Trust Accounting: Crucial For Vacation Rentals

Trust Accounting: Crucial For Vacations Rentals

Vacation rental managers are really in the business of trust accounting. No matter what range of services they provide or how many properties they oversee, their fundamental role is to make sure funds flow from renters to property owners (and themselves) correctly. If managers need to get one thing consistently right, it’s trust accounting.

That’s good news and bad news. Good news because with a great system of trust accounting in place, a vacation rental business is on firm footing to succeed. But bad news because trust accounting can be tricky to set up correctly and draining to keep up with regularly. For managers that underestimate this obligation, accounting issues can cause frequent headaches for an otherwise prosperous business.

Key Challenges With Trust Accounting

Trust accounting has unique features that make it difficult compared to the bookkeeping needed for the average business:

• Managing Multiple Accounts – Best practices suggest using separate bank accounts for property owner funds vs. property manager funds. Managing multiple accounts only puts roadblocks in front of cash flow, though. Proper accounting often involves time-consuming, manual data entries and extra levels of oversight. And if those aren’t properly applied, it risks causing serious cash flow issues. Learn about all the dos and don’ts of trust accounting >
• Preserving Fiduciary Responsibility – As the party tasked with collecting rents and returning security deposits, the vacation rental manager or management company has a fiduciary responsibility to renters and owners. Meeting that responsibility requires high levels of transparency and accountability that only become harder to preserve as the business grows. 
• Complying With State Laws – Every state has different rules for trust accounting. Failure to comply with these laws can cause a business expensive headaches. Trying to manage rental incomes from multiple states can be similarly frustrating. Keep in mind that even when trust accounting isn’t required by law, it’s always the best approach to handling vacation rental accounting. Learn about tax compliance for short-term rentals >
• Knowing Your Cash Position –  Perhaps the most important reason to use sound trust accounting concepts is so you have a sound understanding of your company’s financial position and performance. By co-mingling funds and not tracking advance deposits, management companies can quickly get a false sense of security of their cash position, as much of the cash in their bank isn’t theirs. This makes projecting and managing cash during seasonal downturns especially hard. Check out these 4 financial reporting tips for property managers >

None of these challenges are insurmountable, but none of them are easy to solve either. At least not without the right trust accounting support.

Ximplifi: Experts In Trust Accounting

Ideally, vacation rental managers need a complete solution for trust accounting – a way to streamline the entire process and provide a complete picture of the manager’s financial performance.

Ximplifi offers exactly that kind of solution. With a combination of the right people and the right technology, we ensure all of your financial data stays organized and up-to-date using Sage Intacct, the Best-in-Class Financial Management Solution, or QuickBooks Online. Backed by decades of combined experience working with vacation rental management companies, we understand industry best practices and offer a range of services tailored to meet your business needs. 

If your trust accounting suffers in any way, it’s cause for concern. And if you’re just getting your business off the ground, accounting needs to be a top focus. In either instance, Ximplifi is the partner to help you optimize and simplify your financial management from the start. When you’re ready to continue the conversation, schedule a meeting with our team of vacation rental accounting experts.