Guest Blog by The Letting Partnership
In a recent webinar, The Letting Partnership explored the critical topic of reconciling accounts, covering client bank accounts, deposit accounts, and CRM accounts. Even if you’ve outsourced your client accounting, it’s vital to understand how reconciliations work and why they are so important. Having this knowledge will give you the confidence that your business is running smoothly and securely.
Here’s a breakdown of the key takeaways to help you better understand account reconciliation and its importance for your letting business.
What is Account Reconciliation?
Simply put, reconciling ensures your financial records match your accounting data. This means your client bank account should align with your software records, giving you a clear view of money coming in and going out. It’s essential to ensure that ‘client money’—funds received from tenants, landlords, or suppliers—is accurately accounted for. Keeping records like deposit registrations and trial balances up to date helps maintain control over these funds.
What is a Trial Balance?
A trial balance is an itemised breakdown of all the money held in a client account at a given time, ensuring debits and credits are equal. While the term might sound technical, the process itself is straightforward and an essential part of keeping your finances in check.
Best Practices for Reconciliation
When reconciling client money, consider switching from spreadsheets to dedicated lettings software with built-in accounting. Good software provides accurate, up-to-date views of funds, arrears, payments, and balances, while simplifying record-keeping. With many software options available, it’s important to choose one that fits your business in terms of budget and client accounting features.
Reconciliation of Tenant Deposits
Reconciling tenant deposits is just as crucial. Whether using an insured or custodial scheme, ensure your deposit records match both your software and the deposit scheme provider’s records. For insured deposits, these should also align with your deposit bank account.
Reconciliation helps to ensure deposits are protected in time and that you’re not paying premiums for deposits that no longer exist.
Why Daily Reconciliation Matters
Daily reconciliation isn’t just a tick-box exercise. It helps ensure that funds flowing in and out of your account are accounted for correctly, reducing the risk of financial errors or exposure. For example, if rent is paid early or in advance, daily reconciliation ensures you’re holding the correct funds and not paying out more than what’s available. Even if there’s no movement in your accounts, reconciling daily ensures that you stay on top of any discrepancies before they become major problems.
The Dangers of Neglecting Reconciliation
Failing to reconcile regularly can result in losing track of where the funds should be, which can have serious financial consequences.
The Letting Partnership are regularly asked to audit and reconcile the client accounts of agents involved in acquisitions as part of their due diligence. We recently encountered one agency that hadn’t reconciled its accounts in over two years, leading to a £37,500 deficit due to unaccounted rent payments!
Regular reconciliation could have prevented this situation. It’s also a reminder of how crucial this process is, especially when preparing for audits or acquisitions.
Reconciliation Tips for Letting Agents
1. Reconcile Daily: Lettings software makes this easy, ensuring errors are caught early.
2. Work One Day Behind: Reconciling one day behind the bank statement ensures a clear cut-off and helps avoid duplication of receipts.
3. Batch Payments: Where possible, use batched payments to reduce manual errors and speed up reconciliation.
4. Stay Organised: Prioritise paying landlords first, followed by contractors, tenants, and finally agency fees.
5. Consider Outsourcing: If client accounting is a burden, consider outsourcing to experts like The Letting Partnership. We specialise in client accounting and can help keep your accounts in top shape.
If you need support with your client accounting, contact The Letting Partnership today! Call 01903 477903, email: enquiries@thelettingpartnership.co.uk or visit our website
The Letting Partnership offer a simple hands-free solution by providing the client account as part of our outsourced client accounting package. A small, dedicated team, trained on your own chosen software, work on your existing software and provide support.
The views expressed in this content are solely those of the author alone and do not necessarily represent the views of TDS, its officers, or employees. To read more on TDS views, visit our Policies & Procedures webpage.
Protecting deposits with Tenancy Deposit Scheme is quick and easy. Choose from our FREE custodial scheme, or our best value Insured scheme.
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