Who should read this guide?
This article will teach you how to automate Airbnb trust accounting using Xero, including the workflows that surround Airbnb property managers who use a trust account to collect funds from Airbnb on behalf of owners. This guide can be used as a general foundation for property managers who need to follow state or local requirements in regards to trust accounting. A trust account in this context is a bank account provided by a financial institution that is used by real estate brokers and licensed property managers to manage funds on behalf of the property owners they service.
In this guide, we assume that you have Xero accounting software and all monies collected by Airbnb are transferred directly to the trust bank account. We also assume that you have a separate bank account for your day-to-day business operations.
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NOTE: We only cover income accounting in this guide, not costs. For a guide about Airbnb costs and chart of accounts to consider, check out this guide: Airbnb Costs and Chart of Accounts to Consider
Table of Contents
What you’ll get from this guide:
- A template for Xero with detailed chart of accounts for Airbnb trust accounting
- Learn how to automate Airbnb trust accounting with Tallybreeze
- Execute common transaction workflows in Xero
- Generate monthly owner statements and reports for your clients
Cash Flow Diagram
Who should not read this guide?
There are other business models that may be more suitable in your particular scenario, which are covered better in the following guides:
- Airbnb Property Management Accounting using Xero
- Airbnb Co-Host Accounting in Xero
- Airbnb Arbitrage Accounting in Xero
- Airbnb Investment Accounting in Xero
- All Airbnb templates for Xero
- Airbnb Accounting & Bookkeeping: A Comprehensive Guide
Trust Accounting vs Accounting for your Business
What is fiduciary duty? Fiduciary duty is a legal term that means you are acting in the best interest of another person or organization. As part of trust accounting, property managers serve a fiduciary responsibility when they are handling owner funds within a trust account. This requires them to provide auditable records for the sake of transparency in their use of owner funds.
Many jurisdictions have requirements around managing the accounting and reporting of trust accounts. However, even if your state has no requirements, it’s still a good practice to act as though such requirements exist. This is because of the transparency that trust accounting provides, which owners love transparency.
When you are operating a business that manages a trust account, you are essentially accounting for two entities within the business: 1.) Accounting for the Trust Account and 2.) Accounting for your Property Management Business.
Three-Way Trust Reconciliation for Trust Accounting
The proper reconciliation process for Airbnb trust accounting is known as the three-way trust reconciliation process. This means there are three components that have balances that must be equal when reconciling. These three components are as follows: the trust ledger, the stakeholder ledgers, and the trust bank statement (Source)
- The trust ledger: This is a ledger of all the transactions of the trust account, which will be recorded in Xero. In our chart of accounts template, the trust ledger is the sum of all accounts that start with the words “Trust Account Liability” (all codes starting with 23xxxx).
- The stakeholder ledgers: The stakeholder ledgers are created by taking the trust ledger a step further, assigning each transaction to a specific stakeholder and grouping together all the trust account activity associated with each individual stakeholder. In our chart of accounts template, under our trust ledger (Trust Account Liability), we separate two primary stakeholders, Owner Funds and Property Mgmt Funds. We’ll also make use of tracking categories in Xero to further separate funds between each of our owners.
- The trust bank statement: This is generated by the bank where the trust account is held and it provides third party verification of the transactions posted to the trust account.
During reconciliation, the trust bank statement balance should match both the trust ledger and the sum of all stakeholder ledger balances – this is the reason it’s called “three-way reconciliation.”
Accounting for your Property Mangement Business
In addition to reconciling the trust ledger and each stakeholder ledgers, the property manager also needs to reconcile their own company ledgers. Property management funds are held in the trust account and are eventually paid from the trust bank account to the property manager’s operating bank account. Accordingly, in our template, you’ll notice three main sections: Trust Account Assets, Trust Account Liabilities and Property Mgmt Revenues. Respectively:
- Trust Account Assets: This is the sum of accounts that start with “Trust Account Asset”, which tracks what’s owed to the property management company from the trust account and should always match the Property Mgmt Funds total within Trust Account Liability.
- Trust Account Liabilities: This is the trust ledger discussed above.
- Property Mgmt Revenues: This keeps track of all earnings of the property management company derived from the trust account.
Airbnb Trust Accounting: Xero Chart of Accounts Template
Here we’ll explain the chart of accounts template provided by Tallybreeze (formerly Bnbtally) in great detail.
Account Codes
| No. | Account | Type |
|---|---|---|
| 12100 | Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Reserved | Asset |
| 12200 | Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable | Asset |
| 23120 | Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Reserved | Liability |
| 23140 | Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable | Liability |
| 23310 | Trust Account Liability – Owner Funds – Owner Funds Reserved | Liability |
| 23330 | Trust Account Liability – Owner Funds – Airbnb Collections – Accommodation Fare | Liability |
| 23340 | Trust Account Liability – Owner Funds – Airbnb Collections – Cleaning Fees | Liability |
| 23350 | Trust Account Liability – Owner Funds – Airbnb Collections – Resolution Adjustments | Liability |
| 23360 | Trust Account Liability – Owner Funds – Airbnb Collections – Airbnb Service Fees | Liability |
| 23370 | Trust Account Liability – Owner Funds – Airbnb Collections – Refunds | Liability |
| 23380 | Trust Account Liability – Owner Funds – Airbnb Collections – Custom Taxes Payable | Liability |
| 23390 | Trust Account Liability – Owner Funds – Airbnb Collections – Tax Withholdings | Liability |
| 23400 | Trust Account Liability – Owner Funds – Airbnb Collections – Airbnb Suspense Account | Liability |
| 23500 | Trust Account Liability – Owner Funds – Less Amounts Due to Property Mgmt | Liability |
| 23600 | Trust Account Liability – Owner Funds – Less Owner Payouts | Liability |
| 41100 | Property Mgmt Revenue – Airbnb Commissions | Revenue |
| 41200 | Property Mgmt Revenue – Airbnb Cleaning Fees | Revenue |
NOTE: In this guide, we only cover income accounting, not costs. For a guide about Airbnb costs and chart of accounts to consider, check out this guide instead: Airbnb Costs and Chart of Accounts to Consider
Detailed Explanation of Accounts
Click to expand and learn more about any particular account.
Trust Account Assets
12100 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Reserved – This account balance should always match “23120 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Reserved”. This account tracks amounts allocated to the property management company in the trust account but are held in reserve within the trust account for funding any issues needing to be paid by the property management company. For example, if you provide a refund to a guest because of something at the fault of the property management company (e.g. to reimburse on a complaint for an unclean listing), this amount should be paid out of the property management company portion of the trust account.
12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable – This account balance should always match “23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable”. This account tracks amounts due to the property management company from the trust account.
Trust Account Liabilities
23120 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Reserved – This account balance should always match “12100 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Reserved”. This account tracks amounts allocated to the property management company in the trust account but are held in reserve within the trust account for funding any issues needing to be paid by the property management company. For example, if you provide a refund to a guest because of something at the fault of the property management company (e.g. to reimburse on a complaint for an unclean listing), this amount should be paid out of the property management company portion of the trust account.
23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable – This account balance should always match “12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable”. This account tracks amounts due to the property management company from the trust account.
23310 – Trust Account Liability – Owner Funds – Owner Funds Reserved – This account tracks amounts allocated to owners in the trust account held in reserve. Rather than being paid out to owners, these amounts are held for funding property maintenance from the trust account.
23330 – Trust Account Liability – Owner Funds – Airbnb Collections – Accommodation Fare – This account tracks the accommodation fare portion of each Airbnb reservation. The accommodation fare is equal to the number of nights multiplied by the average nightly rate of each reservation.
23340 – Trust Account Liability – Owner Funds – Airbnb Collections – Cleaning Fees – This account tracks the cleaning fee portion of each Airbnb reservation.
23350 – Trust Account Liability – Owner Funds – Airbnb Collections – Resolution Adjustments – This account tracks any resolution adjustments collected from Airbnb.
23360 – Trust Account Liability – Owner Funds – Airbnb Collections – Airbnb Service Fees – This account tracks service fee costs from Airbnb for each reservation, which is subtracted from Airbnb collections.
23370 – Trust Account Liability – Owner Funds – Airbnb Collections – Refunds – This account tracks refunds executed by Airbnb, which is subtracted from Airbnb collections.
23380 – Trust Account Liability – Owner Funds – Airbnb Collections – Custom Taxes Payable – This account tracks any custom taxes collected from Airbnb and payable to a tax authority from the trust account.
23390 – Trust Account Liability – Owner Funds – Airbnb Collections – Tax Withholdings – This account tracks any taxes withheld by Airbnb for income tax obligations. This is very rare and usually due to the Airbnb account holder lacking tax identification information. Ideally, this account should not contain any balance and is seldom (if ever) used. To avoid income tax withholdings from Airbnb, be sure to update your Airbnb account with your tax identification information and verify your account.
23400 – Trust Account Liability – Owner Funds – Airbnb Collections – Airbnb Suspense Account – This account tracks any income or refund events from Airbnb not tied to any particular reservation or listing. For example, on rare occasions if you receive a credit from Airbnb for referring another host or if you purchase photography from Airbnb. When there’s no associated reservation related to the transaction, there’s no particular listing rules to handle the amounts in Tallybreeze.
23500 – Trust Account Liability – Owner Funds – Less Amounts Due to Property Mgmt – This account tracks any amounts subtracted from the owner’s portion of the trust account to pay the property management company.
23600 – Trust Account Liability – Owner Funds – Less Owner Payouts – This account tracks any amounts subtracted from the owner’s portion of the trust account to pay the owners.
Property Mgmt Revenues
41100 – Property Mgmt Revenue – Airbnb Commissions – This account tracks Airbnb commissions earned by the property management company.
41200 – Property Mgmt Revenue – Airbnb Cleaning Fees – This account tracks Airbnb cleaning fees earned by the property management company.
Accounts not included in this template
For the scope of this guide, we’re mainly focused on Airbnb revenue recognition and movements within the trust account. It is important to point out that our template does not include many general accounts. We also make reference to some accounts not include in this particular template, which we’ll list here:
- 11000 – Airbnb Payment Clearing Account – This account is created by Tallybreeze (formerly Bnbtally) but is not included in this template in particular. This account is used to apply payments to Airbnb invoices upon the day the Airbnb reservation payout is posted. Payouts can take 3-5 days (or longer) to arrive in the bank account after posted from Airbnb. Monies owed are held in this clearing account until the payouts are received in the bank. This account also helps to automate the reconciliation process in Xero.
- 1XXXX – Trust Bank Account – This is a bank account set up with your financial institution for funds held in trust. It’s a cash asset account solely for the management of owner funds as part of the three-way reconciliation process.
- 1XXXX – Operations Bank Account – This is a separate bank account set up with your financial institution. It’s a cash asset account to facilitate your Airbnb property management company’s day-to-day business operations.
- 4XXXX – Billable Expenses Income – This is a general account for capturing income received for the payment of billable expenses by owners, which may include a markup.
- 7XXXX – Billable Expenses – This is a general account for tracking billable expenses for any owners.
Quick Setup Steps
Here’s how to import the above chart of accounts template. All of the accounts discussed in this article can be imported into Xero automatically using Tallybreeze’s setup tools. Here’s how to access this utility:
- If you haven’t already, Sign Up to Tallybreeze. It includes free use of this template.
- Once registered, go to the Connections manager in Tallybreeze. Connect your Airbnb account, connect your Xero account and then create a connection between the two.
- Within the Connection settings, select “Set Up Xero”
How to Automate Airbnb Trust Accounting with Tallybreeze
Tallybreeze (formerly Bnbtally) is a powerful tool that helps property managers track all monies collected by Airbnb. It reconciles all reservations automatically and in great detail, making it easy for you to keep track of trust funds and commissions. Additionally, Tallybreeze offers presets so property managers can use trust accounting practices right out of the box. In this section we’ll discuss step-by-step how to set up a seamless automation using the chart of accounts above.
Tallybreeze establishes a connection between any number of Airbnb and Xero accounts, which therein processes accounting data for each reservation. Here you’ll set specific accounting rules for each listing. When reservations are detected, Tallybreeze can generate invoices automatically in Xero with all allocations processed to the trust account, including Airbnb collections, property management commissions, cleaning fee allocations and any other split needed.
Tallybreeze Listing Presets for Airbnb Trust Accounting
Tallybreeze (formerly Bnbtally) makes it easy to manage your listings on Airbnb and Xero. Once connected, you will be guided through the process of setting up trust accounting rules for each listing in just a few clicks. With our presets from our template, you can get started quickly and can customize as needed. These presets can be broken down into three groups: Lines 1-6, Lines 7-10 and Lines 11-14.
Explanation of Preset Lines
Click to expand and learn more about each preset.
Lines 1-6: All amounts received by Airbnb are 100% allocated to the owner in the trust account
This group of lines allocates 100% of all income from Airbnb to the owner within the Trust Account Liability under Airbnb Collections. This includes the accommodation fare, cleaning fee, Airbnb service fee (subtracted), any resolution adjustments, custom taxes (optional) and tax withholdings (if they exist)
| Airbnb Price Item | % | Account |
|---|---|---|
| Accommodation Fare | 100% | 23330 – Trust Account Liability – Owner Funds – Airbnb Collections – Accommodation Fare |
| Cleaning Fee | 100% | 23340 – Trust Account Liability – Owner Funds – Airbnb Collections – Cleaning Fees |
| Airbnb Service Fee | 100% | 23360 – Trust Account Liability – Owner Funds – Airbnb Collections – Airbnb Service Fees |
| Resolution Adjustment | 100% | 23350 – Trust Account Liability – Owner Funds – Airbnb Collections – Resolution Adjustments |
| Custom Taxes | 100% | 23380 – Trust Account Liability – Owner Funds – Airbnb Collections – Custom Taxes Payable |
| Tax Withholdings | 100% | 23390 – Trust Account Liability – Owner Funds – Airbnb Collections – Tax Withholdings |
Lines 7-10: A 20% commission is received from the owner to the property manager
This group of lines transfers 20% of the accommodation fare out of the owner funds of the trust account and allocates it to the property manager.
| Airbnb Price Item | % | Account |
|---|---|---|
| Accommodation Fare | -20% | 23500 – Trust Account Liability – Owner Funds – Less Amounts Due to Property Mgmt |
| Accommodation Fare | 20% | 23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable |
| Accommodation Fare | -20% | 12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable |
| Accommodation Fare | 20% | 41100 – Property Mgmt Revenue – Airbnb Commissions |
Lines 11-14: The entire Airbnb cleaning fee is received from the owner to the property manager
This group of lines transfers 100% of the cleaning fee out of the owner funds of the trust account and allocates it entirely to the property manager.
| Airbnb Price Item | % | Account |
|---|---|---|
| Cleaning Fee | -100% | 23500 – Trust Account Liability – Owner Funds – Less Amounts Due to Property Mgmt |
| Cleaning Fee | 100% | 23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable |
| Cleaning Fee | -100% | 12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable |
| Cleaning Fee | 100% | 41200 – Property Mgmt Revenue – Airbnb Cleaning Fees |
Example Reservation
Let’s say you have Tallybreeze set up for this listing using the preset settings above. Let’s say Airbnb sends a payout for a current reservation with the following itinerary price items:
- Accommodation Fare: $1500
- Cleaning Fee: $200
- Airbnb Service Fee: -$50
- Airbnb Transient Occupancy Taxes: $250
- Reservation Total: $1900
First, Tallybreeze accounts for all the income received by Airbnb, separating out each price item. The total amount to be received from Airbnb for this reservation is $1900, which is allocated to the Airbnb Payment Clearing Account to be later reconciled against the resulting bank deposit.
| Account | Debit | Credit |
|---|---|---|
| 23330 – Trust Account Liability – Owner Funds – Airbnb Collections – Accommodation Fare | $1500 | |
| 23340 – Trust Account Liability – Owner Funds – Airbnb Collections – Cleaning Fees | $200 | |
| 23360 – Trust Account Liability – Owner Funds – Airbnb Collections – Airbnb Service Fees | $50 | |
| 23380 – Trust Account Liability – Owner Funds – Airbnb Collections – Custom Taxes Payable | $250 | |
| 11000 – Airbnb Payment Clearing Account (Asset) | $1900 |
Next, within the same invoice, Tallybreeze calculates 20% of the Accommodation Fare ($1500 * 20% = $300), reallocates this amount as payable from the trust account and records it as earnings receivable by the property management company:
| Account | Debit | Credit |
|---|---|---|
| 23500 – Trust Account Liability – Owner Funds – Less Amounts Due to Property Mgmt | $300 | |
| 23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable | $300 | |
| 12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable | $300 | |
| 41100 – Property Mgmt Revenue – Airbnb Commissions | $300 |
Then, within the same invoice, Tallybreeze takes 100% of the Cleaning Fee ($200), reallocates this amount as payable from the trust account and records it as earnings receivable by the property management company:
| Account | Debit | Credit |
|---|---|---|
| 23500 – Trust Account Liability – Owner Funds – Less Amounts Due to Property Mgmt | $200 | |
| 23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable | $200 | |
| 12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable | $200 | |
| 41200 – Property Mgmt Revenue – Airbnb Cleaning Fees | $200 |
Finally, on the date the reservation payout is received from Airbnb into the Trust Bank Account (3-5 days later), a bank rule in Xero can automatically reconcile the amount back to the Airbnb Payment Clearing Account:
| Account | Debit | Credit |
|---|---|---|
| 1XXXX – Trust Bank Account | $1900 | |
| 11000 – Airbnb Payment Clearing Account (Asset) | $1900 |
Set Invoice Contact & Tracking Categories
In Tallybreeze, for each invoice in your listing rules, you’re able to configure a contact. For property managers, we usually recommend to set the owner as the contact. As for tracking categories, it’s a good idea to set both the owner and the listing address as the tracking category. See the example below for further illustration:
Automate Additional Bills & Invoices (Optional)
With Tallybreeze, you’re also able to automate the creation of additional bills and invoices for each reservation. Consider the following:
- Create a bill to set payouts payable to the property owner for each reservation.
- Create a bill to set amounts payable to a tax authority for each reservation.
- Create a bill to set amounts payable to a cleaning service for turnover of each reservation.
- Create additional invoice to set amounts receivable by any third party for each reservation.
Quick Setup Steps
All of the above settings can be quickly set up using Tallybreeze presets for your listings. Here’s how to set up these presets…
- If you haven’t already, Sign Up to Tallybreeze.
- After logging into Tallybreeze, set up your connections, then go to Listing Rules.
- Select any listing you’d like to automate that hasn’t already been set up.
- Select “Load Presets”.
From here, presets will be loaded as your listing accounting rules and you can edit as needed.
Execute Common Transaction Workflows in Xero
In this section, we describe the common transaction workflows that take place in Xero, as needed for Airbnb trust accounting and property management.
Paying the Property Manager from the Trust Account
Commissions have accumulated and it’s time to pay yourself, the property manager, from the Trust Bank Account. After any additional expenses have been reconciled, you can find the amount owed in your balance sheet under Property Mgmt Funds Payable and Property Mgmt Funds Receivable (both of these account balances should match). See the below example on how to process this transaction:
Example Transaction
You, the Airbnb property management company, have funds in the Property Mgmt Funds Receivable account in the amount of $9,000 owed by the owner, Jona Bombard for listing 989 Athens Way. You’d like to pay yourself this amount from the trust account.
First, you’ll need to transfer the money between the bank accounts at your financial institution. Once the transfer is posted and complete, record the outgoing transaction from the Trust Bank Account with the following entry:
| Debit | Credit | Tracking Category | |
|---|---|---|---|
| 1XXXX – Trust Bank Account (Asset) | $9,000 | Jona Bombard – 989 Athens Way | |
| 23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable | $9,000 | Jona Bombard – 989 Athens Way |
Next, record the incoming transaction to your Operating Bank Account with the following entry:
| Debit | Credit | Tracking Category | |
|---|---|---|---|
| 1XXXX – Operations Bank Account (Asset) | $9,000 | Jona Bombard – 989 Athens Way | |
| 12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable | $9,000 | Jona Bombard – 989 Athens Way |
Detailed instructions for Xero
1. Find the amount to pay
Assuming you’ve reconciled any expenses, the amount that needs to be paid can be found in the balance sheet under “23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable” or “12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable” (both of these account balances should match).
2. Transfer the amount from the trust bank account to your operations account
Once you’ve verified the amount, go to your bank and transfer this amount from the trust bank account to your business operations bank account.
3. Reconcile the Trust bank feed transaction in Xero
| Contact | Account | Tracking Category |
|---|---|---|
| Your Property Mgmt Company | 23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable | Jona Bombard – 989 Athens Way |
- Set the Contact to the name of your property management company
- Set 100% of the amount to account code “23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable”
- Set the Tracking Category to “Owner Name – Listing”
4. Reconcile the Operations bank feed transaction in Xero
| Contact | Account | Tracking Category |
|---|---|---|
| Your Property Mgmt Company | 12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable | Jona Bombard – 989 Athens Way |
- Set the Contact to the name of your property management company
- Set 100% of the amount to account code “12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable”
- Set the Tracking Category to “Owner Name – Listing”
Paying Owners from the Trust Account
Owner funds have accumulated over the previous month and it’s time to pay owners from the trust account. The amount owed to owners can be found in the balance sheet under “Owner Funds”. Each owner amount can be filtered by selecting the appropriate tracking category. See the example on how to process the payout transaction:
Example Transaction
You, the Airbnb property management company, are holding funds in the amount of $23,500 for the owner, Jona Bombard, for the listing 989 Athens Way. You’d like to pay this amount to the owner from the trust account as a result of a month-end report.
First, you’ll need to send the owner the money via bank transfer, ACH, check or other means. Once the transfer is posted and complete, record the outgoing transaction from the Trust Bank Account using the following entry:
| Debit | Credit | Tracking Category | |
|---|---|---|---|
| 1XXXX – Trust Bank Account (Asset) | $23,500 | Jona Bombard – 989 Athens Way | |
| 23600 – Trust Account Liability – Owner Funds – Less Owner Payouts | $23,500 | Jona Bombard – 989 Athens Way |
Detailed instructions for Xero
1. Find the amount to pay
The amount that needs to be paid to each owner can be found in the balance sheet. Filtering the balance sheet by the tracking category for each owner, look up the sum of all amounts under all “Trust Account Liability – Owner Funds” accounts.
2. Create Bill for each Owner
| Contact | Account | Description | Tracking Category |
|---|---|---|---|
| Kim Sorreno | 23600 – Trust Account Liability – Owner Funds – Less Owner Payouts | “Owner Payout” | Jona Bombard – 989 Athens Way |
- Set Contact to the name of the owner
- Set Account to “23600 – Trust Account Liability – Owner Funds – Less Owner Payouts”
- Set Description to “Owner Payout”
- Set Amount to the sum of all amounts under all “Trust Account Liability – Owner Funds” accounts for the specific owner.
- Set Tracking Category to “Owner Name – Listing”
3. Transfer the amount from the trust bank account to the owner
Once you’ve verified the amount, send the money from the trust account to the owner via bank transfer, ACH, check or other means.
4. Reconcile trust bank account amount with bill
Reconcile the bill with the trust bank feed in Xero
Paying Expenses on Behalf of Owners Directly from the Trust Account
You likely have a clause in your contract that allows you to purchase items on behalf of the owner, for things like property maintenance, which allows you to pull directly from their funds in the trust account. Before making such a purchase, first you’ll want to make sure the owner has enough funds allocated in their Owner Funds Reserved account. If this is not the case, you’ll want to allocate funds into this account before making the purchase, else you’ll run the risk of commingling funds from other owners within the trust account. Assuming all is well, see the following example on how to perform this transaction:
Example Transaction
The owner, Jona Bombard, would like you to purchase a new water heater with the funds she has in the trust account for her listing at 989 Athens Way. The service costs a total of $2330, which includes the installation from a professional maintenance company to complete.
First, you’ll need to pay the maintenance company from the Trust Bank Account either via bank transfer, ACH, check or other means. Once the transaction is posted and complete, record the outgoing transaction from the Trust Bank Account using the following entry:
| Debit | Credit | Tracking Category | |
|---|---|---|---|
| 1XXXX – Trust Bank Account (Asset) | $2,330 | Jona Bombard – 989 Athens Way | |
| 23310 – Trust Account Liability – Owner Funds – Owner Funds Reserved | $2,330 | Jona Bombard – 989 Athens Way |
Detailed instructions for Xero
1. Check how much exists in the Owner Funds Reserved account for the owner
Make sure the owner has enough funds allocated in their Owner Funds Reserved account, which you can find in the balance sheet filtered by tracking category. If there’s not enough funds, you’ll need to allocate funds into this account from another trust liability account, else you’ll run the risk of commingling funds of other owners within the trust account.
2. Create Bill
| Contact | Account | Description | Tracking Category |
|---|---|---|---|
| Name of Vendor | 23310 – Trust Account Liability – Owner Funds – Owner Funds Reserved | “Owner Expense: <description>” | Jona Bombard – 989 Athens Way |
- Set the Contact of the bill to the vendor you’re paying
- Create as many lines as necessary, but set the Account codes to “23310 – Trust Account Liability – Owner Funds – Owner Funds Reserved”
- Set a detailed description for each line, starting with “Owner Expense: ”
- Set the tracking category for each line to “Owner Name – Listing”
3. Transfer the amount from the trust bank account to the vendor
Send the money to the vendor via bank transfer, ACH, check or other means.
4. Reconcile trust bank account amount with bill
Reconcile the bill with the trust bank feed in Xero
Paying Expenses on Behalf of Owners from your Operations Bank Account
There are indeed cases where you may purchase items for the owner’s properties from your property management operations bank account, rather than from the trust account. This may be especially true for smaller maintenance issues that need to be fixed quickly. You can arrange these amounts to be paid back to you after month-end when you report and retrieve the funds back from the trust account. Here’s how such a transaction would work:
Example
A property owned by Jona Bombard needs a bathroom faucet to be replaced by a professional plumber. The service costs a total of $400 and needs to be rectified quickly as there are guests arriving later in the day.
First, you’ll need to pay the plumbing company from your Operations Bank Account either via bank transfer, ACH, check or other means. Once the transaction is posted and complete, record the outgoing transaction from your Operations Bank Account using the following entry:
| Debit | Credit | Tracking Category | |
|---|---|---|---|
| 1XXXX – Operations Bank Account (Asset) | $400 | Jona Bombard – 989 Athens Way | |
| 7XXXX – Billable Expenses (Expense) | $400 | Jona Bombard – 989 Athens Way |
Next, make an entry for the amounts owed to you from the the trust account so it’ll be included at the next month-end payout. Optionally, include a 20% markup for coordinating and funding the service. Use the following entry:
| Debit | Credit | Tracking Category | |
|---|---|---|---|
| 23500 – Trust Account Liability – Owner Funds – Less Amounts Due to Property Mgmt | $480 | Jona Bombard – 989 Athens Way | |
| 23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable | $480 | Jona Bombard – 989 Athens Way | |
| 12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable | $480 | Jona Bombard – 989 Athens Way | |
| 4XXXX – Billable Expenses Income (Revenue) | $480 | Jona Bombard – 989 Athens Way |
When the next month-end payout occurs, the amount of $480 will be included in the “12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable” and “23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable”.
Detailed instructions for Xero
1. After paying the service provider, categorize and reconcile the transaction in your operations bank feed
| Contact | Account | Description | Amount | Tracking Category |
|---|---|---|---|---|
| Plumber Pro | 7XXXX – Billable Expenses (Expense) | “Billable Expense: Bathroom Faucet Replaced” | $400 | Jona Bombard – 989 Athens Way |
2. Create a Zero-Balance Bill
Set the contact of the bill to the name of your property management company. In each line, include a 20% markup ($480 total)
| Account | Amount | Description | Tracking Category |
|---|---|---|---|
| 23500 – Trust Account Liability – Owner Funds – Less Amounts Due to Property Mgmt | -$480 | “Billable Expense: Bathroom Faucet Replaced” | Jona Bombard – 989 Athens Way |
| 23140 – Trust Account Liability – Property Mgmt Funds – Property Mgmt Funds Payable | $480 | “Billable Expense: Bathroom Faucet Replaced” | Jona Bombard – 989 Athens Way |
| 12200 – Trust Account Asset – Property Mgmt Funds – Property Mgmt Funds Receivable | -$480 | “Billable Expense: Bathroom Faucet Replaced” | Jona Bombard – 989 Athens Way |
| 4XXXX – Billable Expenses Income (Revenue) | $480 | “Billable Expense: Bathroom Faucet Replaced” | Jona Bombard – 989 Athens Way |
Remitting Taxes from the Trust Account
In many jurisdictions, Airbnb will collect taxes and remit to local tax authorities on the owner’s behalf. However, you can opt to collect these taxes from Airbnb and remit them directly. If you’re using Tallybreeze (formerly Bnbtally), the Custom Taxes line item found in our presets will take care of the allocation of custom taxes for each reservation. This section is about paying the local tax authorities the amounts owed.
Example
The owner, Jona Bombard, has a listing at 989 Athens Way, which Airbnb is set up to receive custom taxes for all reservations. In Tallybreeze, these amounts are allocated to the Custom Taxes Payable account. After running a balance sheet report on this listing in Xero, you see that $1180 is owed for transient occupancy taxes under “23380 – Trust Account Liability – Owner Funds – Airbnb Collections – Custom Taxes Payable”.
First, you’ll need to send your payment to the tax authority either via bank transfer, ACH, check or other means. Once the transaction is posted and complete, record the outgoing transaction from the Trust Bank Account using the following entry:
| Debit | Credit | Tracking Category | |
|---|---|---|---|
| 1XXXX – Trust Bank Account (Asset) | $1,180 | Jona Bombard – 989 Athens Way | |
| 23380 – Trust Account Liability – Owner Funds – Airbnb Collections – Custom Taxes Payable | $1,180 | Jona Bombard – 989 Athens Way |
Detailed instructions for Xero
1. Check how much exists in the Custom Taxes Payable account for the owner
2. Create Bill
| Contact | Category | Description | Tracking Category |
|---|---|---|---|
| Name of Tax Authority | 23380 – Trust Account Liability – Owner Funds – Airbnb Collections – Custom Taxes Payable | “Taxes Paid: Name of Tax Authority” | Jona Bombard – 989 Athens Way |
- Set the Contact of the bill to the the name of the tax authority
- Set the Product/Service to Custom Taxes Payable
- Set a detailed description, starting with “Taxes: ” and describe the tax
- Set the tracking category to “Owner Name – Listing”
3. Transfer the amount from the trust bank account to the tax authority
Send the money to the tax authority via bank transfer, ACH, check or other means.
4. Reconcile trust bank account amount with bill
Reconcile the bill with the trust bank feed in Xero
Generate Monthly Owner Statements & Reports in Xero
Now that all Airbnb data has been imported perfectly into Xero, after reconciling any other expenses, you’re able to produce beautiful owner statements and reports each month.
Monthly Owner Statement by Listing
This statement can be sent to owners every month. It is grouped by tracking category, which means it is focused on displaying activity details on a per listing, per owner basis. This helps owners see their earnings, per listing, in precise detail along with all the movements in and out of the trust account for each listing. Each line created by Tallybreeze includes a reservation code and details of the transaction. Finally, a grand total due to the owner is displayed at the bottom.
In the following example, we’re showing an owner statement for a single owner, Linette Thompson:
Quick Setup Steps
Here’s how to create the above Owner Statement by Listing in Xero:
- In Xero, go to Reports, select “Account Transactions”.
- Under Accounts, select all accounts starting with text “Trust Account Liability – Owner Funds”.
- Select the report period (perhaps the previous month).
- Under Columns, uncheck all columns except keep “Date”, “Description” and “Gross”.
- Under Grouping/Summarizing, select “Group by” and “Listing” or whichever you named for your tracking category that identifies your listings.
- Under Filter, only select the listings under the owner you want to report for.
- Sort by Description.
- Customize the title as needed.
- Select “Update”
From here this statement can be saved as a custom report and re-used every month for the owner.
Conclusion
Consider this a thorough guide to automating the management of other peoples funds with the highest integrity. Just remember that even if you’re not legally required, following trust accounting standards in your property management operations has a positive impact on how your clients view your services. Proper Airbnb trust accounting discussed in this article provides the most transparency to your owners – which is key for maintaining their trust in you and recommending you to others who are looking for similar services.
The complexity involved in providing such transparency in your accounting is a daunting task that needs automation. We hope that you’ve received great value from this guide as you build your firm. To begin automating your Airbnb trust accounting, check the link below:
Finally, there are other business models that are not covered in this guide but are covered better in the following guides. Be sure to check these out :
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