transactions totalling $1,500.

The Customer Bonds Held account has a $500 liability balance.

The bank statement may contain only one deposit:

ANZ deposit: $1,500

Xero contains:

• $1,000 invoice payment

• $500 bond receipt

When reconciling the bank statement, use Xero's Find & Match functionality to match the single $1,500 bank statement line against both transactions.

The combined amount is:

$1,000 + $500 = $1,500

This allows the actual bank deposit to reconcile while still maintaining the correct accounting treatment for the bond.

When the customer's equipment is returned and the bond is refunded, record a Refund Bond transaction in HirePOS.

For example:

• Bond originally received: $500

• Bond refunded: $500

• Refund account: ANZ

HirePOS exports the refund from ANZ and reduces the Customer Bonds Held liability.

The accounting effect is:

Debit Customer Bonds Held $500
Credit ANZ Bank $500

The Customer Bonds Held balance relating to this hire is now zero.

The customer's Xero invoice remains paid and is unaffected by the bond refund.

The bond does not need to be refunded through the same payment method used to receive it.

For example:

The customer transfers a $500 bond directly into ANZ.

Accounting:

Debit ANZ Bank $500
Credit Customer Bonds Held $500

When the equipment is returned, the customer requests an immediate EFTPOS refund.

The HirePOS Refund Bond transaction is recorded against the EFTPOS account.

Accounting:

Debit Customer Bonds Held $500
Credit EFTPOS Clearing $500

The Customer Bonds Held balance returns to zero.

The next EFTPOS merchant settlement may consequently be reduced by the $500 refund, allowing the EFTPOS Clearing account to reconcile normally.

This is expected behaviour. The account used to refund a bond does not need to be the same account through which the bond was originally received.

A customer pays a $500 bond in cash.

HirePOS records:

Bond Received: $500
Account: Cash Clearing

The accounting effect in Xero is:

Debit Cash Clearing $500
Credit Customer Bonds Held $500

When the cash is later deposited into the bank account, the Cash Clearing account can be cleared using the normal banking process.

If the $500 bond is subsequently refunded in cash:

Debit Customer Bonds Held $500
Credit Cash Clearing $500

A customer originally pays a $500 bond.

Accounting:

Debit Bank/Clearing Account $500
Credit Customer Bonds Held $500

After the hire, $400 is refunded and $100 remains held or requires further processing.

The $400 refund produces:

Debit Customer Bonds Held $400
Credit Bank/Clearing Account $400

The remaining balance in Customer Bonds Held is:

$100

A later transaction can clear the remaining $100 according to the reason it is retained or refunded.

If any part of a bond is retained for damage, additional hire charges or another chargeable amount, consult your accountant regarding the appropriate invoice, GST and accounting treatment.

A Bond Received transaction is not an invoice payment and therefore is not allocated directly against the Xero invoice.

This is intentional.

Allocating the bond directly against the invoice would affect Accounts Receivable and could cause the invoice to appear overpaid.

Instead, where supported by the HirePOS Xero integration, HirePOS adds an entry to the Xero invoice's History & Notes.

For example:

HirePOS Bond Received: $500.00. Bond currently held: $500.00. Reference: HP-BOND-123456.

When the bond is refunded:

HirePOS Bond Refunded: $500.00. Bond currently held: $0.00. Reference: HP-BOND-REFUND-123457.

This provides a visible audit trail from the Xero invoice without changing the invoice balance.

A customer overpayment generally represents money received in excess of an Accounts Receivable invoice balance.

A refundable hire bond has a different purpose.

The business is holding the money temporarily and normally expects to return it to the customer.

For this reason, HirePOS can treat the bond separately from:

• invoice payments;

• Accounts Receivable;

• sales income; and

• Xero customer overpayments.

Xero provides separate Bank Transaction types for ordinary money received and spent, including RECEIVE and SPEND, as distinct from its dedicated overpayment transaction types.

This allows the bond to be allocated to a Current Liability account while the actual bank or clearing account still records the movement of funds.

A typical business may therefore have the following Xero accounts:

The Customer Bonds Held account should generally be configured as a Current Liability rather than a Bank account. Xero supports Current Liability accounts separately from Bank accounts in its Chart of Accounts.

As an accounting control, the total value of outstanding refundable bonds in HirePOS should broadly reconcile to the balance of the Customer Bonds Held account in Xero.

For example:

The corresponding Xero Customer Bonds Held account should show approximately:

$1,500 liability

Differences may indicate:

• a bond that has not yet been exported;

• a refund that has not yet been exported;

• a transaction manually edited or deleted in Xero;

• an incorrect account mapping;

• a bond that has been retained or applied to another charge; or

• a transaction awaiting further processing.

Generally, no separate HirePOS invoice is required simply to collect a refundable bond.

HirePOS can calculate the required bond and record the Bond Received transaction independently from the hire invoice.

This avoids requiring staff to manually determine and enter a separate bond invoice.

Normally, no.

The bank or clearing account represents where the money is located.

Customer Bonds Held represents the amount owed back to customers and is therefore normally configured as a Current Liability account.

Yes.

For example, a customer can make one $1,500 payment consisting of:

• $1,000 invoice payment; and

• $500 bond.

HirePOS separates these into the appropriate payment records while preserving the total amount received.

Yes.

If the bank statement shows one combined deposit, use Xero's Find & Match functionality to select the corresponding transactions whose combined total equals the bank statement amount.

Yes.

For example, a bond may be received by direct bank transfer and later refunded using EFTPOS.

The Customer Bonds Held liability connects the accounting transactions; the original payment method does not need to match the refund method.

No.

When the bond is treated as a separate bank transaction allocated to Customer Bonds Held, it does not change the Accounts Receivable balance of the invoice.

Where supported by the HirePOS Xero integration, bond receipt and refund information is recorded in the Xero invoice's History & Notes.

This allows users to see the amount received, refunded and currently held without treating the bond as an invoice payment.

The Refund Bond transaction reduces the Customer Bonds Held liability.

If a $500 bond was received and the full $500 is refunded, the remaining bond liability for that hire is zero.

The refunded amount reduces the Customer Bonds Held account while the remaining amount stays as a liability until it is subsequently refunded or applied appropriately.

If the retained amount is used to pay an invoice, damage charge, additional hire or another taxable supply, consult your accountant regarding the appropriate accounting and tax treatment.

The recommended HirePOS and Xero bond workflow separates the movement of money from the accounting purpose of the money.

A normal invoice payment:

Bank/Clearing Account → Accounts Receivable

A bond received:

Bank/Clearing Account → Customer Bonds Held

A bond refunded:

Customer Bonds Held → Bank/Clearing Account

This allows:

• invoice payments to reconcile correctly;

• EFTPOS and cash clearing accounts to reconcile correctly;

• direct bank-transfer bonds to be handled without routine Suspense transactions;

• bonds to remain separate from customer overpayments;

• refunds to be made using a different payment method from the original receipt;

• Xero to show the total bond liability being held; and

• bond activity to remain visible from the associated Xero invoice through History & Notes.

For advice on the appropriate Chart of Accounts codes, tax rates, GST treatment or treatment of forfeited bonds, consult your accountant or bookkeeper.