Top 5 Trust Account Audit Tips

Posted by
on Jun 30, 2018

To ace your trust account audit, you need to first ask yourself this–do you really understand your trust account?

Essentially, a trust account is a special type of bank account “where money is received or held by an agent (including any member of the agency’s staff) on behalf of another person in relation to real estate, business or settlement transaction.”

The purpose of a trust account audit is to report on whether the records relating to trust monies have been properly kept, whether there are any discrepancies in trust monies and whether the trust account is compliant with legislation. Failure to comply can result in hefty penalties and even loss of licence.

To help you out, here are our top five trust account audit tips:

1. Diarise trust account audit dates

The simple act of diarising your audit period and due date will help keep you accountable and ensure that you stay one step ahead.

However, keep in mind that trust account audit requirements, periods and due dates vary depending on the state or territory which you operate in. Be sure to check out the below resources for more information:

Note that some states and territories require more than one audit per trust year, through unannounced visits, so it is best to be prepared at all times.

2. Reconcile daily

So you’re performing end of month and you’ve just found a discrepancy...

Would you rather comb through an entire month of transactions or a single day of transactions?

The more often you reconcile, the easier it is to identify and rectify any discrepancies in your trust account so that your records are always up-to-date and accurate. This not only prevents mistakes from snowballing into bigger problems, but also ensures that you’re always prepared for an unannounced trust account audit.

3. Avoid accepting cash

Imagine this. A tenant comes to your agency and hands you some cash to cover their rent. You receive an urgent phone call and have to rush off that very minute. You come back to the office after half a day, only to realise that you have no idea where the cash went...

Rewind–let’s start again.

While it can be tempting to accept cash for rent payments and other fees, it opens you up to a plethora of risks as it needs to be banked manually. For example, you might forget to write the tenant a receipt for their payment which can result in a he-said-she-said legal dispute or you might lose the cash like the aforementioned scenario. So do yourself a favour and avoid accepting cash. After all, keeping a clear digital paper trail is key to acing a trust account audit.

4. Document your processes

Another top trust account audit tip is to document your processes in the form of playbooks and checklists. These should be formal and detailed to help minimise human error and ensure consistency across the business. This way, come audit time, the auditor is better able to understand and navigate your trust account.

Additionally, anyone who handles your trust account should have the proper training and qualifications necessary to maintain your records. After all, it’s your licence that’s on the line if a breach is detected!

5. Use a compliant trust accounting software

We don’t mean to toot our own horn, but using a compliant trust accounting system or property management software like PropertyMe can make your life a whole lot easier. With built-in automation and streamlined workflows, PropertyMe allows you to disburse all your owners and suppliers with the click of a button, upload bank statements for automated reconciliation and trigger messages based on tasks performed. Plus, if you use Xero, PropertyMe has a great Xero integration, amongst others.

Not only does this mitigate human error caused by manual data entry, but it also saves you time and money–just check out how this property manager saves $3,437 every month. More importantly, it means that come audit time, your digital paper trail will be squeaky clean!

To sum it up…

Here are our top five trust account audit tips:

1. Diarise trust account audit dates

2. Reconcile daily

3. Avoid accepting cash

4. Document your processes

5. Use a compliant trust accounting software

Thanks for reading! If you enjoyed this blog post on the Top 5 Trust Account Audit Tips, you might also be interested in 9 Trust Accounting Mistakes You Need to Stop Making Now, How PropertyMe is Different From the Competition and 10 Incredibly Useful Tech Tools Every Real Estate Agent Needs.

Did we miss a top trust account audit tip? Please let us know in the comments below.