Setting up and using working capital in Guesty

Working capital is the money used to fund operations and meet short-term obligations. Include working capital in your agreement with the owner to protect yourself from liquidity or cash flow problems in case a repair is needed on a property.  

Working capital in contract reflects the amount of money agreed upon with the owner to be withheld. This amount is entered in the owner profile as a static amount.

Working capital on hand is the current amount in the working capital sub-ledger. This amount changes dynamically as funds are moved between the working capital and owner balance sub-ledgers.

When you make a disbursement to the owner, funds are automatically withheld from or refunded to the owner until the working capital on hand balance equals the working capital in contract amount.

How it works

1.  You enter the agreed upon working capital in contract amount in the owner's profile. 
2. The working capital on hand is funded in one of the following ways:
   • You create a transaction to manually move the amount from the owner balance to working capital.
   • The amount is automatically withheld from the next payout to owner. If the payout is less than the working capital in contract amount, withholdings occur in consecutive payouts until the working capital on hand balance equals the working capital in contract amount. 
3. When you need to use working capital funds, create a transaction to manually transfer funds to the owner.  For example: An owner's working capital in contract and working capital on hand are both $1000. The owner needs to replace an appliance, at the cost of $500.
   1. Create a transaction to transfer $500 from working capital to the owner balance to cover the cost.
   2. The working capital on hand is reduced to $500.
   3. In the next disbursement to the owner, $500 is automatically withheld to get the working capital on hand balance back to the working capital in contract amount of $1000.
4. Every time funds are moved between working capital and the owner balance, a journal entry is created  and the owner statement updated.

Set the working capital in contract amount

Step by step:

1. Sign in to your Guesty account.
2. In the top navigation bar, click the mode selector and select Operations mode.
3. Click Owners.
4. Click the relevant owner.
5. Scroll down to the "Business information" section. To the right, click Edit.
6. In the "Working capital" field, enter the working capital amount in contract.
7. At the top right, click Save.

At any point you can edit this field to increase or decrease the working capital in contract amount. Once this amount is changed, the next time you make a disbursement to the owner funds are automatically withheld or refunded, depending on the working capital on hand balance.

If you no longer have a working capital agreement with the owner, follow the steps below.

Remove working capital in contract amount

Step by step:

1. Sign in to your Guesty account.
2. In the top navigation bar, click the mode selector and select Operations mode.
3. Click Owners.
4. Click the relevant owner.
5. Scroll down to the "Business information" section. To the right, click Edit.
6. In the "Working capital" field, change the amount to "0".
7. At the top right, click Save.
8.  This amount is returned to the owner in one of the following ways:
   • You create a transaction to manually move funds from working capital to the owner balance.
   • In the next disbursement to the owner, the working capital on hand balance is automatically refunded.
9. Regenerate the owner statement to apply the change.

Manually transfer working capital

Manually move funds between the owner and working capital outside of a disbursement in the following scenarios:

• The owner needs to use working capital funds to pay for an expense or repair
• You want to fund the working capital on hand on a certain date
• You no longer have a working capital agreement with the owner, and want to refund the working capital on hand balance on a certain date

Step by step:

1. In the top navigation bar, click the mode selector and select Accounting mode.
2. Click General ledger and select Posting journal.
3. In the top-right corner, click .
4. Select Working capital as the transaction type. 
5. Under "From" and To", select from the dropdown menu. You can transfer funds from working capital to an owner, or vice versa.
6. Under "Owner", select the specific owner for this transaction from the dropdown menu.
7. Fill in the amount to transfer and the recognition date.
8. Click Add.

View working capital balances

Step by step:

1. Sign in to your Guesty account.
2. In the top navigation bar, click the mode selector and select Accounting mode.
3. Click General ledger and select Balances.
4. Select Owners balance as of today.
5. To the right, click Columns. In the dropdown menu, toggle on Outstanding balance, Working capital in contract and Working capital on hand.
6. At the top right, click Save or Save as and name the filtered view for future access.

If the working capital on hand balance is less than the working capital in contract, it's reflected in the owner ledger balances as follows.

• Balance owed from PMC to owner

When this payout is made, the $500 difference is automatically transferred from the owner balance to working capital.

• Balance owed from owner to PMC

In the example shown above, there is $0 working capital on hand for a working capital in contract amount of $1000. The ending balance of $17,510.77 is owed from the owner to the PMC. $1000 is added automatically to make the outstanding balance $18,510.77. Once the owner pays this amount, $1000 is transferred from the owner balance to working capital.