Trust Accounting: Crucial For Vacation Rentals
Founder & CEO
If you’re in the vacation rental management business, trust accounting is essential to sound fiscal principles - for your owners, your guests and your business.
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:
- Don’t Co-mingle Funds – 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.
- 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.
- Know 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 or times like the early months of the COVID-19 pandemic especially hard.
None of these challenges are insurmountable, but none of them are easy to solve either. At least not without the right trust accounting tools.
VRPlatform by Ximplifi for Trust Accounting
Ideally, vacation rental managers need a complete solution for trust accounting – something that streamlines everything about that process while integrating it with the rest of a manager’s financial concerns.
VRPlatform by Ximplifi offers exactly that kind of solution. VRPlatform integrates with your property management system to pass financial data seamlessly into Sage Intacct, the Best-in-Class Financial Management Solution, or QuickBooks Online. Thanks to rich multi-entity and multi-ledger functionality, everything accounting related happens in the same system. Within that system, smart features, intuitive designs, and accessible automation work together to make trust accounting and owner statements easy for anyone – even those new to the process.
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, VRPlatform is the solution, and Ximplifi is the partner to help you optimize this financial management platform from the start. When you’re ready to continue the conversation, schedule a meeting with our team of vacation rental accounting experts.
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