How Money Flows in VRM
Escrow Accounting
VRM is designed to track transactions through your rental escrow or trust account. When VRM accounting procedures are followed correctly you should be able to reconcile the VRM general ledger balance and trust account balance with your escrow bank account every month. When a money market account is used to manage escrow deposits along with a checking account for escrow expenses, it is possible to combine the beginning and ending balances of both accounts in order to reconcile with VRM on a monthly basis. When escrow and operating funds are co-mingled in the same bank account, it is virtually impossible to reconcile as there is no way to track operating account transactions in VRM.
VRM is a property based system. This means that each property has its own set of accounts. For example, there is not one management account but instead, a management account for each property in your system. This makes it very easy to identify and correct problems with transactions in the system. Also, each property has an owner account and an owner(s) is (are) attached to the property owner account. When ownership is changed. The selling owner must be removed from the owner account and the new owner assigned.
Accounting Terminology Commonly Used in VRM
Terms commonly used are:
Pay a receivable:
A receivable is any amount owed to an account in VRM. It can be a prepay amount due on a reservation or a balance owed by an owner. Receivable amounts due are paid by either posting a payment to a reservation in the PayUp! screen or by posting a payment to a non-reservation account in
Accounts Receivable. On a reservation, a receivable is created by assigning a rental price or by adding guest or custom charges to the reservation. In Accounts receivable, a receivable needs to be created first in order to make a payment to the receivable.
Pay a payable:
A payment due to a guest, owner or vendor with the proceeds from a reservation(s) or work order is called a payable. When payables are set out to be paid, they are expensed and then disbursed to the appropriate party. When accounts are expensed, the funds are moved from the original account to Accounts/Payable. All payables in the check queue are essentially in Accounts Payable.
Payables can be expensed out in one of two ways; by using the “Expense Ledger Balance” function which disburses all available funds in the account being expensed as of the date the ledger balance is set to be expensed. Only accounts with a vendor attached can be expensed using the "Expense Ledger Balance" function in Accounting. All accounts can be expensed individually or in some cases batch format in Accounts Payable.
The recipient of the disbursed funds is the Payee.
In VRM, payees are distinguished according to type: member, vendor, owner or Travel Agent and are disbursed separately. You will see this in Accounts Payable and in the Check Queue. Reservations distribute their funds from the Prepay account to the accounts designated to receive them (management, owner, taxes, etc.) with the automated jobs that run nightly at 11:20 PM. Automatic distributions occur according to each client's business rules which are set in the system configuration. The night a reservation is checked out is generally when ALL Prepay funds are distributed off the reservation leaving the Prepay account balance at $0.00. Some funds can be configured to distribute prior to arrival (e.g., Travel Insurance), on arrival (Accidental Rental Damage Insurance), or on departure but by default all funds should automatically distribute on the night of check out.
The Flow of Money
Money flows through the Virtual Resort Manager system based on a custom designed system of user accounts. This functionality allows you the flexibility to configure your money flow to best fit the financial structure of your individual business. The hourglass illustrates this process.
When installation of your system begins, the software is configured with four basic accounts: Prepay (rent and fees collected in 
advance of arrival); Security Deposit (damage deposit); management (fees and commissions); and owners. As part of the installation process, your system of accounts will be configured and placed in the bottom of the hourglass.
Typically, the accounts will include your various tax accounts, travel insurance, damage deposit waiver funds, housekeeping, reservation and cancellation fees, and other reservation related categories. Included, of course, will be your management commissions, and your pay-out to owners.
Money belonging to prepay and security deposit accounts resides in the top of the hourglass pending distribution of the reservation, which normally takes place automatically on the night of check-out.
On check-out, or at earlier times designated by you, Prepay amounts automatically pass through the neck of the hourglass using a series of automated processes which take place each night at 11:20 pm. In addition to prepay, work orders which have been approved for payment, damage deposits which are ready to be refunded to the guest, and certain other items also pass through the hourglass.
As a result of these processes, which are called "allocation," funds the following morning have been broken up for you and placed in the various accounts.
At this point, the funds in the bottom of the hourglass are "payables" ready for disbursal. All that is necessary is for you to assign the items to a payee (vendor), and move the items to the check queue for printing. Items can be paid now, or can remain in the payables area awaiting disbursal at a later time.
The Chart of Accounts:
There are four predetermined accounts assigned to each property in VRM.
These accounts are:
- Prepay
- Damage Deposit
- Owner
- Management.
These accounts cannot be changed to function in any other manner except that pre-determined by the software (See below the minor variation for the Management account). All money paid into a reservation is assigned to either the prepay account or the damage deposit account until the charge to which the payment is assigned distributes
(leaves the reservation and goes to its designated account).
Money can leave the Prepay account at one of three times:
- on payment
- on check in
- on check out
Assuming no hold is put on the funds, the damage deposit will automatically refund to the guest at the pre-designated time (set in the system configuration) after check out. Assuming the payment criteria have been met, money can be assigned to automatically leave the prepay account to go to either the owner or the management account at two pre-designated times; with the first payment
(advancing) and/or at check out. Advances for up to 100% of the rent payment can be manually advanced at any time.
All monies designated to go to management can be assigned to the management account or as many management accounts as needed (i.e., one for housekeeping overrides, one for amenities, etc.,) can be set up.
The chart of accounts established in the System Configuration > Financial > Accounts determines the destination accounts to which money from posted receivables flows in VRM.
Although the software only has one Management account “hard-wired” to receive management commissions, the program will recognize up to four accounts as “Management” accounts in VRM. These four management accounts can be created and named anything in System Configuration > Financial > Accounts but their functions are fixed and set in System Configuration > Company > Offices.
They are the accounts designated by the program to receive:
- Management Commissions – this is the original management account
- Reservation Fees
- Cancellation Fees
- Travel Insurance Commissions
NOTE: The primary management account designated by VRM as THE management account should always be the account assigned to receive management fees or commissions and can be renamed from management to “management commissions” if desired.
Regardless of the number of accounts established within your system, every property has its own separate set of these accounts. Each property has its own management commission, prepay, damage deposit and owner account in addition to its own set of tax accounts and travel insurance accounts. There is no one management account from which money can be drawn.
All accounts in VRM should be configured to handle revenue distributed from reservation prepay accounts. No accounts should be created that have no source of reservation revenue.
Reservation Vs Vendor Accounts
Accounts are designated as either reservation accounts or as vendor accounts.
A reservation account is one that does not have a single vendor assigned to receive the money from that account and is generally established for accounts such as housekeeping and linens where multiple contract housekeepers or linen vendors are paid from the same account on a per reservation basis.
For example, when a reservation checks out, the money in the reservation prepay account assigned as a housekeeping charge to pay for departure cleaning will automatically be transferred from the prepay account to the Housekeeping account and become available to pay the housekeeper for the departure cleaning.
Reservation Accounts can be identified in the System Configuration>Financial>Accounts as having a vendor disabled. Once a reservation account, always a reservation account. A vendor should never be attached to an account that was previously configured as a reservation account because of the way VRM allows access to funds in the two account types.
The Prepay and Damage Deposit accounts are also reservation accounts.
Vendor Accounts (also know as Non-Reservation Accounts) are accounts from which a single vendor is paid automatically when the “Expense Ledger Balance” function is used. This Vendor is assigned to receive money from the account in System Configuration>Financial>Accounts.
Only accounts with vendors attached can be expensed using the “Expense Ledger Balance” Function. Reservation Accounts are expensed from “Accounts Payable.” It is also possible to expense a vendor account to any vendor in accounts Payable. Automatic functions which move money from a reservation Prepay account to other accounts in the system occur nightly at 11:20 PM with the “nightly Jobs.”
The Travel Insurance account and the Owner account for Long Term Properties are currently the only accounts which routinely disburse monthly. The Travel Insurance Account automatically disburses on the last night of each month with the nightly jobs and the Long Term Owner Accounts disburse to owners on the night set in System Configuration > Company >Long Terms.
Sections You Will find in this Chapter
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