As with many aspects of business, it is acceptable to believe there will be a steep learning curve, mistakes made, and lessons learned as you navigate your way through business. The same goes for your trust accounting.
We have previously outlined 10 of the most common mistakes made by real estate agents in a previous blog, which you are invited to head over and read. Unfortunately, from first hand experience, we have witnessed yet another 11 common items to this list. It’s like the gift that keeps on giving – and we want to share them with you so that you can avoid making these same costly mistakes!
The Gift that Keeps on Giving…
- Handling transactions on your smartphone
Yes we know that we are increasingly reliant upon technology and our handheld devices for many things in life – but just don’t make your trust accounting transactions one of them! Leave your major tasks to the office when your concentration is focused on the job at hand.
- Handling transactions on your smartphone…whilst driving
Yes, we are not kidding – this has actually happened. We could spend this whole blog discussing the dangers of smartphones and driving but that is a whole other topic. So not only is it illegal to handle your smartphone whilst driving, it can have catastrophic results. Your capability and concentration is impaired, let alone your ability to actually see what you are doing. Results generally are landlords are overpaid and wages get paid from the trust account insteadof the general account. Bottom line – don’t do it!
- Lying about rent in arrears
Lying may be a bit harsh a term – so let’s adjust to ‘holding back about rent in arrears’ to your landlords. In a bid to hide the fact, we have seen agencies ‘loan’ the owner funds from the general account and allocate it to rent in order to retain the management. It’s fraught with danger and the wrong thing to do. Honesty is the best policy and putting procedures in place for arrears management.
- Using Band-Aid fixes
A bad habit to get into and a hard one to get out of is using adjustments in your accounting software to fix data entry mistakes instead of going back to the source problem and adjusting the original entry. It creates more work and makes reconciliations a much harder task.
- Writing cash cheques to owners
This one really should need no explanation. No matter how intimidating your owner may be, they are not worth a visit from your licensing authority as a result of you writing cash cheques. If you think you’ll get away with it – think again!
- Paying cash to tradies
The trade industry is renowned for cash jobs but do not make the mistake of paying tradies cash from your trust account because they ‘only take cash’. It can land you in a lot of hot water and is not worth the risk. Do your research and find qualified and honest tradies who work by the book.
- Misusing trust money
When bills are due and rent is in arrears or due, it can be tempting to pull funds from your trust account that belongs to other clients, with the aim that you’ll ‘top it back up’ when your tenant pays their rent. Wrong. This can lead to so many reconciling issues and can quickly snowball to be a much bigger problem. Keep your accounts and bills streamlined and managed correctly and don’t misappropriate funds that aren’t yours.
- Undervaluing trust account management
Ensure that the person/s allocated to your trust account management are adequately qualified, responsible and up-to-date with the rules and regulations of trust accounting. Some agencies allocate a junior or school-leaver to manage their trust accounts. They are simply not mature enough or qualified to manage the responsibility. Don’t try to cut costs with your trust accounting. It will end up costing you a lot more than it’s worth in the thousands you’ll pay to fix elementary mistakes.
- Being in the dark about your own trust account
As a licensee, if you delegate your trust accounting to a staff member, ensure you know the ins and outs of the process and account yourself. Set aside the time to get briefed on your monthly activity. You will then know what you are signing off each month. If something goes wrong the responsibility will come straight down on your shoulders. So be sure to know what you are signing off
- Not reconciling accounts in your current software before making the switch
If you are considering switching trust accounting software, make sure to reconcile your old software before moving to the new. it’s like packing up the mistakes and taking them with you! Reconcile correctly and start afresh. We have outlined the things to consider when switching software in a previous blog.
- Holding on to cash and cheques
Last but certainly not least is holding on to and not banking your cash and cheques within the prescribed 24-48 hours and waiting for funds to build up to warrant a trip to the bank. Bad idea. Avoid the risk and bank all funds immediately upon receipt. Holding on to them is a recipe for disaster.
There you have it – another 11 common mistakes made by agencies when it comes to their trust accounts. Let’s hope we can stop adding to this list and agencies start to manage their trust accounts professionally, correctly and ethically.
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~ 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 19 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.