A Bank Guarantee is a guarantee from a lending institution such as a bank ensuring the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank covers it. A Bank Guarantee enables the customer, or debtor, to acquire goods, buy equipment or draw down loans, and thereby expand business activity.
A client may ask you to provide a Bank Guarantee from a third party such as a bank. This guarantee is for a specified amount, which is usually a percentage of the total value of the contract. The Bank Guarantee is valid for a specified duration after which it expires and must be returned to you by the client.
1. How to create a Bank Guarantee
- Go to: Accounts > Banking and Payments > Bank Guarantee > New.
- Select the type whether you're receiving or providing a Bank Guarantee.
- Set the start date and enter the number of days the guarantee is valid for.
- Select the Sales Order or Purchase Order depending on step 2.
- The customer/supplier and the amount will be fetched automatically.
- Select a Bank and the Bank Account.
- Enter a Bank Guarantee number.
- Enter the name of the beneficiary.
- Save and Submit.
This document allows you to track Bank Guarantees given to clients. You can set Email Alerts as the Bank Guarantee expiry date approaches to remind yourself to get the Bank Guarantee back from your client.
- Chart Of Accounts
- Sales Order
- Purchase Order