How to KonMarie Your Trust Account at EOFY
Are you obsessed like us and an avid follower of the #konmarie method of tidying up? If so, then you’ll have probably watched Marie Kondo’s series in full on Netflix – Tidying Up with Marie Kondo. For those of you not on the tidying movement (for the uninitiated you should really give it a go), Marie is a Japanese-born organising consultant. She helps people declutter their homes by following simple methods and ‘sparking joy’ through the satisfaction of organisation in the home. The premise being that everything has its own place.
So this got us to thinking…. Can you imagine how clean Marie’s trust account would be if she had one? Which got us to further thinking…. could we apply these same principles to trust accounting?
The answer is yes!
Trust accounting software can accumulate a lot of clutter over time. It can be bought on by a change of staff, change of software or simply overlooking the clutter whilst we are busy with the daily processing and running the business. As the 30th June rolls around, now is the perfect time to start thinking about decluttering your trust account. Let’s clean out some of the dead wood before your upcoming annual audit.
What does clutter demonstrate to your auditor?
Clutter can send a loud and clear message to your auditor – and it’s not a positive one.
- Lack of supervision
- Lack of established systems or processes
- Lack of knowledge and understanding of regulations
Not exactly a glowing report right?
Find the Joy
So, let’s adapt Marie’s theory and judge whether the following areas of your trust accounting software ‘spark joy’?
How many adjustments do you currently have sitting in your reconciliation? How many of these adjustments are older than 3 months? You should aim to clear these as close to $0 as possible pre-30th June 2019. Allocate them to either an unidentified ledger or by bulk contacting your clients to check if any of these funds belong to them. If these are adjustments are stored in multiple places within the software, it would be ideal to start moving them to one destination such as an UNIDENTIFIED ledger. This will ensure you have an organised list and explanation for each amount.
Have you been hoarding tenant balances in tenant deposit accounts? It’s time to work through these and aim to allocate to rent/invoices or refund any amounts to vacated tenants. You should aim to have NIL tenant balance before 30th June 2019.
Do you feel you need more space in your database? It’s time to clean out all the dead wood from your software. Archive old records and only show current properties. This will eliminate the need to search old records every time you look up information.
Look at some of the items in your reconciliation and ask – is it piled high with clutter? Now you may ask what would constitute clutter in a reconciliation? Clutter is anything that is unpresented and older than 3 months. Ask yourself – why haven’t these been reconciled? Are you waiting on cheques to be deposited? All it may take is a friendly reminder to the payee to bank their funds. Or you could suggest cancelling the cheque and alternatively paying to the person via EFT. Also watch out for any unpresented deposits. You shouldn’t have any as it means funds haven’t been banked.
Marie goes into great detail about sorting the miscellaneous items of your home into sub-categories. This same rule can be applied to your trust account. Areas of concern in your trust account database would be:
- Unprocessed bills/invoices older than 2 months
- Supplier ledgers with odd amounts and NIL payment method
- Unposted banking.
Adopting a little of Marie Kondo’s philosophy in the lead-up to EOFY will at the least ensure you have a clean start for the new financial year going forward. Whilst the actual clean-up of data may not ‘spark joy’, it will definitely spark the joy of your auditor and see you pass with flying colours.
Now that is joy we’d all like to see!
– 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 22 years industry experience. Don’t trust just anyone with your trust accounting. Book an appointment with an End of Month Angel today.