How to Account for Trust Funds Properly
Do you run your own business within the real estate industry? You may be relatively new to this sector and still figuring out various office procedures, so you may not be on top of your accounting as yet. As part of your work, you often have to hold money in trust on behalf of your clients, but you should be particularly careful in handling this. What do you need to consider?
Best Practices
In all cases, you should segregate this money from the rest of your finances and ensure that your bookkeeping work is impeccable. You need to account for the money at every stage once it is in your possession, and you may have to get those accounts professionally audited once per year, should legislation call for it.
Each client should have their own ledger, and this should be monitored carefully. You should only make legitimate transfers and try to avoid any single trust transfers between parties that are unrelated to each other.
Ensure that you keep all of the details up to date, especially when it comes to the client's contact information. You may need to keep them updated with any relevant transactions, and you should always be transparent in all your dealings.
Never pay any of your general office expenses or other fees directly from a trust account. If any bank fees are generated in relation to the specific trust, then you should account for those separately and recover them from your client.
If any discrepancies arise or any errors are made, these will need to be recorded and details kept for future analysis. The more information that you keep here, the better, as it will help to avoid any confusion or charge of impropriety in the future.
If you do use accounting software, make sure that it is of an acceptable standard in your industry when it comes to trust accounting. Some software is not recommended or suitable and you will always want to work with the right technology.
Expert Help
It can be difficult to keep on top of small business accounting at the best of times, especially if your industry is a little more complicated than others. If you haven't done so already, talk with a bookkeeper who has experience in trust accounting and bring them on board to help you. This may help you avoid any issues in the future and allow you to focus more on your general everyday work.
Reach out to a bookkeeping service near you to learn more.
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