What reports should I review for my trust account?
There are numerous steps and processes that go into accurate trust accounting. One of those steps is reviewing reports that tell you if your trust account is in balance and if you’re holding all the funds as you should.
Whether you handle your trust account bookkeeping, or you’ve hired someone else to do it, we recommend reviewing the following reports on a regular basis.
1. Balance Sheet
Start with your Balance Sheet. Trust accounts should have a balance sheet that show Assets and Liabilities. Your Assets consist of funds you are expecting to receive from guests (accounts receivable), and Cash you are holding for all stakeholders.
Liabilities are funds you are expecting for guests, and the amount of money in stakeholder accounts, usually summarized into Guest, Manager, Owner, Vendor, and Tax Authority.
This report gives you a quick overview to verify that your Assets equal your Liabilities, and your stakeholder accounts are not negative.
2. Individual Balance Sheets
While the Balance Sheet provides an overall view of your account, it is equally as important to run Individual Balance Sheets that report specifically on Owner, Vendor and Tax Authority balances.
Owner, Vendor and Tax Authority balance sheets allow you to quickly identify if any of these stakeholders have negative balances and are out of trust.
3. Liability Detail Report (LiveTrust specifically)
We mentioned above that funds expected from guests are considered an asset and a liability, and these numbers should equal each other. To ensure this number is accurate, run a Liability Detail Report regularly.
A Liability Detail Report tells you if a reservation is still expecting funds but shouldn’t be (e.g., a cancelled reservation), or if funds are being held for a guest that has departed (e.g., security deposits). A clean Liability Detail Report ensures accurate Asset and Liability totals.
4. Reconciliation Reports
Finally, Reconciliation Reports. Reconciling your trust bank account to your trust accounting software should be done monthly at a minimum. This ensures that you have enough funds in your bank account to cover advance deposits from guests, and other stakeholder payments.
After you have reconciled, you should have entries that are considered Uncleared Transactions. This means that the payment or refund has been entered into your trust accounting software but has not yet hit your bank account. While uncleared transactions are normal, they should be reviewed monthly to make sure they can be accounted for.
Here are guidelines to follow when it comes to uncleared transactions:
- Deposits (payments or refunds) – Deposits include credit card charges, refunds, or cash/checks taken to the bank. These should clear your bank account (show as deposited) within 3 business days.
- Checks – Checks that are written to stakeholders should be cashed within 3 months. If they are not, it is best practice to reach out to the receiver to make sure they got the check, and if needed, re-issue it.
- Electronic Transfers – Normally these will occur the same or next day.
- Other payment types – If you enter other payment types to cover an entry on a reservation, such as the Manager covering part of the cleaning fee for a dirty BBQ, an adjustment should be made in the accounting system to offset this from the responsible stakeholder. These should clear the same month they are entered.
If any entries on your uncleared transactions fall outside these time frames, they should be reviewed.
Whether you do your own trust accounting, or have someone else do it for you, reviewing your Balance Sheet, Individual Balance Sheets, Liability Detail Report, and Reconciliation Reports regularly will help ensure your trust account is healthy!