Being a property manager means that you handle quite a number of individuals money. Rental payments, down payments, bill finances, and security deposits are all yours to maintain and keep track of. While opening separate bank accounts for each property may seem like an easy idea, balancing just one banking account can be a hassle. So why attempt to keep 20 or 200 of them balanced singularly? That’s where trust accounting comes in.
What is a Trust Account?
It may sound a bit intimidating but a trust account is really quite simple to understand. Having a trust account basically means that you have separate accounts for each property in one single banking account.
Think of a trust account like a room full of safety deposit boxes. While your banking account holds all of the accounts, or ‘safety deposit boxes’, it allows you to go through and maintain them all individually. This helps to keep each property account managed without the worry of having funds being mixed with others.
Why use a Trust Account?
Aside from keeping your accounts from commingling, using a trust account allows you to keep diligent track of the properties in the instance your company is audited. This also gives you far better and accurate account transactions if you need to pinpoint a specific piece of information.
Another great plus to using a trust account is that being able to have separate accounts for each property. For example, you have an account for Mr. John Johnson’s property. In Mr. Johnson’s account you can have an account for security deposits and an account for rent and bill money. This helps you keep the deposits separate and make sure not to misuse the other accounts.
Remember the Rules!
Just like with all other banking accounts and businesses there are rules to abide by. While each state is different, here are a few basic rules and laws that you must follow in order to keep in good, legal standing:
- Deposit all funds within the time limit, usually 24-48 hours
- Maintain proper record-keeping
- Reconcile account balances immediately
- Never commingle funds between accounts
While your state law may not require the use of trust accounts for your property management company, utilizing one would make your business and accounting life far easier.
