When dealing with thousands of dollars there are 2 types of people.
There is no in between. As an onsite manager landlords are trusting you to handle their income with honesty and integrity. After many years in the industry I have performed end of months with as little as $2000 in the trust account and as great as $200 000 in the account. Each time the money, system and process was treated exactly the same……with care.
One property or 1500 properties, each state of Australia has regulations and rules in place to ensure that the correct rental money and commission are deposited in the correct bank accounts by following streamlined procedures.
Unfortunately in the news of late we have seen an overwhelming amount of fraudulent trust account cases. I have personally been involved in purchasing a rent roll that the OFT had investigated. It was a very unfortunate case in that the Principal of the Real Estate agency in question lost their Real Estate license however the Property Manager at the time was the culprit. As the licensee it is your responsibility to investigate and understand the operation of your own trust account. As a consultant when performing a pre audit check and reporting back to the Licensee I cannot tell you how many times that I am told to please discuss this with the Receptionist or Book keeper. My reply is always the same…….”you have employed me to check over your trust account and I want to make sure that you understand the seriousness of rectifying these abnormalities”.
1) Do not accept cash. Even if it is a bond – In most cases banks will take 2 working days for funds to clear into a trust account. This is generally MORE days than a tenant has been informed that they are approved for a property. Once approved there is no reason the tenant cannot transfer the bond and any rent to your trust account.
2) DO NOT make one person solely responsible for the trust account. If one person is solely responsible there is no one to check or come across any abnormal transactions.
3) Suppliers/Creditors – this is a common way to transfer money to staff members’ OWN bank accounts. ABC Supplier is entered as a tradesperson. However this tradie does not exist and the bank details belong to the Receptionist’s boyfriend……ALL new suppliers must be questioned and have the appropriate insurance forms completed for authorisation.
4) Licensee’s MUST hold monthly checks of the trust account. The Licensee should take the reins and investigate the trust accounting software themselves. I urge you to be trained in ‘what to look for’. You must know what EVERY report in the end of month process means. All Adjustments must be explained and your Book keeper/Receptionist must be able to show you proof as to why it has been entered. The statement balance MUST coincide with what has been entered into your software.
It is said all the time, “yes we are in balance”. But what exactly does that mean? It is very easy to be in balance if you adjust the statement balance……
How many of you actually know what a 3 way balance is? ”it comes up on my report and says that we have achieved a 3 way balance”.
Trust Account: How much money is in your trust account (Statement balance)
Cashbook: How much you have receipted in & expensed out (Debits & Credit)
Ledger Balance: Where it has been allocated to. Which ledgers: owners, creditors, bonds etc. have these funds.
Once again I cannot stress the importance of understanding your trust account. The numbers and dollar signs can scare a lot of people however I guarantee you that once you spend the time understanding it you will feel a lot more comfortable in ‘using it’.
If you have any questions at all please do not hesitate to contact me.
By Lauren Kropp
Director – Real Strategix
Lauren Kropp Bio:
When it comes to Management Rights systems and trust accounting, Lauren Kropp is at the forefront. Lauren has 13 years’ experience in all facets of Management Rights business operations.
Her understanding of Real Estate & Management Rights operations ventures further than just managing people, properties and accounts. Lauren also excels in systems and legislation support. Besides working In Property Management for 10 years for a further 3 years she worked as Product Manager for a leading trust account software company where she was a key player in the development, enhancement and marketing of its program together with a subsequent role providing system support and national training for clients and their staff.
As the Membership Manager and Business Development Consultant for the PPM Group she was resource, mentor and support for national members who had legislation and system difficulties and disputes.
Lauren is now Owner/Director of Real Strategix and provides Management Rights consulting and relief management to the Management Rights industry.
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