7 Real Estate Trust Accounting Mistakes You Should Avoid

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WELCOME TO
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7 Real Estate Trust Accounting Mistakes You
Should Avoid
Mistakes are a part of life wise are those who
take their mistakes as experience. When it comes
to managing real estate trust accounts, we have
seen agents making some preventable mistakes that
can produce adverse outcomes for their business.
If you lack knowledge and make these common
errors, start to eliminate them before it gets
too late. Absolutely, some of these common
lapses are a nightmare that leads agents to the
cancellation of their license. So, before you
find yourself in a guilt-trip, let us tell you
the mistakes you need to avoid in real estate
trust accounting.
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• Not Reconciling Regularly

We know that you can reconcile your data once a
month as per General, Accounts and Audit
Regulations 2018 but it is always wise to
reconcile everything on a weekly or maybe daily
basis. This is because you might forget which
data was reconciled after a month. Following
this, you will be relaxed because you know that
you are not missing anything critical.
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• Not Creating Trust-Specific Policies

Rules are what helps you minimize any kind of
risk in a business. This is what most real
estate agencies lack in. It is important to set
up some standard process and a set of policies
that you are going to follow to ensure
flexibility in real estate trust accounts. It
would be helpful to manage the company accounts
and maintain consistency in the workflow.
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• Not Aware of Your Trust Accounts Position

Another big mistake! Most of the real estate
agents dont even know the situation of their
trust accounts. Are you one of them? Be vigilant!
As this could not only affect your reputation
but could also lead to some unwanted outcomes.
As a licensee, you should be aware of the
variations in your real estate trust accounts.
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• Paying Cash Cheques to Landlords

Yes, we have seen agents doing this. Just in
order to make the landlords satisfied, some
agents withdraw money from their trust accounts
and pay them cheques. But you shouldnt do this.
We know that bank allows you to do this, but not
the government policies. You can be penalized
because of doing this, and hence there could
also be a risk of license cancellation.
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• Misallocating Trust Funds

Another one that seems alluring but is
definitely not to opt. Many property managers
withdraw the funds from their trust accounts and
allocate them to their other clients. This comes
out to be audit breaching and can put you at
risk. Do not take out the funds from real estate
trust accounts just to fulfill other clients
needs. Again, you are putting yourself at risk
that can even cancel your license.
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• Lacking in Daily Backups

Can you think of yourself trapped in a situation
where you are settling all the weeks data just
because you have lost the precious information
due to a possible server crash? Oh, dreadful! If
you dont want this, then dont make the mistake
of missing daily backups. This one is a common
mistake and therefore leads to a lot of work.
Using cloud software can be helpful in this
case. If you cant manage this yourself, leave
the job to a professional accountant.
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• Hiring The Unexperienced Person For Auditing

Just like you feel it a little chaotic handling
the daily data of your trust accounts, an
unexperienced person will feel the same. Hiring
the wrong person means, you are affecting your
business. When you hire someone unprofessional,
they might start with little things, but their
way of handling the monthly data can lead to a
lot of confusion. Instead of wasting time on the
wrong person or clearing the trust account, you
should always think of hiring a professional. It
might cost you a little more to hire the best
tax accountant in Melbourne, but the money spend
will be worth it.
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Final Verdict

• Are you making any of these mistakes? No? Thats
  great! If yes, then be mindful. Your little
  mistake can cause you a penalty. In order to run
  a successful real estate business, do not
  neglect the auditing of your trust accounts. For
  a consultation, reach out to Palia Partners for
  no-obligation advice.

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VIC 3029
Thank you
Phone Number 0433 832 301 Email Address
info_at_paliapartners.com.au
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real-estate-trust-accounting-mistakes-you-should-
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