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When a business has to hold onto other people’s money, the law requires that the money be kept in a type of bank account called a "trust account". In the hospitality business, the guest's money is held in the trust account until it is transferred to other entities, namely, you - the property management company (PMC), the property owner, tax authorities, and third-party service providers called vendors.
Since the PMC is holding (sometimes very large amount of) funds that need to be paid to different stakeholders, at any given moment they need to:
- Know they are holding the correct amount of funds to meet all of their obligations.
- Be able to identify who owns the funds in the trust account at any point.
- Ensure they do not commingle funds (commingling of funds is when you pay one stakeholder's expenses with the funds from another stakeholder).
- Protect guests from losing their money if the short-term rental host goes out of business or fails to pay their expenses.
- Ensure that they are paying all applicable taxes and fees
Our Accounting solution uses trust accounting to do all of that by tracking the ownership of funds for multiple stakeholders as the funds move through our system. Standard accounting would not be enough, because it tracks the profit and loss of just one entity.