Bank Guarantees and Letters of Credit in Odoo#
Bank guarantees and letters of credit are common instruments in B2B transactions - a bank promises to pay a vendor if the buyer defaults. While Odoo doesn't have a dedicated guarantee module, these instruments can be tracked systematically using existing features.
Tracking Bank Guarantees#
Step 1 - Create a Dedicated Account#
Accounting → Chart of Accounts → New:
- Name: Bank Guarantees Issued
- Type: Notes Payable (or Off-Balance Sheet Memo)
- Code: 9100 (or in a memo/off-balance sheet section)
Bank guarantees are contingent liabilities - they don't appear on the balance sheet unless called upon. Using an off-balance-sheet memo account keeps them visible to management without distorting the balance sheet.
Step 2 - Record the Guarantee Issuance#
When a bank guarantee is issued:
Accounting → Journal Entries → New:
- Debit: Bank Guarantee Receivable (memo) - $50,000
- Credit: Bank Guarantee Liability (memo) - $50,000
This creates a record without affecting the main balance sheet.
Step 3 - Track in a Spreadsheet or Odoo Document#
For each guarantee, record:
- Guarantee number
- Beneficiary (vendor name)
- Issuing bank
- Amount
- Issue date
- Expiry date
- Purpose (performance bond, bid bond, advance payment guarantee)
- Status: Active / Expired / Called / Returned
Letters of Credit (L/C)#
For import L/Cs:
- Bank issues L/C on your behalf (contingent liability)
- Vendor ships goods → presents documents to the bank
- Bank pays the vendor → your liability converts to a real bank loan
- Record: Debit: Import Goods (inventory), Credit: Bank Loan Payable
The L/C itself is off-balance-sheet until the bank pays; the resulting loan is on-balance-sheet.
Expiry Date Monitoring#
Create a calendar activity or automated action to alert when guarantees are 30 days from expiry:
Technical → Automation → Automated Actions:
- Model: Journal Entry (or custom model if you track guarantees there)
- Trigger: expiry date − 30 days
- Action: send email to treasury manager and create a task to renew or cancel
Guarantee Release#
When a guarantee expires or is returned by the beneficiary:
- Reverse the memo journal entry (Debit: Liability memo, Credit: Receivable memo)
- Record the bank's guarantee fee as a finance expense:
- Debit: Bank Fees (e.g., 0.75% × $50,000 = $375)
- Credit: Bank Account