Why Reconcile Your Client Account?

Accounting terminology can be a turn-off to business owners, understandable given that the majority didn’t get in to lettings to show off their accounting skills! However, once you get to grips with the basics it is apparent just how valuable this process to ensure your business runs smoothly. Of course, outsourcing your client accounting is a viable option, but even then you should have an understanding of the process and of why you should reconcile your client account. Having this knowledge will allow you to be confident that things are being run as they should be.

the majority of business owners didn’t get into lettings to show off their accounting skills!

What is a client account reconciliation?

Very simply, a check that your monetary records match the accounting information you hold – in practical terms typically this means your client account should match your software records. If you look at your client account between two dates, you should be able to see the opening balance, money in and out and closing balance. Your client accounting software should be reflecting these changes and if the records match, you can say that they are reconciling.

What do I need to know about reconciling tenant deposits?

In the same way as your client accounting records should be reconciled, so too should your tenant deposit records. Whether you hold tenant deposits or you pay them into a custodial scheme, deposits are still client money that you are responsible for. Your own software or ledger records should match the deposit scheme provider’s records and – in the case of insured deposits – with your deposit bank account.

Why do letting agents need to do reconciliations?

With so many transactions happening on a day-to-day basis, there is always a chance that errors could occur. Regular reconciliation is intended to spot these errors in a timely manner, allowing you to resolve them quickly and efficiently. Reconciliation has the added benefit of potentially detecting fraudulent activity on your client accounts, such as paying dummy contractors or bogus commissions. Whilst matching a payment out of the software to a payment out of the bank won’t immediately spot fraud, regular reconciliation may allow you to identify patterns of activity or unusual transactions which would otherwise go unnoticed.

What should I be reconciling?

  • Client money accounts with software
  • Deposit accounts and/or software records with the deposit provider’s records
  • Spot check random transactions
  • Be mindful of any unusual transactions and patterns of activity
  • If your business is broken down into subsidiaries, check whether money transferred between client accounts has been allocated appropriately
client accounting checklist

How often should I reconcile?

Now you understand why you need to reconcile your client account, the next questions is ‘how often?’. With so many high-value transactions going through the business, it is good practice for letting agents to reconcile every day. If you are using lettings software this should be a simple exercise and will highlight any mistakes immediately and enable you to rectify them with the minimum of fuss

Top tips

If you aren’t doing so already, think about processing the money paid into your account one day in arrears. This means that today, you process money that came in yesterday. This gives you a clear cut off time and a fixed point for reconciliation (yesterday’s closing balance) rather than a moving target where daily transactions can credit the account up to midnight. It also gives you confidence that the funds appearing in your account are cleared. Ensuring your client account and software records are accurate and up to date is part of basic compliance for letting agents but we know it can be tedious. Ask yourself these questions:

  • Is your business growing?
  • Are you short of time?
  • Do you worry that your client’s money is not fully accounted for?

If the answer to any of the above is ‘Yes’ then why not get in touch.

Whatever your size, we offer tailored service packages using your existing software or ours, pay-as-you-go pricing and no hidden costs.  In fact, outsourcing your client accounting to The Letting Partnership could be the best business decision you ever make. If you would like to know more why not give us a call on 01903 447900 or send us a message and we’ll get back to you.

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