This year, more than ever, we are seeing Fair Trading follow through on agents with qualified audits with a polite, ‘please explain’. At the EOMA office, we come across common receipting errors which are at the heart of these qualified audits. One of the biggest and most frequent receipting error, is the timing between receiving and the receipting of funds into the trust accounting software. Secondly, receipting in general.
We have 4 common scenarios when it comes to the main receipting errors made by agents.
Let’s delve into each.
Top 4 Agency Receipting Errors
An Owners funds bounce back to the trust after EOM
When an owner’s funds bounce back into the trust after End of Month, they will appear as a credit on the bank statement. More than likely, this is due to the Owner failing to advise you of a change of account details. As this appears as a credit on the bank statement, you need to record the funds in the owner’s ledger and cashbook. So where does the breach occur? The agent error generally occurs as they pay the funds back to the Owner manually into the new bank account. They then fail to record the transaction in the software. How to fix the situation? Record the transaction in the owners ledger and pay out to the Owner again once you have the new account details.
The agency has sold the rent roll however tenants are still paying funds into the selling agents trust account.
What to do in this situation? You need to record funds in the selling agents trust accounting software. These funds are not recorded as rent, but as an entry against a Creditor setup in the name of the buying agent. All funds are recorded against the tenancy holding account and transferred to the new agent. This will give the new agent a comprehensive breakdown of funds transferred to their trust.
Receiving cheques and recording as EFT
The scenario. A buyer pays a 10% deposit as a cheque. Funds are banked into the trust. When they hit the account, the agent is recording the 10% as EFT instead of CHQ. Remember: the entry must be done in the software first and banked second. Record all of the cheque details and mark the receipt as CHQ deposit. Present this entry when it shows on the next day’s banking.
An Agent has backdated a receipt to reflect the date shown on the bank statement. This is correct, however the ‘date processed’ is also important. We see agents enter data up to 15-30 days after funds hit the account. This is an immediate breach of Clause 23 of the PSBA Regulations: ‘A licensee must, immediately on receiving money for or on behalf of any person, prepare or cause to be prepared a receipt in accordance with this clause’.
Follow the General Receipting Rule
Aim to receipt and reconcile daily to demonstrate good systems and procedures. Backdating transactions is only acceptable when you’re receipting on a Monday for Friday and for weekend transactions.
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 23 years industry experience. Don’t trust just anyone with your trust accounting. Book an appointment with an End of Month Angel today.