High quality trust accounting is the quintessential part to any Real Estate office. Whether your main focus is residential or commercial, sales or property management, your clients expect that their accounting is done professionally. Particularly in commercial management since the majority of clients are required to report quarterly to the ATO.
Offering a high level of management service extends to how you deliver transactional reporting to the client. This doesn’t refer to how the funds are transferred or the method in which they receive their statement. It’s the little detail of what’s on the statement that counts the most.
There is no point selling your services to your clients and saying how wonderful your agency is if you are not investing the time into getting the accounting correct. Make any one of these 10 trust accounting fails and you could be literally sending your clients straight to your competitors.
Our Top 10 Trust Accounting Fails
- Transaction reversals showing on statement
- Double payment of invoices
- Charging incorrect agency fees
- Incorrect allocation of expense & revenue
- Sending incorrect attachments
- Poor allocation of GST
- Wrong paid to dates
- Not holding back funds when requested
- Taking funds from wrong client
- Wrong bank details
Transaction reversals
This generally happens when the agent makes an entry error in the trust accounting software and have made a subsequent correction. You don’t want these sort of mistakes showing up on your owners statements and nor should they. Most software will allow you to exclude reversals from the statement. It’s not that you want to hide things from the client. But if it’s messy and just means that you’re not having to explain why you made a mistake in the first instance.
Double payment of invoices
Refers to paying the same invoice twice from the same owner ledger. Happens because agents fail to follow a process whereby paid invoice aren’t marked as paid and are entered again. Sometimes the creditors send the same invoice twice and it’s not being checked against the clients account. One way to minimise this issue is to create an invoice work flow and invest in a good trust accounting software where the system will inform you of duplicate entries.
Charging incorrect agency fees
This generally means either poor entry of fees when entering the details of the management into the trust accounting software. For example, charging 8% when you negotiated 7% or charging a client twice for the same service such as double letting fees. Statement previews are a fantastic solution to detecting these kind of errors before statements are issued.
Poor allocation of expense/revenue
Improper allocation of expense and revenue generally comes down to laziness. Just remember what you enter today will effect your owners financial statement next year. For example council rates and water rates are entered as expenses and items such as rent and GST are entered as revenues to the client.
Sending incorrect attachments
Picture this. One of your clients receives another of your clients monthly statements and sees that the management fee to the other client is less than what they are paying. You can bet that the first client will be shopping around the following day. This can also relate to the attachment of paid invoices sent with clients’ statements. You have to be super careful with attaching the right statement with the right invoices as it can it can breach the client’s privacy.
Poor allocation of GST
Your trust accounting software is equipped with various GST codes for revenue and expenses. It is imperative the correct allocations are assigned to the right income or expense. For example GST on Rent is different to GST on Outgoings. It’s all GST at the end of the day BUT is it clear enough so your client can calculate their GST obligations? Regular training and hiring in-depth experience is the key to managing these sorts of entries.
Wrong paid to dates
Relates to management of rental properties. This occasionally can be a result of a system error. Generally it is caused by poor database entry. Checklists are a excellent way for prevention of this occurrence.
With-holding funds
The client has asked you to hold back funds for a large expense that may be due to in the future. However you’ve realised after disbursement of funds that you’ve forgotten to hold back the requested amount. The best way to prevent this is to enter the holdover on receiving the request. Then there is no possible way of forgetting. Another method is to do statement previews as a last minute check before payment is made to the client.
Taking funds from wrong client
When you pay an invoice from client B’s account when the funds were meant to taken from client A’s ledger account. Super unprofessional when this happens. It can be due to similar client names or similar property addresses. Always match the name on the invoice to the name of the client, or the property address to the address on the invoice. Statement previews and attention to detail are crucial for not making these kind of mistakes.
Incorrect bank details
Mostly always this is due to the fault of the client not informing the agent of their change of account. But if the shoe was on the other foot then it just shows incompetence and lack of attention to detail when entering numbers. Check and re-check again before accepting the bank details as being correct in the software.
If you want to know more about the trust accounting services my company provides or have any trust related questions please don’t hesitate to get in touch: jane@endofmonthangels.com.au
We LOVE to receive your comments, feedback and questions (especially the hard ones).
Connect with us on Facebook, LinkedIn & Twitter.
~ 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.