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Dynamics 365 Community / Forums / Microsoft Dynamics GP (Archived) / Setting up a performan...
Microsoft Dynamics GP (Archived)

Setting up a performance bond in GP

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Posted on by Community Member

Hello:

I need some help with an unusual transation.

From time to time, a company that we do business with will provide us with a "performance bond" - basically it is money that we hold on deposit during the length of our contract with them, that is refunded to them when the contract is complete (or used to offset costs if they default on the contract).

In the past, these types of bonds have been recorded simply in our books directly through the general ledger as DR Bank Account, CR Bonds Payable.

What I don't like about this approach is that I have to do an awful lot of digging through old transactions to find out exactly which deposit is for which company, and sometimes these contracts can continue or be renewed for a significant amount of time.

I would prefer to have the bonds payable set up in a subleger so that I can print a report showing the breakdown of the balance in our Bonds Payable account (I am assuming the Payables subleger might be able to do this), but cannot figure out how to record it properly. 

 

Any suggestions?

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  • Mariano Gomez Profile Picture
    Mariano Gomez 26,225 on at
    RE: Setting up a performance bond in GP

    You definitely will not want to use an 'indefinite' due date. Set the payment term to be the duration of the contract. So if the contract is 6 months, then setup a payment term of NET180. Which means the payment is due 180 days from the invoice date. If the contract goes beyond the original days, you can always go to Edit Transaction Information under Purchasing | Transactions and extend the due date there.

  • Community Member Profile Picture
    Community Member on at
    RE: Setting up a performance bond in GP

    Hi Mariano G - So I am testing out your #2 suggestion in our test environment, and so far I have been successful in completing the steps.

    My only question left is the aging of the amount in Payables.  When I run a report on this new vendor class, it shows my balance for this bond as being a very aged Payable... (I backdated my test transaction to July 1, 2012 just to see what will happen if the bond is on deposit for a long period of time).  I did set up new "Payment Terms" for this vendor class with "None" under the Due category, but that has not seemed to do the trick.  The "Due Date" is still showing as July 1, 2012.

    Do you have any suggestions on how to leave this payable with an 'indefinite' due date?

  • Mariano Gomez Profile Picture
    Mariano Gomez 26,225 on at
    RE: Setting up a performance bond in GP

    There you go! 3 methods are better than 2, lol!

  • Suggested answer
    Frank Hamelly | MVP, MCP, CSA Profile Picture
    Frank Hamelly | MVP... 46,321 Super User 2025 Season 1 on at
    RE: Setting up a performance bond in GP

    I've never experimented with this but you might consider setting up your performance bonds as Fixed Assets, although in reality they're Fixed Liabilities.  You could set them up in a separate Asset Class with the appropriate accounts in Account Group Setup and assign No Depreciation as the Depreciation Method, then retire the asset when the bond expires.

    You'd still have to perform a separate cash transaction on the front and back ends, but this might be a good way to track your bonds.

  • Mariano Gomez Profile Picture
    Mariano Gomez 26,225 on at
    RE: Setting up a performance bond in GP

    Two methods:

    1) You can record it as a bank transaction Increase Adjustment against your Bonds Payable account.

    2) You can setup the company as a customer in receivables and a vendor in payables and relate the two records via the Customer/Vendor Consolidation feature. On the vendor side, the AP account will be your bonds payable account.

    When you receive the cash from the company, you will enter a cash receipt in AR (Sales | Transactions | Cash Receipt):

    DB   CASH  

    CR   AR

    You will then want to consolidate the account (Sales | Transactions | Customer/Vendor Transactions), which will create a debit in AR applied to the cash received from the company:

    DB  AR

    CR  Suspense

    This in turn will generate a liability in payables:

    DB  Suspense

    CR  Bonds Payable

    If you must return the cash to the company, you can issue a standard check or EFT in payables:

    DB  Bonds Payable

    CR  Cash

    While #2 seems like a lot of work, it does provide for a nice workflow using the AR and AP subsidiaries and you can always use all the reporting on both modules to generate reports. Furthermore, you can setup a vendor class called BONDS and use that to run most of your reports without even referencing the vendor ID you setup for this company.

    With #1, I guess you could always use the miscellaneous check feature in Bank Rec to cut a check for the company in question. If you want to keep your bonds liabilities separate from your actual AP Trade, then this is probably a very good option. You could leverage the Bank Distribution History report to print all transactions related to your Bonds Payable account at that point.

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