Triple Tied Out: Three Times A Charm
The AppFolio Accounting system has a three-way reconciliation process that APM Help commonly refers to as Triple Tied Out. A three-way reconciliation is the comparison of the ending balance of your bank account, the cleared items within the current month, and the cumulative running “adjusted” balance for all of your ledgers to date. That was a mouthful!
As in any accounting software, it starts with a beginning balance, debit and credit items are cleared, with a result that matches the ending balance. The third part of the reconciliation is checking that your cleared balance matches your running property balances, or to put it another way… what your accounting software thinks you SHOULD have in the bank. Let’s break it down by each of these three areas of the reconciliation.
What is the Adjusted Cash Balance?
The adjusted cash balance is a calculation that represents the amount of money that should be in your bank account. All transactions on the bank statement must be posted in AppFolio accurately to be cleared.
The calculation is the Total Cash Balance less those unreconciled items that would display in the Deposits and other Credits top half section of the reconciliation screen plus the unreconciled items displayed in the Checks and other Payments bottom half section of the reconciliation screen as shown in the image below.
Adjusted Cash Balance = Total Cash Balance – unreconciled deposits (in Deps/Creds) + unreconciled payments (Checks/payments)
In this image, the bank reconciliation did not TTO and is out of balance by $98,770.00. This scenario is not unrealistic. We at APM Help see these types of issues on a daily basis and sincerely want to bring awareness to the community and to be a vital part of the machine that helps clean up property management trust bookkeeping and initializes real reform that allows for Property Managers all over, to have bulletproof books.
Being clean or getting clean starts with an accurate record of the transactions that actually took place in real life. We use these transactions to tell a financial story, and without accuracy, the story does not make sense and is not reliable when messy situations have to be fixed. The consequences of not keeping bank reconciliation accurate and clean can result in duplicated deposits, overpayments, unintentional commingling of funds, among a myriad of other issues.
Let’s Go A Little Deeper
Being Tripled Tied Out in Appfolio, unfortunately, does not mean that your books are clean. While it is the first and crucial step to getting clean, there is also a 3 Way Tie out that many states require as well. Our audit tool called Triple Tied Out helps with this more complex 3 Way Tie.
The 3 Way Tie that is required in many states, is made up of 3 numbers. These 3 numbers all have to match and are pulled from various reports in Appfolio.
1. Reconciled Bank Balance: This number can be found in your reconciliation report and is essentially your bank balance, plus/minus unreconciled transactions.
2. Check Register or Journal of Receipts and Disbursements: This number is generally pulled from the General Ledger
3. Total of Owner/Tenant Ledgers or Security Deposits: This amount is pulled from the Trust Account Balance Report for owners, and from the Security Funds Detail Report for Tenant Ledgers. This report shows what the liabilities of the management company are, so of course, you want your reconciled bank balance to cover the amount that is owed.
The above three totals have to match.
In summary, many states require some kind of a 3 Way Tie for trust accounting purposes. There are states with official forms and other states that require the information be pulled monthly, but there is no formal form. Some states require you to submit this information monthly, while others yet require that you keep the information on file for a number of years. No matter what state you are in, we recommend you do this soft audit monthly, to stay on top of issues, and to stay in compliance.
APM Help is Your Virtual Neighbor and is Here for You
APM Help has a mission to raise awareness about proper accounting in the Property Management Community. It’s our goal to assist every property management client with this service regardless of which state they reside in and are utilizing Daily Bank Reconciliation (DBR) services plus our Triple Tied Out (TTO) tool that analyzes the company books to be sure that there are no accounting issues. Our TTO software will not allow you to pass your daily audit when there are older transactions that have not cleared.
If you need help with your Daily Bank Reconciliations, 3 Way Tie or would like to have a guarantee that you will be able to pass a state audit with flying colors, call us today at (281)949-8755, email us at info@APMHelp.com, or visit our FB page at www.facebook.com/TripleTiedOut/ where you can post your questions or message us. Our response time is incredibly fast and we can’t wait to hear from you!