Router deposits and equipment that is not returned
How a provider holds a refundable router deposit on the subscriber's account, refunds it on return, and charges for equipment that never comes back.
By Achekam · · 4 min read · For Telecoms businesses in South Africa, Nigeria, Kenya
Many internet providers lend a router, an ONT or a wireless antenna to each subscriber and take a deposit for it. The idea is simple: the subscriber gets the deposit back when the equipment comes back, and the provider keeps it if the equipment does not. In practice, deposits go missing in the books, refunds are paid to subscribers who never returned anything, and equipment worth more than the deposit disappears without a charge.
The root cause is usually accounting for the deposit as income on day one. This article explains why that is wrong, how to hold a deposit in Achekam, and what to do at the end of the contract in each case.
A deposit is money you may have to give back
A refundable deposit is not revenue. It is money you hold that belongs to the subscriber until something happens: the equipment comes back and you return it, or the equipment does not and the deposit is applied to what they owe. Until then, it is a liability. Investopedia's explainer on deferred revenue describes why money received in advance, deposits included, is a liability until delivered rather than income.
Invoicing the deposit as a sale gets this wrong twice. It inflates revenue in the month the subscriber joins, and, if your invoices post output VAT, it may charge VAT on money you will hand back. Whether any VAT arises on a deposit that is later kept is a question for your accountant in your country.
Holding it on the subscriber's account
The simplest approach in Achekam uses how customer receipts work. A business records customer payments against one invoice or spread across a customer's invoices, and any extra beyond the invoices allocated is held on the customer's account.
So at sign-up:
- Issue the first invoice for installation and service only, without the deposit.
- Ask the subscriber to pay the invoice plus the deposit in one payment.
- Record the payment as one receipt, allocate the invoice amount, and leave the deposit unallocated, where it is held on the subscriber's account.
Make it a firm rule that nobody allocates that held amount to later monthly invoices. A held deposit used to pay a monthly invoice is a deposit you no longer have when the router comes back. Note the deposit on the subscriber's record and in your sign-up checklist.
Some accountants prefer a separate liability account instead. Each business has its own ledger, accounts can be added, and manual journals can be posted, so an "Equipment deposits held" account is possible as well. Agree the method once, and use it for every subscriber.
Returning it when the equipment comes back
When the equipment is returned in working order:
- Check it in. Record the serial number and condition, and move it back into your equipment records.
- Refund the deposit. Administrators can refund or reverse a receipt, so the deposit is refunded by an administrator, and the payment back to the subscriber is made from your bank.
- Send a final statement. The server produces a statement of account as a PDF that can be e-mailed, showing the account settled.
Refund to the account the deposit came from wherever possible, and only after the equipment has been checked in. A refund paid before the router is on your shelf is how deposits disappear.
Charging for equipment that does not come back
When the subscriber leaves and the equipment does not return within your terms:
- Send a written notice with a final date for return and the charge that will apply.
- Issue an invoice for the equipment charge stated in your contract. Issuing posts debtors, sales and output VAT, so check the VAT treatment with your accountant first.
- Apply the held deposit to that invoice. A receipt can be re-allocated, so move the held deposit onto the equipment invoice.
- Chase any balance. If the equipment is worth more than the deposit, the rest is an ordinary debt, with statements and reminders.
If the router comes back late, after you have charged for it, a credit note issued from the equipment invoice, in full or for chosen lines, reverses the charge, and any leftover credit is held for the subscriber to refund.
If an early-termination fee is also due, bill it separately, as described in billing an early-termination fee.
Taking the equipment off the asset register
If you keep lent equipment on the fixed-asset register, an unreturned router is an asset you no longer have. The register lets a business dispose of an asset with the profit or loss posted, so record the disposal once you are sure it is not coming back.
The loss on disposal and the income from the equipment charge are separate entries. Together they show what the unreturned router actually cost you. Whether equipment you lend belongs on the register or in stock in the first place is covered in routers lent to subscribers: stock or fixed assets, and equipment still waiting on installers' vans is covered in routers and devices held on installers' vans.
A deposit checklist for your support team
- Take the deposit with the first payment and leave it unallocated.
- Never apply a held deposit to a monthly invoice.
- Refund only after the equipment is checked in, by an administrator.
- Charge for unreturned equipment by invoice, then re-allocate the deposit.
- Dispose of the equipment in the register when it is written off.
Pin it next to whoever handles cancellations, and review the held deposits on your subscriber accounts at least once a quarter.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
