Trust errors tend to increase when multiple trust bank accounts are used, and when clients have multiple matters. Within this category of trust errors, there are 3 errors that are commonly found:
- simple trust posting errors, usually involving posting the wrong amount or posting to the wrong matter. Just locate the error and correct the entry.
- negative matter trust balances – sometimes the client has sufficient trust funds, but they are not distributed to the various matters as needed to eliminate the negative balances. These errors will reveal themselves when you compare your trust bank reconciliation to your client trust listing.
- depositing funds or posting to the wrong trust bank account is another common mistake when multiple accounts are used. Simply viewing the client ledger or the client trust listing does not easily draw your attention to this error. Instead, you must run separate client trust listings for each bank account. You may need to transfer funds to correct this error.
As always, I invite your comments and suggestions for future post topics. Next week – Accounts Receivable Errors.
Clyde
Other than the slip-up in due diligence of ensuring money is coming in and coming out of the correct matters, areas where slip-ups can also occur and that need a system of checks include: 1)transferring money to term depoist trusts, 2)receiving wire transfers/direct deposits & 3) paying out via wire/debit transfers. Since there are no physical deposits or cheques to cut out in such transactions, the posting process can be missed entirely particulalry if one is dealing with dozens of bank accounts. At end month during Bnk Recs is when such issues surface. Just my thoughts.
ReplyDeleteExcellent points. 1) If you have care and control of the funds being invested, you should set up separate trust banks in PCLaw for the term deposits. 2) Always check your wire receipts online before closing. I have noticed a few mortgage transfers are deducting $10 for the wire fee before sending the funds. Not only will you be short the $10, but all your paperwork will be wrong too, including the trust ledger you provide the client. 3) For outgoing wires/debits, be sure to complete a Form 9A for each.
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