Deposits are one of the most effective tools accommodation providers have to secure bookings and protect against late cancellations or no-shows. But when handled poorly, deposits can also become a major source of friction for guests – or worse, a liability for your business.
The purpose of deposits is simple: they act as a commitment from the guest and a financial safety net for the property. Yet one of the most common accounting mistakes is misclassifying these payments as immediate revenue instead of liabilities. Recording deposits as income before the guest arrives can inflate your revenue figures, distort your financial statements, and expose your business to tax complications if deposits need to be refunded. Therefore, consider automating the correct classification of deposits as liabilities, recognising them as revenue only after the guest’s stay begins – a cornerstone of robust accounting.
Another frequent issue is inconsistent or unclear deposit policies. Guests who don’t understand how much they need to pay, when it’s due, or what happens in the event of a cancellation are more likely to abandon their booking or dispute charges later. Properties benefit greatly from clearly communicating deposit terms upfront during the booking process.
Automation plays a key role here as well. By automating deposit collection, you reduce human error, eliminate manual payment chasing, and ensure deposits are collected on time, every time. This not only helps secure your revenue but also improves the guest experience by making the collection process seamless. So, consider setting expectations and building trust with:
- Automated reminders before payment deadlines
- Auto-confirmation emails
- Instant receipts
Flexibility in deposit structures can also give properties an advantage. For example, allowing for flat fees or percentage-based deposits depending on booking value or length of stay can better match guest profiles and reduce barriers to booking. Meanwhile, securely storing deposit payments and using pre-authorisation for security or damage deposits simplifies management and avoids unnecessary refunds.
When deposits are handled with accuracy, transparency, and automation, they become a powerful tool to protect your income without compromising guest satisfaction. Systems like eviivo Suite™ offer built-in features for collecting, classifying, and tracking deposits in compliance with accounting standards – giving you peace of mind that both your revenues and your guests are protected.
For more guidance on setting clear deposit policies and automating processes for accurate invoicing, download our Invoice and Reconciliation White Paper.
Stay tuned for Part 3, where we’ll explore how to keep your books balanced by managing deferred revenue effectively.