What happens when you think about your trust account? Does your blood pressure skyrocket while you quiver in your shoes? If so, don’t worry as you are not alone. It seems that many property managers are sometimes overwhelmed by the financial aspects of managing a trust, on top of managing their small business finances (if they own one).
You shouldn’t have to be an accountant to manage these everyday transactions, and with the help of software such as PropertyMe it becomes far easier to document and track your trust account transactions in a simple to use app, so you can stop fighting your clunky old system or finally update from that spreadsheet you are using.
So what exactly is a trust account?
If you hold or manage other peoples money as part of your business practice, it is considered that the money is ‘entrusted’ to you, and you may be required to keep that money in a ‘trust’ bank account. This is usually a special type of bank account that is governed by legislation. Real estate agents in Australia, like solicitors or travel agents, are required to have a trust account when holding their clients money.
The Consumer Affairs Victoria website outlines the definition of a trust account in the following way:
‘By law, if you receive money in advance from a client, you must deposit it into a trust account held with an authorised financial institution. This money may include a sales deposit, rent or fees for advertising or maintenance.’
The table below from Consumer Affairs Victoria summarises which payments are to be deposited in a trust account and which should be deposited in a general business account.
It’s important that when dealing with your trust account you follow these simple principles:
- All money must be deposited into your trust account and be tracked and reported
- Your software transactions must match, or be ‘reconciled’, to your bank account transactions
- Always be transparent when receipting and withdrawing money
- Try not to accept cash, as this will increases your risk and will also need to be banked manually.
Different states in Australia have different rules and regulations when it comes to trust accounts, so it’s best to check with your states consumer affairs website for details. Below is a list of links that you may find useful outlining specific state regulations (as we know it can be pretty hard to find good help these days).