Holding customers money
Discussion
I am now finding myself holding a lot of deposits from customers in a current account, amount varies due to seasonal income but ranges from 50k in winter to 400k in summer. Averaging around 240k.
The money is ring fenced in as much as I never touch it until the service is provided.
I also have a mortgage of around 900k 3.5 over base. Obviously it would be ideal to offset the deposits against the mortgage but my bank won't do this. They pay me no interest on the deposit money.
Santander have offered 0.6% and I have a meeting with rbs next week.
I need online access to the money as it changes daily.
Does anybody have any better ideas.
I'm not in a position to change the mortgage from barclays who pay me no interest on the deposits whatsoever.
Thanks in advance.
The money is ring fenced in as much as I never touch it until the service is provided.
I also have a mortgage of around 900k 3.5 over base. Obviously it would be ideal to offset the deposits against the mortgage but my bank won't do this. They pay me no interest on the deposit money.
Santander have offered 0.6% and I have a meeting with rbs next week.
I need online access to the money as it changes daily.
Does anybody have any better ideas.
I'm not in a position to change the mortgage from barclays who pay me no interest on the deposits whatsoever.
Thanks in advance.
I'm not sure any institution would want to facilitate such a deal using what is technically termed 'client money'.
I would question whether you are holding these funds properly in the first instance. For example, are your customers fully aware that their money is held by you in your personal account rather than being legally ring fenced and so they are at 100% risk to you, what happens to you or what you do?
For example, if you drop down dead, get divorced, have any claim made against you or any other such event they will lose their money.
I would question whether you are holding these funds properly in the first instance. For example, are your customers fully aware that their money is held by you in your personal account rather than being legally ring fenced and so they are at 100% risk to you, what happens to you or what you do?
For example, if you drop down dead, get divorced, have any claim made against you or any other such event they will lose their money.
369racing said:
I am now finding myself holding a lot of deposits from customers in a current account, amount varies due to seasonal income but ranges from 50k in winter to 400k in summer. Averaging around 240k.
The money is ring fenced in as much as I never touch it until the service is provided.
I also have a mortgage of around 900k 3.5 over base. Obviously it would be ideal to offset the deposits against the mortgage but my bank won't do this. They pay me no interest on the deposit money.
Santander have offered 0.6% and I have a meeting with rbs next week.
I need online access to the money as it changes daily.
Does anybody have any better ideas.
I'm not in a position to change the mortgage from barclays who pay me no interest on the deposits whatsoever.
Thanks in advance.
I'm presuming such deposit money gives your business better cashflow than even multi-million operations can only dream of.The money is ring fenced in as much as I never touch it until the service is provided.
I also have a mortgage of around 900k 3.5 over base. Obviously it would be ideal to offset the deposits against the mortgage but my bank won't do this. They pay me no interest on the deposit money.
Santander have offered 0.6% and I have a meeting with rbs next week.
I need online access to the money as it changes daily.
Does anybody have any better ideas.
I'm not in a position to change the mortgage from barclays who pay me no interest on the deposits whatsoever.
Thanks in advance.
That cashflow benefit alone is worth thousands.
Chimune said:
That arrangement stinks.
Thanks for posting it !
The OP has alluded to working in the mortgage industry so ought to be FCA regulated in which case holding client money is something you need to be very careful with even after obtaining the correct permissions.Thanks for posting it !
Ideally all client money should be held in a nominee account in order to provide protection to the clients should anything happen to the OP or his business.
http://www.fca.org.uk/your-fca/documents/client-mo...
aka_kerrly said:
Chimune said:
That arrangement stinks.
Thanks for posting it !
The OP has alluded to working in the mortgage industry so ought to be FCA regulated in which case holding client money is something you need to be very careful with even after obtaining the correct permissions.Thanks for posting it !
Ideally all client money should be held in a nominee account in order to provide protection to the clients should anything happen to the OP or his business.
http://www.fca.org.uk/your-fca/documents/client-mo...
Clearly doing well as alluded to by the size of deposits and also the size of personal mortgage.
But I think we are all questioning whether these deposits are being correctly held?
DonkeyApple said:
I read it as being in the tourist industry. Huge seasonal variations and based in Lancashire made me assume it was a holiday business in Blackpool. The obvious one that would take advance deposits being a hotel or some sort of 'package' provider?
Clearly doing well as alluded to by the size of deposits and also the size of personal mortgage.
But I think we are all questioning whether these deposits are being correctly held?
I thought that too, not sure where he alluded to mortgages?Clearly doing well as alluded to by the size of deposits and also the size of personal mortgage.
But I think we are all questioning whether these deposits are being correctly held?
If he was, the FCA would take a VERY dim view of that.........
I trust this money is held in a separate client money account? You need to check the requirements of your regulator BUT there is not a cat's chance in hell that you will be permitted to offset this money against your business. In mine I get the interest on money held unless it exceeds a small amount at which point it goes to the client.
There does sound like there is a potential issue with the way the funds are currently being held.
In OP's shoes I would be looking to rectify this before anyone starts to ask difficult to answer questions.
No hint of dogginess (although it is a bit 'sharp' to think that you could use it to off set a personal mortgage IMO) but I think that there is something amiss with how the funds are currently held, even if I can't be 100% sure as I am not up to speed on how this should be held and obviously internet post detail is light for worthwhile advice.
In OP's shoes I would be looking to rectify this before anyone starts to ask difficult to answer questions.
No hint of dogginess (although it is a bit 'sharp' to think that you could use it to off set a personal mortgage IMO) but I think that there is something amiss with how the funds are currently held, even if I can't be 100% sure as I am not up to speed on how this should be held and obviously internet post detail is light for worthwhile advice.
DonkeyApple said:
aka_kerrly said:
Chimune said:
That arrangement stinks.
Thanks for posting it !
The OP has alluded to working in the mortgage industry so ought to be FCA regulated in which case holding client money is something you need to be very careful with even after obtaining the correct permissions.Thanks for posting it !
Ideally all client money should be held in a nominee account in order to provide protection to the clients should anything happen to the OP or his business.
http://www.fca.org.uk/your-fca/documents/client-mo...
Clearly doing well as alluded to by the size of deposits and also the size of personal mortgage.
But I think we are all questioning whether these deposits are being correctly held?
Possibly travel industry - specifically holidays and coaches focused on the disabled.
At a guess.
Are these deposits non-refundable if the client cancels? There may be different moral/legal answers here. Are the funds held in a company account? (I'm presuming the mortgage is personal not a loan on a business property)
At a guess.
Are these deposits non-refundable if the client cancels? There may be different moral/legal answers here. Are the funds held in a company account? (I'm presuming the mortgage is personal not a loan on a business property)
Edited by sleepezy on Friday 10th April 14:47
Sorry folks been away for a few days.
Yes we are a hotel. Customers pay upfront only.
Our booking terms state no refunds and we reccomend taking travel insurance to every guest that books. We do the odd refund in good faith for example upon a customer death. Generally done by bacs.
Of course if I can't provide the service the customers will be refunded
The main point I didn't mention is that we are a ltd company. Mortgage in the ltd company.
I think I need to take proper advice on this one.
It just seems a shame to have all that money sat doing nothing when we have such a large mortgage.
In theory it helps Cashflow but I hold the money seperatly until the guest arrives so in reality it doesn't help the current account.
Yes we are a hotel. Customers pay upfront only.
Our booking terms state no refunds and we reccomend taking travel insurance to every guest that books. We do the odd refund in good faith for example upon a customer death. Generally done by bacs.
Of course if I can't provide the service the customers will be refunded
The main point I didn't mention is that we are a ltd company. Mortgage in the ltd company.
I think I need to take proper advice on this one.
It just seems a shame to have all that money sat doing nothing when we have such a large mortgage.
In theory it helps Cashflow but I hold the money seperatly until the guest arrives so in reality it doesn't help the current account.
Edited by 369racing on Monday 13th April 10:26
369racing said:
Sorry folks been away for a few days.
Yes we are a hotel. Customers pay upfront only.
Our booking terms state no refunds and we reccomend taking travel insurance to every guest that books. We do the odd refund in good faith for example upon a customer death. Generally done by bacs.
Of course if I can't provide the service the customers will be refunded
The main point I didn't mention is that we are a ltd company. Mortgage in the ltd company.
I think I need to take proper advice on this one.
It just seems a shame to have all that money sat doing nothing when we have such a large mortgage.
In theory it helps Cashflow but I hold the money seperatly until the guest arrives so in reality it doesn't help the current account.
Definitely worth sitting with an accountant. First just to check that how you currently operate isn't either putting the business at risk or breaching any industry codes etc. Yes we are a hotel. Customers pay upfront only.
Our booking terms state no refunds and we reccomend taking travel insurance to every guest that books. We do the odd refund in good faith for example upon a customer death. Generally done by bacs.
Of course if I can't provide the service the customers will be refunded
The main point I didn't mention is that we are a ltd company. Mortgage in the ltd company.
I think I need to take proper advice on this one.
It just seems a shame to have all that money sat doing nothing when we have such a large mortgage.
In theory it helps Cashflow but I hold the money seperatly until the guest arrives so in reality it doesn't help the current account.
Edited by 369racing on Monday 13th April 10:26
If it is 'customer money' then there probably are ring fencing guidelines to adhere to buy maybe there is an argument that as you operate a zero refund policy then it isn't a deposit but a down payment and is no longer customer money but part of your balance sheet.
Out of interest, why do you currently segregate it from the rest of the business if it is non refundable?
But also, as you say, it seems very prudent to then also confirm whether there is any way to make this money work better for your business.
Edited by DonkeyApple on Monday 13th April 10:34
If I can't provide the service then the deposits will be refunded of course.
Hotel burns down. We go bust etc.
No refunds is on the customer side. Illness or changed their mind etc.
It's very simple. If we have 12k worth of holidays checking in today we transfer 10k to the current account and 2k to our vat saver account. The current account is then used for costs.
We used to run with a large overdraft and the deposits were in the current account but a recent bank restructure of the debt means we no longer have an overdraft. It seems sensible to run it this way now. It's much 'cleaner'
Barclays have just come back with a 0.25% account. Which is something I suppose. They have also agreed to put in writing that the money is customers until the service is provided Incase the worst happens.
Hotel burns down. We go bust etc.
No refunds is on the customer side. Illness or changed their mind etc.
It's very simple. If we have 12k worth of holidays checking in today we transfer 10k to the current account and 2k to our vat saver account. The current account is then used for costs.
We used to run with a large overdraft and the deposits were in the current account but a recent bank restructure of the debt means we no longer have an overdraft. It seems sensible to run it this way now. It's much 'cleaner'
Barclays have just come back with a 0.25% account. Which is something I suppose. They have also agreed to put in writing that the money is customers until the service is provided Incase the worst happens.
If bookings are non-refundable, receipts are not client funds, they are your revenue.
It seems like a very unusual / cautious way of operating a business if you specifically retain individual bookings receipts until arrival date. You may find it more cost-effective to buy insurance so that if the hotel burns down, your insurer reimburses your customer.
If your receipts are in the same LtdCo as the property, then why not just reduce the mortgage? Obviously check that the cost of insurance is lower than the saving in interest.
It seems like a very unusual / cautious way of operating a business if you specifically retain individual bookings receipts until arrival date. You may find it more cost-effective to buy insurance so that if the hotel burns down, your insurer reimburses your customer.
If your receipts are in the same LtdCo as the property, then why not just reduce the mortgage? Obviously check that the cost of insurance is lower than the saving in interest.
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