Processing a Loan
Schools, Academies, Multi-Academy Trusts (MATs), Sixth Form Colleges and Free Schools are able to receive 100% interest-free Salix Loans for energy efficient technologies for Academies and MATs through the Salix Energy Efficiency Fund (SEEF).
Alternatively, they may receive a loan from the Education & Skills Funding Agency (ESFA) to aid cashflow in the event of a deficit budget.
In either case, the loan needs to be recorded on IRIS Financials.
Treatment of a Loan in IRIS Financials
When a loan is received, both the debt and the repayments to the lender need to be recorded in IRIS Financials. This is explained in the Recording Receipt of the Loan and Recording Loan Repayments sections in this article.
You may also wish to track the expenditure against the loan funding. This is explained in the Recording Expenditure of Loan Funds section.
Recording Receipt of the Loan
Loan funds are typically received via a transfer directly into your bank account.
This should be entered as a Nominal Receipt, debiting the bank nominal (e.g. ***
- Nominal ***
- Nominal ***
- Alternatively, you could set up a new nominal code specifically for loan, e.g. ***
- If you have more than one loan, it is recommended best practice to separately track the outstanding value owed for each loan. To do this, you can set up a new nominal specifically for each loan.
Recording Loan Repayments
Recording repayments via monthly Funding Statement
If the loan was issued by the ESFA and is to be 'clawed back' on your monthly funding statements, you will need to enter an additional line when entering your monthly Funding Statement in IRIS Financials. This should debit the relevant loan creditor nominal with the amount 'clawed back' that month.
Recording repayments made from your bank account
If your repayments are made from your bank account, you will need to record the payment in IRIS Financials as a BACS or Direct Debit/Standing Order document. You will debit the relevant loan creditor nominal and credit the bank with the applicable monthly payment
DR ***
CR ***
Recording Expenditure of Loan Funds
You may wish to track the expenditure of loan funds (If the loan is from the ESFA to assist with cashflow in the event of a deficit budget, this may not be necessary).
To do this, set up a new Account on the relevant Ledger, for example a Capital Ledger Account or a Cost Centre Ledger account.
You can post relevant expenditure to the new account(s) in exactly the same way as you would post purchase orders and invoices to other cost centre or capital ledger accounts. You may wish to set a Budget on the relevant nominal/account to track how much is remaining.
Interest-bearing Loans
Where interest is going to be charged on a loan, you will need to set up a new expenditure nominal for loan interest.
If a loan is received at the beginning of the financial year and is repayable over 3 years at an interest rate of 1% per annum (£360 x 3yrs = £1,080), you will need to record receipt of the loan funds, enter a general journal, debiting the bank with the amount received and the loan interest with the total interest due, and crediting the loan creditor nominal. For example:
DR ***
DR ***
CR ***
You may wish to spread the loan interest liability evenly across the term of the loan by entering a general journal debiting the Accruals nominal and crediting the Loan Interest nominal with the value you wish to accrue, for example:
DR ***
CR ***
Then post a Recurring Journal, debiting the Loan Interest nominal and crediting the Accruals nominal with the monthly value of the loan interest.