COMMISSION CLAWBACK

Meg51

My client is a mortgage broker.  He receives upfront commissions on settled loans.

 

One of his loans has been paid out early and the lender is clawing back 50% of the upfront commission.  The lender is doing that by withholding any future commissions and deducting those amounts from the debt.

 

How do I account for this? 

*  My client has obviously already paid GST on the amount so we need to have an adjustment for this GST.

*  We need to enter the "income" for future commissions even though they will not be received in the bank account.

*  If I enter the debt as a Purchase how do I account for the "repayments" as they will not be coming through the bank?

 

Your help would be most appreciated.

 

Many thanks.

Tracey_H

Hi @Meg51 

 

Thanks for your post. It might be worth checking with the accountant about how this needs to be recorded. From an AccountRight perspective though you use the Undeposited funds account for both the Receive Payments and Pay Bills transactions. Then process the $0 bank deposit through Prepare Bank Deposit window.

 

For example:

• you've got a commission sale invoice for $10,000, record a Receive Payments transaction and tick the Undeposited Funds option
• you've entered the debt as a purchase transaction, the lender has taken that $10,000 commission, record a Pay Bills transaction and change the Pay from Account to the Undeposited Funds account
• go to Prepare Bank Deposit and you'll have the debit and credit transactions for $10,000, select them both and the bank deposit amount will be $0.00. Record the transaction
• if the lender doesn't take the whole commission, say they only took $5,000, record the Pay Bills transaction for $5,000. In the Prepare Bank Deposit window tick both transactions and the bank deposit will be $5,000 which can be matched in bank feeds

I would recommend checking with the accountant to make sure this is suitable and accounts for the GST correctly.

 

Please let me know if you need further help.

 

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