How to record turnover in Xero as a rental agent?

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Hello,

I am just starting to use Xero for my small holiday rental business - renting chalets and villas outside of UK.

When a guest books with us, we take their payment for the full cost of the rental, and then transfer the balance to the owner minus our commission.

E.g. £10,000 total cost (payment comes into our account from guest); 10% commission (£1000 stays in our account and is our profit); we transfer remaining £9,000 to owner.

At the moment, on Xero the £10,000 looks like it is our turnover, when in fact the actual turnover as a rental agent is our commission. My question is how can this be recorded to accurately show this on our accounts? The business is in early stages so we cannot pay an accountant, so if anyone can explain this in laymans terms then I would be very grateful.

Many thanks,

George

Replies (11)

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By Tim Vane
14th Mar 2019 02:04

Your accountant would have talked this all through with you when you opened your books. You say you can’t afford an accountant but it seems more like you can’t afford not to have one. Why did your business plan not factor in the cost of an accountant? What else have you not costed for? Get proper professional advice up front and you won’t regret it.

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Replying to Tim Vane:
RLI
By lionofludesch
14th Mar 2019 09:00

Tim Vane wrote:
You say you can’t afford an accountant but it seems more like you can’t afford not to have one.

Only "seems" ?

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ALISK
By atleastisoundknowledgable...
14th Mar 2019 07:44

Do you transfer the 90% immediately that you receive the 100%?

If so, the easiest thing is to post the ‘spend money 90%’ to the same sales nominal that you used for the ‘received money 100%’. Net affect will be 10% in the sales nominal.

If not, why not?
To avoid any timing differences, you should have a current asset control account & post the receive money here, then immediately journal the 10% to your sales nominal. When you pay the 90%, post the spend money to your control account.

Out of curiosity, if 1 transaction is £10k, have you considered the complexities of VAT in your industry? Probably time to get that accountant Tim was talking about ... well worth the fines & interest & VAT HMRC may throw your way...

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RLI
By lionofludesch
14th Mar 2019 09:04

George - talk sense. It's fine not paying an accountant when you know how to do the job yourself but that's not the case here.

Do you rewire these houses or fix their gas boilers ? Probably not - because you don't have the skills. The same argument applies to your accounts.

Now - what else don't you know ? You may not even realize you don't know.

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By ireallyshouldknowthisbut
14th Mar 2019 13:37

As an accountant who deals with lettings businesses (goodness knows why, they are always horrible from a transactional point of view) one thing I can tell you is you have it set up wrong.

The money should never be coming into your business bank account inthe first place. The words "CLIENT ACCOUNT" should be top of your list of actions to find out about. And then seperate the fugging client money from your money.

if you dont you will spend 2-3 times the normal rate to defuck (a technical term you will understand) your accounts at the year end vs getting it right first time.

Hire an accountant, you are talking about an hour or two of advice now to save 20 at the end of the year. Xero will not magically do your accounts for you, but will allow you to make a huge mess which takes hours to unpick.

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paddle steamer
By DJKL
14th Mar 2019 15:17

What legislation exists re client bank accounts re lets would be a good starting place?

http://www.legislation.gov.uk/ukdsi/2018/9780111169155/pdfs/ukdsi_978011...

I have no idea if applies to holiday lets but cannot see why it would not, we are not in E & W so I cannot really comment re the scope of the legislation.

Once you know your legal requirements you can then get an accountant to advise re accounting software that will make your, and their, life easier and will ensure, if used properly, your legal compliance.

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By George Hayworth
14th Mar 2019 22:39

Okay so we are going to be getting an accountant, and have had advice - however they said that as we will not be reaching the VAT threshold we can do it ourselves on Xero...that's why I started to try. Going to find another accountant definitely, I just wanted to make a start to get things going to tidy up our books.

So we do not hold client funds, as soon as we receive their payment into our account we transfer the 90% to the owner. Would this still require a client account? To complicate this further, we receive funds in GDP, EUR, USD, CHF - and use Revolut to receive and send funds in these currencies. Would you suggest using these accounts solely for this purpose and a different account for other business activities/expenses?

VAT is being dealt with separately and we are aware of TOMS.

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Replying to George Hayworth:
paddle steamer
By DJKL
15th Mar 2019 01:12

You do hold client funds as they hit your account. The time may be limited but they are held for that time.

Edit- Is TOMS even on point, are you buying in the use of the property and selling it or are you acting as agent for the owner?

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Replying to George Hayworth:
ALISK
By atleastisoundknowledgable...
15th Mar 2019 08:00

George Hayworth wrote:

... they said that as we will not be reaching the VAT threshold we can do it ourselves on Xero...

Who gave you that advice? The two things have little correlation. I mean, you ‘can’ do it yourself, in the same way that the CEO of ICI ‘can’ do their bookkeeping, doesn’t mean (s)he should or that it would be correct though.

The issue of your trading model (and hence VAT position) needs dealing with before knowing how to deal with the money. I should have said this before posting my original answer.

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Replying to atleastisoundknowledgable...:
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By George Hayworth
15th Mar 2019 11:00

If was an accountancy firm that actually gave us that advice - they said they would do it but not much point until we have a higher turnover figure...now realise this was bad advice and will be speaking with a different firm asap.

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Glenn Martin
By Glenn Martin
14th Mar 2019 22:46

What you need to do is get a second Xero subscription (cashbook version available via a Xero partner) and deal with client account side of things through that.

Connect the bank feed then post the post bank transactions to a liability code, in theory once the landlords have been squared up the balance should be your cut.

In your main Xero account only your business should be reflected so your 10% commission less your trading costs.

If you are getting mixed up take some advice from a Xero accounting partner, a small fee now will save you a huge amount in the long run.

As if you lump all the transactions into 1 account it could get into a right mess which will cost you a lot to sort out.

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