Do you run your own Australian conveyancing firm?
Did you find that you were thrown in the deep end with managing your statutory trust account? Or did you have the opportunity to learn the ins and outs of trust account management prior to going out on your own?
My story
I started working with trust accounts as a teenager when I was employed by law firms that also offered conveyancing services. When I started my bookkeeping firm in 2015, I found myself once again working with trust accounts. I continue to do so – managing the trust account reconciliations for many fantastic conveyancing and real estate clients.
Trust Accounts = Extra Responsibility
As you would be fully aware – when you start working with trust accounts you’re taking on another whole level of responsibility, in addition to the usual tax and compliance obligations that come with running a business in Australia. Through our regular discussions with conveyancers and real estate agents, we see the added stress that the annual trust account audit can cause.
With that in mind, here are some of my top tips to get you managing your trust account like a pro:
- Don’t overdraw a client’s trust ledger (don’t allow it to go into the negative)
- Ensure you have the details of every client whose money you hold
- Keep all cheque butts and ensure all cheque numbers are accounted for in sequential order
- Do not pay general office expenses, debts or bank fees from trust monies
- Perform regular backups of trust accounting software and store a copy off-site as well. (How your software is backed-up will depend on what software you’re using – and whether it’s desktop or cloud-based).
- Don’t hold onto funds received from clients, such as cheques. Deposit all funds received as soon as practicable into a financial institution.
- Check with the governing body of your industry as to what accounting software is able to be used for your trust accounting. In many circumstances the software you use to track your business income and expenses is not suitable to use for your trust accounting (see Extra Note below).
- Keep detailed records of any errors or discrepancies that have occurred and/or are being fixed
- Don’t draw “cash” cheques
- Reconcile regularly and thoroughly
Extra Note – Accounting Software
If you’re an Australian conveyancing or real estate firm using Xero for your business bookkeeping (which many of our clients are), Xero isn’t going to be suitable to use for your trust accounting. You will want to, however, keep good records in Xero of the income that is coming over from your trust account. Use file numbers and client names as references where possible. Report your fees income separately to your disbursements income and ensure you’re recording GST on those amounts correctly.
Final wrap-up
As with any business bookkeeping, errors may sometimes occur. But if they do, make sure you have a “paper trail” or explanation of what has occurred and how it was fixed. Fix mistakes promptly and don’t hang onto client’s money any longer than necessary. Regular reconciling will help pick up any differences between your bank account activity and your accounting records.
About us:
Festival Bookkeeping are a team of Xero advisers and bookkeepers located in Adelaide, South Australia. We help busy business owners and their teams Australia-wide. You can contact us on 0421 501 887 or sarina@festivalbookkeeping.com.au
Learn more about our bookkeeping services here: https://festivalbookkeeping.com.au/services/xero-bookkeeping-packages/
Looking for more helpful articles about bookkeeping and accounting? Try https://festivalbookkeeping.com.au/xero-payroll-4-common-mistakes and https://festivalbookkeeping.com.au/8-different-ways-to-bundle-your-services/
Read what our happy clients have to say here: https://festivalbookkeeping.com.au/testimonials/
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