Three-way reconciliation in Buildium, step by step

The three balances that must agree

Pick one trust bank account and one date, usually the last day of the month. Then compare:

• 1. The adjusted bank balance. The statement's closing balance, minus checks you've written that haven't cleared, plus deposits you've made that the bank hasn't posted yet.
• 2. The book balance. What Buildium shows for that bank account on the same date.
• 3. The sum of the ledgers. Every owner's funds held in that account, plus the tenant money you're holding there, such as security deposits and prepaid rent.

When 1 = 2 = 3, the account is reconciled three ways. A bank reconciliation alone only proves 1 = 2.

Before you start

• Have the bank statement for the month, with its closing date and balance.
• Make sure every payment you received has been put on a bank deposit in Buildium. Payments still sitting in undeposited funds will make the books disagree with the bank.
• Enter the month's bills, owner draws and bank fees before you begin, so you aren't chasing a moving target.
• Run every report as of the same date. Mixing dates is the most common reason the numbers won't meet.

Seven steps, every month

• Step 1: Reconcile the trust account to the bank statement in Buildium. Enter the statement's ending date and balance, tick each deposit and payment that appears on the statement, and leave the rest uncleared.
• Step 2: List what's in transit. The uncleared checks and deposits are your reconciling items. Write them down with dates and amounts. Anything older than a couple of months needs a reason, such as a stale owner check to void and reissue.
• Step 3: Confirm the bank side. Statement balance minus outstanding checks plus deposits in transit should equal the book balance, and Buildium should show a difference of $0.00 before you finish.
• Step 4: Total the ledgers. As of the same date, take the cash balance held for each owner or property in that trust account, and the tenant liabilities held there: security deposits and prepaid rent. Add them up.
• Step 5: Compare all three. Adjusted bank balance, book balance and ledger total. They should agree to the cent.
• Step 6: Check the individual ledgers, not just the total. Look for any owner with a negative balance and any tenant whose deposit doesn't match their lease. A matching total can hide one owner's shortfall covered by another's money.
• Step 7: Sign it off and keep it. Save the bank reconciliation, the ledger totals and a one-page summary with the date, who prepared it and who reviewed it. Your broker of record may need to show these to your state's regulator. Then close the month so nobody edits it by accident.

A worked example

Example Property Co., trust account, as of 31 October. Example figures only.

When it doesn't tie: where to look first

• Books agree with the bank, but not with the ledgers. Usually a transaction posted to the trust account without an owner or tenant behind it, such as a bank fee or interest. Bank fees on a trust account are normally paid from operating or charged to a specific owner, not left unassigned.
• Ledgers agree with the books, but not with the bank. A payment left in undeposited funds, a deposit recorded for the wrong amount, or a cleared item ticked in the wrong month.
• A difference equal to one payment. A tenant payment applied to the wrong ledger, or reversed after an NSF without the reversal reaching the right owner.
• A difference equal to an owner draw. The draw was paid twice, or paid from the bank but never recorded.
• A difference divisible by 9. Often two digits swapped when an amount was typed in.

Fix the cause in the month it happened, then re-run the month and every later one. Write a one-line note of each correction for your records.

How often, and whose rules

Monthly is the common standard for property managers holding other people's money, and many states require it for broker trust accounts. The frequency, the reports you must keep and how long you keep them are set by your state's real estate commission, so check its current rules for your licence. Buildium is a trademark of its owner; Ledgermere is an independent bookkeeping firm.