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Bank Guarantees

The Bank Guarantees sub-module enables you to track and manage all bank guarantees (BGs) issued in connection with your organization's contracts and projects. In the construction industry, bank guarantees are a common requirement for securing contracts, ensuring performance, and providing financial assurance to clients. JobNext provides a centralized register to monitor BG types, amounts, validity periods, and expiry dates.

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Bank Guarantee Requests 0:19
How to View Bank Guarantees 0:38
Bank Guarantee Types 0:19
Navigation

Access Bank Guarantees from Finance > Bank Guarantees. The main screen displays a list of all registered bank guarantees with their current status and validity information.

Bank Guarantee Lifecycle

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How to Create a Bank Guarantee Request 0:42
BG Request Type, Amount Validity period BG Issued Bank issues BG Record in system Active Expiry monitoring Alerts at 30/15/7 days Renewed Extended validity New expiry date set Invoked BG encashed by beneficiary Released BG returned Obligation ended Common BG Types EMD (Earnest Money) Performance BG Advance BG Retention BG Defect Liability BG
Bank Guarantees register showing BG numbers, types, amounts, validity periods, and expiry status indicators
Bank Guarantee register with validity tracking and expiry alerts

Types of Bank Guarantees

Construction projects typically require several types of bank guarantees at different stages of the project lifecycle:

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BG Type Purpose Typical Percentage
Earnest Money Deposit (EMD) Security deposit submitted with a tender bid to demonstrate serious intent 1-5% of tender value
Performance Guarantee Assurance that the contractor will fulfill contract obligations as per terms 5-10% of contract value
Advance Payment Guarantee Security against mobilization advance or other advance payments received Equal to advance amount
Retention Money Guarantee Replaces cash retention deducted from running bills to release working capital 5-10% of certified work value
Defect Liability Guarantee Covers the defect liability period after project completion 2-5% of final contract value

Registering a Bank Guarantee

To register a new bank guarantee in the system:

  1. Navigate to Finance > Bank Guarantees
  2. Click Add Bank Guarantee
  3. Fill in the required details as described in the fields table below
  4. Attach a scanned copy of the BG instrument if available
  5. Click Save to register the bank guarantee

Bank Guarantee Fields

Field Description Required
BG Number The unique reference number issued by the bank on the guarantee instrument Yes
BG Type The category of guarantee (EMD, Performance, Advance, Retention, Defect Liability) Yes
Issuing Bank The name of the bank that issued the guarantee Yes
Job / Contract The project or contract for which the BG is issued Yes
Beneficiary The customer or party in whose favor the guarantee is issued Yes
BG Amount The face value of the bank guarantee Yes
Issue Date The date on which the bank guarantee was issued Yes
Expiry Date The date on which the bank guarantee expires Yes
Claim Period End The last date by which a claim can be made against the guarantee (often extends beyond expiry) No
Margin Amount The margin money deposited with the bank for issuing the guarantee No
Commission Rate The bank's commission percentage charged for the guarantee No

Expiry Tracking and Alerts

JobNext monitors bank guarantee expiry dates and provides alerts to ensure that guarantees are renewed or released in a timely manner. Failing to renew a guarantee before it expires can have serious contractual consequences.

  • Dashboard Indicators — Bank guarantees approaching expiry appear highlighted in the BG list view
  • Advance Notifications — The system sends alerts when a guarantee is within the configurable advance notice period (e.g., 30 days before expiry)
  • Expired BG Alerts — Guarantees that have passed their expiry date without renewal or release are flagged for immediate attention
Expiry Risk

An expired bank guarantee that has not been renewed or released can expose your organization to contract termination, encashment of the guarantee by the beneficiary, or loss of eligibility for future contract awards. Always track expiry dates proactively.

Renewal Process

When a bank guarantee needs to be extended beyond its original validity period:

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  1. Identify the guarantee approaching expiry from the BG list
  2. Request a renewal or extension from the issuing bank
  3. Once the bank issues the renewed guarantee, update the record in JobNext
  4. Update the Expiry Date to the new validity date
  5. Record any additional commission or charges associated with the renewal
  6. Attach the renewed BG instrument document

BG Release

When a bank guarantee is no longer required (e.g., the contract is complete and the defect liability period has passed), it should be released:

  1. Obtain a release letter or no-claim certificate from the beneficiary
  2. Submit the original BG instrument to the bank for cancellation
  3. Update the BG status in JobNext to Released
  4. Record the release date and any margin money refunded by the bank

Best Practices

  • Register BGs immediately — Enter bank guarantee details into JobNext as soon as the instrument is received from the bank
  • Set adequate alert periods — Configure expiry alerts to provide enough lead time for renewal processing (at least 30-45 days)
  • Track margin money — Record margin amounts to maintain visibility of cash locked up in BG margins
  • Link BGs to jobs — Always associate bank guarantees with the correct job or contract for project-level financial reporting
  • Follow up on releases — After project completion, actively pursue BG releases to free up bank limits and recover margin money