With a career spaning over 25 years in international hotels, holiday letting management rights as well as receiver’s industries, I have seen many trust accounting mistakes that could have been avoided.
Below are the 7 most common mistakes people make in our industry. If you’re guilty of making these mistakes in your business, be sure to correct them before it’s too late.
And if you’re not guilty of any of these, congratulations! However, it’s still important to develop your trust accounting policies and procedures to minimise the possibility of error.
One of the most common trust accounting mistakes is not reconciling daily. To maintain the most accurate and up-to-date records, you should make sure your accounts are balanced every day. This way, come mid-month or end of month, you can rest easy knowing that you’re not forgetting something crucial.
Additionally, any discrepancies in your accounts are easier to spot on a daily basis rather than on a monthly basis. This means that mistakes won’t be allowed to snowball and can be rectified more readily.
Similarly, it’s crucial to reconcile your current trust account on a daily basis. This ensures that your data is up-to-date and free of mistakes when you come to end of month rollover. If you are not performing daily reconciliation, you should make this a priority. Alternatively, outsourcing to a specialist hospitality management right bookkeeping provider can be priceless!
Every property management business should have its own set of trust-specific policies and procedures. They should be formal and detailed to ensure compliant trust accounting and consistency across the business. As part of the procedures, it’s also helpful to develop standardised forms and checklists to minimise any chance of err.
Hiring the wrong person for the job can be detrimental to your business. An inexperienced or underqualified staff member might make some small mistakes in the first few weeks. Over time, these can lead to an assortment of Band-Aid fixes, time wasted during mid-month and end of month and ultimately, a mess of a trust fund.
Rather than spending time and money cleaning up your trust fund in retrospect, it’s always better to spend a little more money by outsourcing to an experienced specialist bookkeeping firm, that has proven trust account management experience.
Knowing the exact position of your trust accounts is vital.
Ultimately as the licensee, it’s crucial you know what you’re signing off each month. Any discrepancies will be your responsibility and could potentially cause irreparable damage to your reputation.
While this may seem like a no-brainer. In my time working for a receiver’s firm, I have seen property managers misallocate trust funds to pay off mounting operating expenses or worse the embezzlement of owners’ monies. These discrepancies can not only snowball into a bigger problem but can also result in audit breaches and a potential visit from Fair Trading. Simply put, don’t risk it. Ever.
Likewise, you should never withdraw cash from your trust fund, no matter how insistent your owners or tradies are. This is bad practice and can result in loss of license and hefty penalties from the authorities.
Imagine working on receipting accommodation payments, rent, paying bills and disbursing funds all week, only to have your computer crash. Bam. You’ve lost a whole week’s worth of precious data.
Failing to perform daily back-ups is one of the most common and most avoidable trust accounting mistakes. So, if you’re sick of manually backing up your data daily, think again. The financial cost of needing to re-enter lost data is far too great if anything ever goes wrong. Performing this simple task each day means you have peace of mind that anything lost can be easily and quickly restored.
Another common trust accounting mistake is disbursing funds early. Under no circumstance should disbursement occur before the keys are exchanged and all required paperwork completed. Deals fall through regularly, and last-minute agreements/alterations can often be made. If early disbursement occurs in these instances, numerous time-consuming adjustments would be required.
Early disbursements result in non-compliance and are a major headache for your trust accountant – it’s simply not worth it.
If you can avoid making these 7 mistakes in your business, you will be sure to remain compliant and will save yourself a great deal of stress at both mid-month and end of month.
Thanks for reading! I trust you enjoyed this post. If you need to engage a trust account bookkeeping service, which has extensive experience with both HiRUM property management software, and first-hand experience in managing a trust account in the holiday letting industry, feel free to contact us. We would be happy to arrange a chat and answer your questions.
HiRUM’s Trust Accounting Software is renowned in the industry, providing not only precision accounting and transparent record keeping, but our accounting wizards ensure lightning fast speed.
Steve Bickerton, Founding Director of Bicko’s Bookkeeping, comes with a wealth of knowledge within the hospitality industry, with a career spaning over 25 years in International Hotels and Holiday Let Management Rights. His Property Management career culminated in his appointment as General Manager of a holiday let management rights apartment, under management of Australia’s 2nd largest accommodation provider, located on the Gold Coast.
Steve’s passion and vision throughout his time as General Manager, saw this property succeed to be one of the most sough-after places for visitors to stay at on the Gold Coast.
His achievements over 3 years, drove the property’s ranking on TripAdvisor from position 38, to its current position of 3rd. Similarly, its ranking on Booking.com climbed from 7.8 to 8.4. During FY15, the property proudly achieved the number one ranking (for the Gold Coast Region) for its brand within the organisation. While General Manager, Steve also achieved a compliance score of 98% and maintained year on year occupancy in the mid-80% range.
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