There are times when we just want an easy fix, there are times when an easy fix is OK and legitimate, but there times when it isn’t.
There will be times in your trust accounting travels that you will receive unidentified funds and the process is pretty clear on how to treat these type of transactions.
The Easy Fix
Create an adjustment on your bank reconciliation so your account balances. This is a bandaid solution, is bad practice and will come back to bite you…badly!
The Correct Fix
Receipt the unidentified funds into your suspense or unidentified ledger and do not create an adjustment in your bank reconciliation. This is correct accounting practice and will heal the wound rather than a careless and messy temporary.
Why can’t we just bandaid?
Trust accounting best practice is to have a matching ledger entry for every credit on your bank statement. This process is taught and recommended through nationally accredited real estate training courses.
What is a lazy adjustment?
Some agents can get lazy with their accounting and use adjustments as a lazy fix to their accounting practices. This sort of lazy practice that can result in audit breaches. It can also very quickly become trust accounting hell for that agency to try and identify what those adjustments are for in the future.
When are adjustments OK?
The only time you should use adjustments is when the bank makes a mistake and incorrectly debits the trust account and you need to temporarily adjust to balance your account.
It is important to note that the adjustments should be rectified as soon as possible and not carried over for long periods of time.
Through our CPD training and software training we actively discourage this type of practice with our students because it leads to “Please Explains” from the auditor and Fair Trading (or equivalent).
Enter your data correctly from the outset and avoid unnecessary trust accounting hellish disasters and unhappy auditors.