Let’s face it – the word ‘daily reconciliation’ can be scary to most Property Managers or Trust Accountants but trust account reconciliation does not need to be the process that everyone dreads. In our Top 10 Trust Accounting Mistakes Made by Real Estate Agents, not reconciling daily was the second biggest mistake that agents made after not backing up daily.
What is a reconciliation?
In Real Estate terms, a trust account reconciliation is the act of making our bank statement compatible with our trust accounting software or manual records.
The reconciliation statement shows any amounts brought forward from the previous month. The total number of deposits minus the number payments for the month, giving us a cashbook balance. It will also show any unpresented cheques or unpresented deposits. The final amount after all these things have been taken into account will mirror the exact dollar amount shown on the bank statement of the last day of the month.
Section 26 PSBA Regulations 2014
According to Section 26 of the PSBA Regulations 2014 our requirements for trust reconciliation are as follows:
- Each reconciliation is for the period ending the last day of each month
- Must be completed within 21 days following the end of the month for the previous month
- Signed and acknowledged by the Licensee
- Retained in the Licensee’s place of business for the purpose of auditing
If you’re using a good Property Management software then you’re already on the way to achieving a successful bank reconciliation every single time but despite ease of use with your software, many agents will maintain that they will continue to do the reconciliation on a monthly basis because ‘its what the Act says’.
Our Top 5 reasons to conduct a trust account daily reconciliation
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Avoid the End of Month Stress
Daily reconciliation ensures you’re not left tearing your hair out at end of month, making the process even longer than it needs to be. Nobody wants to spend more time doing end of month than necessary. See our other tips on Avoiding End of Month Stress.
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Prepare One-off Disbursements With Ease
If you have to do a one off disbursement or even sales settlements, you can do so with confidence knowing you’re not going to pay creditors, vendors and landlords more than they’re owed. Paying a landlord more monies that have been receipted in error can be easily fixed but it looks unprofessional having to explain to the landlord why you have paid them more than they were expecting.
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Mistakes Will Snowball
Discrepancies are easier to detect on a daily basis rather than monthly. If you’ve receipted an amount twice, failed to receipt an amount shown on the bank statement or accidentally paid out too much then you’re not having to look through an entire months cashbook, rather only the entries made on that day.
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Pass an Audit with Flying Colours
If you are randomly audited by Fair Trading then you can confidently show that your accounts are reconciled to the previous days balance. Even your own auditor will be impressed by your ability to maintain the records to this high standard. For other tips on surviving a random audit read our Surviving a Random NSW Fair Trading Inspection: 10 Things You Need to Put In Place.
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Easier to Detect Theft or Fraud
Many offices will have more than one delegated person looking after the trust account reconciliation. Daily trust accounting provides the Licensee better control over what is happening within the trust account. It provides a clear picture of the exact position of the trust account at any given time. Trust theft or fraud can sometimes be very hard to detect. Keeping watch over large transfers and settlements can minimise the agencies risk in unlawful transactions.
What is the procedure for bank reconciliation within your office? Do you reconcile daily or monthly? Do you agree or disagree with daily reconciliation? We’d love to hear your thoughts.
Are you finding trust account reconciliation or the process of trust accounting generally difficult to manage in your office? Read our post about how End of Month Angels can give you a holiday from your trust account. Or contact us via our website for a competitive tailored solution specifically designed to meet the needs of your agency.
~ Jane Morgan is the Director of End of Month Angels, a consultancy firm specialising in Trust Accounting. Jane knows the legislative requirements of running a successful Real Estate office through her 18 years industry experience. Don’t trust just anyone with your trust accounting. Trust End of Month Angels and get back to what you do best – growing your business.