If you are operating as an estate agent or property manager for STR it is vital to manage your clients and owners funds professionally and ensure accuracy and security for all involved. As there is no legislatitive requirement to do so in the majority of states in Australia many STR property managers are not operating a Trust Account and do not have effective systems in place to complete bank reconciliations of these funds creating a self compliance system. Is this the perfect storm for misuse of funds?
In any business, if you want an accurate set of books, first and foremost this revolves around a reconciled bank account. You would not prepare and present a set of accounts from MYOB/XERO or any other accounting program without completing a bank reconciliation. Currently, only NSW and QLD require a STR operator to be licensed, undergo annual audits and provide a reconciled Trust account. There also is no specific exemption in Tasmania, however enforcement in that state does not appear to be as stringent.
The remaining states in Australia do not require an STR operator to operate a Trust account or provide a bank reconciliation for their Trust account, EVER! This translates to hundreds of millions of dollars being held by trustees in states with no legislative checks and balances.
The Australian STR market generates in excess of $1bn gross revenue annually ($1,041M Financial Year 2016) and growing requiring billions of transactions to be processed by PMS andAccounting systems. Traditionally before STR was such a huge portion of the accommodation market all estate agents or property managers operating in Australia were required to hold a license and were bound by trust account legislation to ensure no unauthorised transactions were conducted and consumers money was safe.
For Example The majority of property managers hold substantial amounts, hundreds of thousands of dollars in Trust at any one time. In an unregulated state not requiring bank reconciliations and annual reporting, a property manager does not have to reconcile these funds nor be subject to an audit of these funds. Could they not then withdraw $50,000 from the Trust account and go to the casino? They lose it and can’t pay it back. Or use Trust funds as an interest-free loan, go and buy a car,a house? Who is going to pick this up without a bank reconciliation and an annual audit?
The STR industry is exposed to unknown long term errors and misappropriation of funds not being identified as property managers are always holding huge sums in forward deposits which could cover any errors made or misappropriation of funds. Without a bank reconciliation being required any unknown transactional errors made will not be picked up and the $50,000, the car/house, etc. would never be found.
In 2014 legislation was amended in VIC as to what constituted a STR. This was defined in summary as a letting of residential property where the period of each letting is or is to be for a period of 90 days or less. It was also defined in VIC that these STR operators are exempt from requiring a license and the same Audit and reconciliation conditions as other real estate agents or long term property managers.
The fact that strict guidelines are imposed for long term agents (who in most instances would hold far less Trust monies than STR operators) yet the same rules do not apply to STR operators does not make sense.
The same lack of regulation also applies to SA, ACT, NT, WA, and TAS where no Trust Account is required to be reported on or reconciled nor undergo any audit. Self-regulation has never proven successful and is potentially creating the perfect storm for errors, misuse, and neglect of clients and owners funds. If you operate in a state that does not require an Audit, even if you are not bound to run a Trust account or complete a bank account reconciliation, it is impossible for accuracy of data to be guaranteed without this function being performed.
If your property manager is operating in one of the states not bound to compliance, ask the question: do you reconcile your trust Account? – If they say “no and we are not required to do so” I would be concerned. Challenge that performing a bank reconciliation is a basic accounting principle for any business. Every property manager of STR, bound by legislation or not, should place critical importance on this aspect of their business for the clients, owners and their own peace of mind.
If you are not performing a bank reconciliation as an STR property manager you cannot guarantee the accuracy of your payments and are opening yourself up to error. Legislation should be implemented by all remaining states to ensure that all STR managers comply with the same rules and regulations that real estate agents and long term property managers have to adhere to.
A property management system or PMS is about processing the booking and receiving the money into the property managers account. What happens next? That’s where BookingTrust steps in to help and provides the management tool to process management fees and charges, Owners earnings, property statements, Guest refunds ,services and expenses for each booking.
Specifically designed for STR and compliant for clients bound by legislatitive audit BookingTrust enables daily bank reconciliations of your trust account with 3 way EOM balancing reports. The combination of a PMS and Accounting software specialised for the short term property market is an essential combination for all property managers success.
More importantly, BookingTrust takes the guess work out and provides peace of mind that all transactions are verified and reconciled whilst saving precious time and improving business efficiencies. Sick of using spreadsheets and accounting programs not designed for STR, let BookingTrust show you the way.