A trust account is any type of financial account opened by a person or business and managed by a designated trustee. The trustee is the person who actively manages the funds or assets in the account. This process is known as trust accounting.
Basically, trust accounting is a specialized form of accounting designed to manage funds held on behalf of others.
In the world of vacation rentals, when guest payments are held by property managers on behalf of the property owner, the money is legally required to be placed in a trust account until they are disbursed to the different parties involved.
Trust accounting is meant to prevent those handling an owner’s funds from inappropriately using them for purposes outside of their agreed upon duties.
Trust accounting has long been viewed as a clear and safe way to manage and transfer payments. And while there is some merit to belief, there are other — and depending on your situation — better options.
Today, the vacation rental industry has evolved and now offers more than adequate systems to handle the transfer of payments to homeowners, property managers and other parties involved.
In other words, if the correct sums are paid directly to property managers or property owners through OTAs, you don’t need trust accounting.
For example if you use Airbnb’s co-host payouts, you can share a percentage of the booking (including or excluding the cleaning fee), the cleaning fee or a fixed amount directly.
Payments will be sent to both hosts and co-hosts within about 24 hours after the guest checks in, depending on their chosen method of payment. Both the owner of the listing and the co-hosts will even receive their tax documents for the relevant amounts.
Even if you don’t use an OTA’s direct payment methods, and use an accountant to do your accounting for you instead, it still isn’t necessary to adopt a formal trust accounting system.
Many vacation rental homeowners and property managers use property management software (PMS) to streamline and automate their operations, from reservations management and guest communication to property maintenance.
That said, as with any aspect of your business dealing with financial filings and taxes, it’s extra important to ensure accuracy.
With trust accounting, even a small error or inconsistency in the data you’re working with can lead to serious financial discrepancies and costly consequences.
Good trust accounting is not possible if you can’t ensure precision and compliance. If you choose the wrong system you’ll be putting your vacation rental business and yourself at risk.
Trust accounting is complicated, depends on the laws and other norms of your location and requires a lot of resources to do. This can distract from the most important tasks of your PMS such as multichannel distribution, bookings management and property management.
If you still feel you need trust accounting for your vacation rental business, don’t worry, because Hostaway is fully compatible with everything you need for trust accounting.
You can trust in Hostaway to provide you with accurate data in real-time so your trust accounting process is founded on reliable information. This also eliminates double entry of data.
Hostaway offers the best financial reporting solution for short term vacation rentals in the world. Plus, reports are easy to export and share, with your accountant, property owner or accounting software tool.
Because Hostaway integrates with the best trust accounting software providers, you can easily perform trust accounting without having to worry about data accuracy or data exportation.
Our accounting software partners include:
Financial software designed for small businesses, Intuit Quickbooks provides a wide range of accounting services including trust accounting.
Ximplifi enables automation of accounting tasks while providing professional accounting support for vacation rental managers to simplify short term rental accounting.
Designed for short term holiday accommodation, BookingTrust is a cloud-based trust accounting software. It also provides a range of account management services.
AbacusVRA delivers comprehensive accounting services including auditing, consulting and bookkeeping. It also provides tax preparation, reporting and processing.
Most short term rental property owners, property managers and hosts can easily do without trust accounting. But if you are one of the few who need it, Hostaway gives you high-quality data, easy data exporting and great accounting software tools to help you manage trust accounting for your vacation rental easily and without worry.