Escrow Account

A business wants to collect an extra $275 monthly from a customer and keep that money growing in an escrow account so that funds are available to cover eventual large utility bills on behalf of that customer. What’s the best way to record the (growing) escrow account? The business would like to show the (growing) balance of the escrow account on monthly statements mailed to the customer (and also show when the funds are used to purchase said utilities).

This is similar to what mortgage companies do, the monthly mortgage payment typically includes principal, interest, and escrow (the escrow is for taxes, insurance, etc.). The monthly statement shows the escrow balance growing, until they use it to pay a bill, at which point that balance shrinks.

What is the best way to set this up in manager (and be able to show the growing escrow balance on monthly statements, in addition to other items on said monthly statements)?

Manager’s capability in this regard is more limited than that of mortgage companies, which use specialized software customized for mortgage service processing. What you can do is:

  • Create a liability account for the escrow funds using special accounts. (See https://www.manager.io/guides/10555. The example there is for real estate trust accounts, but the principles should be obvious.)
  • Enter receipts to record monies received from the customer. Allocate the receipt (or one line of it) to the escrow account and the customer’s subaccount.
  • When the large utility bill is paid, enter a payment allocated to the escrow account and the subaccount.
  • Generate an escrow account report by drilling down either from the Summary or Special Accounts tab. Export the account transactions/balances to a spreadsheet and manipulate as desired.
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Alternatively, you can keep the entire process within the normal Customer set up with modification.

First go to Setting > Chart of Accounts and create a Control Account for the purpose.
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Then under the Customer tab, edit the control account for those escrow customers
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For both Receipts and Payment the account allocation would be:
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For the monthly statement you can then use the standard form under Reports
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To get this, without having to drill down and export.

In addition you could use a Customer code like “E” to group all escrow accounts together.
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Can you explain how the “E” Customer code would be used?

Customers are listed in alpha order, but if you have both escrow and non-escrow customers, then using a code would identify them and clicking on the column heading “Code” will resort them into groups.
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So, in the “Customers” tab, each customer would need TWO definitions:
John
John Escrow
Sally
Sally Escrow
and so on…
And escrows would be billed separately from sales…

In other words, there is no way to MIX on one Sales Invoice, a sales line (reflecting in accounts receivable for that client) and an escrow line (reflecting someplace, until payment is received, at which point it would move to the escrow account)?

Under @Brucanna’s approach, yes, assuming you want to separate the escrow accounting. That is why I prefer the special accounts approach. With special accounts, you are not mixing the escrow accounting with normal receivables accounting. But this is a matter of preference.

True, because you can only have one customer on a sales invoice. But, if you use the special accounts approach, you can mix escrow billing with ordinary sales billing. That’s another reason I prefer that approach.

You could but you don’t need to, but you would still have two definitions if you used both a customer and a special account.

Cause you can, what ever you can do with a special account you can do with a customer. they are a replica of each other, You don’t have to separate the two under customer, it was just a suggestion.

This is introducing a new dimension “move to”. With the models being provided there is no need to move anything - they are self containing.

then how does your next comment reconcile with that:
"if you use the special accounts approach, you can mix escrow billing with ordinary sales billing.

Isn’t ordinary sales billing normal receivables accounting.

The big advantage of using “Customer”, either one or two, is the ability to easily create monthly statements. Anyhow, create a test business and create some examples using one customer, two customers or one customer and one special account and create the required reports

I apparently didn’t state my thought clearly enough:

  • When I said, “With special accounts, you are not mixing the escrow accounting with normal receivables accounting,” I was referring to the fact that the balance of a special account would not appear in the customer’s subaccount under Accounts receivable.
  • When I wrote, “… if you use the special accounts approach, you can mix escrow billing with ordinary sales billing,” I was referring to the ability to include separate line items on a sales invoice to a single customer, one posted to a regular income account and another to the special account.

I was using the term receivables to reference the Accounts receivable control account. I was using the term billing to refer to the act of creating sales invoices.

I like Tut’s approach using Special Accounts. However, to keep customers separate, a special escrow account is needed for each customer, along with a separate control account for each such special escrow account. Then, using a General Ledger Transactions Report, each customer’s Control Account’s transaction history can be generated separately. My only wish would be the ability to rename the report, so instead of saying “General Ledger Transactions for the period from x/x/xxxx to x/x/xxxx”, it could say “Your Escrow Account Transactions for the period from x/x/xxxx to x/x/xxxx”.

This is not correct. Customers start out and remain only under the Customers tab. With the Special Accounts method, they are not involved in the escrow accounting. That is the benefit of this method. You can keep reporting of their sales invoice balances under Accounts receivable.

Only one control account needs to be created as the escrow account. For my example, I called it Escrow account. What you create separately are the special accounts, designating all of them to be under the single control account. For example:

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A more useful statement of an individual customer’s escrow account can be obtained by drilling down on their balance in Escrow account and exporting:

You can title and format the resulting spreadsheet however you want. And your chart of accounts will only have one Escrow account on it, instead of an ever-growing and permanent list of escrow accounts for future and past customers.