Refundable damage deposits on equipment hire
How an events hire company takes a refundable damage deposit, keeps it out of income, returns it, and keeps only what the damage costs.
By Achekam · · 5 min read · For Events businesses in South Africa, Nigeria, Kenya
A marquee, a sound rig or a set of glass-topped cocktail tables goes out on Friday and comes back on Monday. Usually it comes back fine. Sometimes it comes back with a torn side panel, a speaker that crackles or three tables short. The damage deposit is what makes Monday's conversation possible, and how you record it decides whether your books tell the truth in the meantime.
The mistakes are predictable: the deposit is counted as income in the month it arrives, then refunded weeks later as if it were an expense; or the refund is paid from the bank and nobody records it against the customer at all. Both leave the hire company's figures wrong. Here is a cleaner way to run deposits in Achekam.
A deposit is not income
Until the equipment is back and checked, the deposit is the customer's money held by you as security. If nothing is damaged, every cent goes back. Only the part you keep for repairs ever becomes yours. Investopedia's explainer on escrow describes the neutral-third-party version of this idea, where someone independent holds money until both sides perform. In equipment hire you are the one holding it, which is exactly why it should not sit in your sales.
So the aim is simple: the hire charge is income, the deposit is not, and any damage you charge becomes income only when you decide to keep it.
Two ways to take the deposit
You can take the deposit in either of two ways in Achekam. Pick one and use it every time, because a mix of both is hard to follow later.
Route one: held on the customer's account. Invoice only the hire charge. Ask the customer to pay the hire charge plus the deposit, by transfer or at your counter. When you record the payment against the hire invoice, the hire invoice is settled and anything paid over is held on the customer's account. The deposit never touches your sales. This route suits customers who pay by transfer, because a pay link asks for the invoice amount.
Route two: a deposit invoice. Some customers, especially companies, will not pay without a document. Raise the deposit as its own invoice and send it as a PDF on your letterhead, with a pay link if they pay online. The catch is that issuing any invoice posts it to the ledger as debtors, sales and output VAT, so the deposit will sit in sales until you credit it. Ask your accountant how VAT applies to a deposit and to any amount kept for damage in your country, and whether they want a journal at month end while a large deposit is outstanding.
| Route one: held on account | Route two: deposit invoice | |
|---|---|---|
| Document the customer gets | The hire invoice only | A separate deposit invoice |
| Pay link possible | For the hire charge only | Yes |
| Deposit shows in sales | No | Yes, until credited |
| How it is returned | Refund of the held amount | Credit note, then refund |
Returning the deposit
When the kit comes back undamaged, return the money promptly and record that you did.
- Paid by transfer or cash. Pay the refund from your bank and record it against the customer. Administrators can refund or reverse a receipt.
- Paid online through a gateway. Achekam does not send the refund through the gateway for you. Make the refund in the gateway's own dashboard, then record it in Achekam, so your books and the gateway agree.
Bank transfers deserve one more check. The pay page can show your bank details and a payment reference, and a staff member marks a transfer received once it appears on the bank statement. Make sure the deposit really arrived before you hand over a marquee on the strength of a screenshot.
On route two, issue a credit note from the deposit invoice before refunding. A credit note is raised from the invoice it corrects, in full or for chosen lines, and posts to the ledger, so the deposit leaves your sales. Any credit left over is held for the customer, ready to refund.
Keeping part of it for damage
Inspect returns with the customer present if you can, and photograph damage before anything is repaired. Then get a repair quote or a replacement cost so the amount you keep is a real figure, not a guess made in the yard on Monday morning.
A worked example in words: a wedding planner hires a dance floor and pays the hire charge and the deposit. Two panels come back cracked.
- Raise a damage invoice for the repair cost, describing the panels and the date of return.
- On route one, re-allocate the planner's receipt so that part of what is held on their account settles the damage invoice. On route two, credit the deposit invoice in full first, then re-allocate the receipt that paid it in the same way.
- Refund whatever remains of the deposit.
- E-mail the damage invoice with your photos and the quote, so the planner can see how the amount was reached.
The damage charge is now income, the rest of the deposit has gone home, and nothing about the deposit is hiding in your sales.
A monthly look at what you are holding
At month end, open the trial balance and the customer balances and look for deposits still held for jobs that ended weeks ago. Each one is either a refund you forgot or a damage claim you never raised. Settle both before the month is closed.
Setting the rules before the next booking
Write your deposit terms into the hire agreement: the amount or how it is worked out, when it is refunded, how damage is assessed and what evidence you will show. Then choose route one or route two and train whoever takes bookings to use it every time. For a hire company that also pays deposits to its own suppliers, see deposits paid to venues and caterers; for why the till itself wants payment in full, see ticket deposits and the till.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
