Don’t Spend Your Escrow

In this lesson, we’re going to explain what an escrow account is and why it’s important.

The term “escrow account” has a slightly different meaning among bookmakers than the typical definition. An escrow account is typically used for two parties to complete a transaction safely.

Funds are held in an escrow account and aren’t released until the escrow agreement is fulfilled.

In the bookmaking industry, the term escrow account is used to describe a bookie’s emergency fund. This is money you keep in a separate business account for emergencies only.

The bookmaking business can be volatile, so maintaining an escrow account is mandatory.

How Much Money Do I Need to Keep in My Escrow Account?

It’s recommended to always maintain an escrow account with a minimum of 20% of the credit you issue. If you want to be even more cautious, you could increase the percentage as you grow.

So, if you have $10,000 in credit extended to your players, how much do you need to keep in your escrow account? You need to keep a minimum of $2000, which is 20% of the credit amount.

When Should I Use the Money in My Escrow Account

The goal is to never have to spend the money in your escrow account.

However, that’s unrealistic, as problems will arise at some point. There are a very limited number of reasons why you should ever use any of the money in your escrow account.

Here are those reasons:

    • Players Fails to Pay: Whether a player needs to simply pay late or a player has stiffed you on a payment, there will be times when players fail to pay. There’s no avoiding this as a bookie.

    • Players Win Big: Some weeks, players are going to win more than they lose. That means you’ll be coming out of pocket to pay the winners that week. As we discussed in the last lesson, you need to pay on time, which is why maintaining an emergency fund is important.

These are the only times you should touch the escrow account. This emergency fund is strictly for your bookie business. While it may be tempting to spend the funds elsewhere, you can’t.

If your bookie business is important to you then you need a safety net.

Don’t Put Your Business at Risk

Sports bettors are typically fickle. The second you miss a payment, their loyalties will change very quickly. What are you going to do if you don’t have an escrow account to fall back on?

Here’s a quick example:

You have 10 players with $1000 credit limits and things are going good.

However, one week, a couple players go on heaters and win $4000 on NFL Sunday. Now let’s imagine your other players only lost $2500 throughout the week. You’re $1500 short on payout day and that’s even if every one of the losers pays on time. Where is the money going to come from?

Having an escrow account to deal with situations like this will put your mind at ease. It’s always nice to have an insurance policy for the weeks where you lose money. You never want to be in a position where you need to dig into your personal funds, so simply maintain a separate escrow account.

Believe us, there are going to be times when you’re going to need the money in the emergency fund and it can save your business. No bookie can afford losing players because of slow paying. Word spreads quickly and it’s like a domino effect - slow paying is never an option.

Last modified: Tuesday, 14 July 2020, 6:03 PM