An Earnest Money Deposit (EMD) is a sum a bidder deposits with a tender to show they are serious, which is returned to unsuccessful bidders and adjusted against the security deposit for the winner, but forfeited if the winner backs out.
The tender document states the amount, often a small percentage of the estimated cost in government tenders, and the form it may take, such as a demand draft, bank guarantee or online payment.
EMD is different from the security deposit or performance guarantee, which is taken from the successful bidder to secure performance of the contract.
For a contractor bidding on several tenders, EMD ties up cash until it is refunded. Tracking each deposit and its refund date prevents money being forgotten.
Record a deposit as a payment against the project and track it in pending payments until it is returned, along with cheques issued in the cheque register. See all features.
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