LIQUID OVERVIEW FOR BROKERS
This partnership offers 4 key benefits:
1) Significant Revenue Potential: The revenue share for the brokerages can make a meaningful impact.
2) Effortless Setup: Branding and implementation is seamless, with zero lift required on your part.
3) Eases Financial Strain for Agents: Liquid provides agents with timely access to funds, helping them navigate the economic challenges facing our industry today.
4) Impactful Reporting Metrics: easily determine capital deployed, average advances vs income, brokerage earnings, and annualized returns.
Liquid Overview
Calculation example spreadsheet:
https://docs.google.com/spreadsheets/d/1qz2-6jGy9lc07CH1c79awuIhz9Cpvytqp5z6w_EgkDs/edit?usp=sharing
Accounting for Advances
Getting Started
You'll want to ensure you have a few GL accounts in your accounting system to track advances.
Advance Receivable: This GL account is an asset similar to Accounts Receivable and will track funds released to the Agent
Advance Daily Interest: This GL account is an income account and will track the interest or daily rate charged to the Agents on the Advance
Advance Admin Fees: This GL account is an income account and will track admin fees charged to the Agents on the Advance
Entries
For each approved advance, you'll make two entries for your books. Liquid will send you an email notification to remind you to post a bill and an invoice for each advance.
Record a bill payable to the Agent for the NET amount you release to them. You will date this bill for the current date or the date you release funds, and the due date on the bill will be the same.
Record an invoice to the Agent for the NET amount of the advance plus the interest and admin fee income you charged the Agent. The invoice date should be the transaction's closing date, and the due date should be the same.
See the image below to see which accounts you'll debit or credit to reflect the accounting transactions accurately.
Please note: When posting a bill, the accounts payable account is automatically credited so that you can enter the debit amount into the Advance Receivable account. When posting an invoice, the accounts receivable account is automatically debited so that you can enter the credit amounts into the Advance Receivable, interest income, and admin fee income accounts.
Head here for a more detailed breakdown of accounting entries or an example.
Accounting for Custom Fees
Two types of fees can be added to an active Advance. Brokers and Admins will be notified when the new fees are added.
Advance-type fees “AMOUNT”: These fees were advanced on another property, were considered uncollectible, or are the collective balance owed by your agent. They are now associated with “Address” commissions.
Income-type fees “AMOUNT”: These are charges applied to the Advance and are considered income, which can be used to an income-type GL account, including Advance Daily Interest.
If custom fees are added to an Advance, you must update your accounting records and ensure your commission deductions are current.
Whether the Agent has a current invoice related to an older Advance or you need to add a new invoice, you'll add the fees from the notification as a charge to the Agent in your accounting system. Reference the property address and add the advance or income amounts.
Update any new “Income” charges by adding a new line to the invoice and applying it to your Advance Daily Interest GL account. (If this is a negative value, then it should be recorded as a debit to the GL)
Update any new “Advance” charges by adding a new line to the invoice and applying it to your Advance Receivable GL account. (If this is a negative value, then it should be recorded as a debit to the GL)
Finally, update the deductions on the transaction for “Address” in your commission management solution so you can recover the complete receivables before paying them their remaining commissions.
Recovering Funds
You can send the invoice you created to request funds directly from your Agent; however, the most efficient method to recover the advance amount is to deduct the total from their pending commissions.
Depending on your commission management platform, you should be able to add a deduction to the Agents' commission payout that will reduce the accounts receivable balance. Your commission management platform should also allow you to communicate the balance due to the brokerage for the advance to the Agent, Legal, Title company or outside Brokerage to settle the account.
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