Trust accounting, why it matters for your business.
Trust accounting is essential in the property management sector, providing a secure way to manage clients' funds and ensuring that business operations meet legal and ethical standards.
"Using a trust accounting compliant property management system (PMS) enables accommodation business operators to build trust with owners and investors by enhancing transparency and accountability in day-to-day operations," notes principal at Holmans Accountants, Lel Parnis.
One of a property manager’s primary responsibilities is to handle funds such as rent, security deposits, and payments on behalf of property owners. Trust accounting ensures these funds are managed separately from the business’s operating accounts, preventing misallocation and safeguarding client money. When managers use a compliant PMS, they not only enhance accountability but also streamline their operations through increased automation and accuracy.
One of the most significant advantages of using a cloud-based PMS, particularly one with automatic bank feeds, is the operational efficiency it brings. These systems simplify reconciliation processes by seamlessly syncing transactions with bank records.
"Using a Cloud-based PMS, particularly where automatic bank feeds are available, provides efficiencies to operators in their letting operation and in enabling accountants and auditors to review and advise upon the business with ease," says Parnis. This streamlined process reduces manual errors, saves time, and ensures that financial records are always up-to-date and accessible.
From a sales perspective, "Having a booking system fully reconciled to bank balances and bookkeeping software removes any doubt as to the income generated by the business which can greatly assist in verifying the net profit for valuation of accommodation businesses", explains Parnis. This level of transparency greatly assists in verifying net profit, offering peace of mind to potential buyers and investors.
Ultimately, trust accounting isn't just a regulatory requirement—it’s an investment in a business’s reputation and operational efficiency. Implementing a robust, cloud-based PMS supports property managers by reinforcing trust, ensuring compliance, and simplifying financial management, making it a wise choice for forward-thinking operators.
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