If a tenancy has been set up with the incorrect start date in the rent template there are a few ways to resolve the problem.  How long the tenancy has been running needs to be taken into consideration when deciding on the best method of correction.


If the tenancy is very new, and the owner still has the funds in their ledger:

  1. reverse all of the receipts;
  2. void all of the incorrectly dated rent invoices;
  3. correct the start date on the rent template;
  4. set an opening balance;
  5. receipt the tenants funds back against the new receipts.

In the scenario where an owner no longer has funds in their ledger, the simplest option is to adjust the billing goings forwards and use credit notes and one-off rent invoices to make the corrections.  In the event of a tribunal hearing, making a good description in your credit note and the absence of reversals should make it clear enough what has happened.


If the tenancy was started too late:

  1. adjust the start date of the rent template to what it should have been;
  2. check what the 'next' invoice date range will be;
  3. use the option to generate a one-off rent invoice to cover the missed period at the beginning of the tenancy;
  4. use another one off invoice to cover the gap between the previous invoice and the next invoice (the 2 invoices should add up to one rental period);
  5. match the tenants next payment to the two invoices.

Example:

Tenancy was invoiced from 10th Feb 19 but really started on 1st Feb 19, and has already been invoiced for February and March, 'next invoice' date shows 10th April.  Adjust rent start date to 1st Feb, and the 'next invoice' date will move forwards to 1st May.  Raise one-off rent invoices for 1-9 Feb & 10-30 April.


If the tenancy was started too early:

  1. adjust the start date of the rent template to what it should have been;
  2. check what the 'next' invoice date range will be;
  3. use the option to generate a one-off rent invoice to cover the gap between the previous rent invoice and the next rent invoice;
  4. raise an income credit note for the overcharged period at the beginning of the tenancy, make sure the description is very clear, the amount should match the invoice in the previous step, apply the credit note to the invoice.


Example:

Tenancy was invoiced from 1st Feb 19 but really started on 10th Feb 19, and has already been invoiced for February and March rent, 'next invoice' is showing as 1st April.  Adjust rent start date to 10th Feb, and the 'next invoice' date will move forward to 10th April.  Raise a one-off rent invoice for 1-9 April, and a credit note for 1-9 Feb, apply the credit note to the invoice.


Some users have a preference to correct the entire history for a tenant.  Before heading down the path of making many reversals, consider your local trust accounting legislation - it may be non-compliant to reverse a receipt which has been issued.  If you absolutely must reverse all the receipts for an entire tenancy, we would suggest you make notes about it for your trust account auditor, and possibly seek their advice on compliance matters regarding your choice.


Ledger 'Top Up' Method - best practice options


Top up the balance of the owners ledger using one of these options and proceed as described for a new tenancy at the beginning of this article:

  1. if they have other properties, use a ledger transfer to top up the ledger which is going to have the reversals, the funds can be transferred back to the other ledger afterwards.  These transfers will both show on their statement and in financial reports;
  2. if your agency has a ledger with a 'buffer' fund held in it for making corrections with, transfer from that ledger, put the funds back using another transfer after the corrections have been made.  These transfers will both show on their statement and in financial reports;
  3. receive money into the trust account (from yourself or the owner), raise an income invoice to match it to - coa = contributions from owner or loan from agency or other similar equity code.

After making the corrections, check the property and tenancy fees pages, cancel any fees on the re-receipted funds as these will have been charged previously.  Very important - read the messages when reversing the receipts so you know if any fees were able to be cancelled so that you don't cancel them again later and miss a fee.


Ledger 'Top Up' Method - pretend money option


WARNING: this method is only suitable where all funds to be reversed will be returned to the owners ledger.  If they will end up with less funds after your corrections you will be unable to remove the top up funds.  In this instance the owner needs to return some funds, or the agency pay a loan into the trust account as described above so that the ledger does not end up overdrawn.

Pretend to receive money into the trust account the same way as option 3 above, but using a manual bank statement (this is where you might like to see what your auditor thinks first).

After the corrections have been made un-reconcile and reverse the receipt, delete the bank statement and void the income invoice.  

Generally the manual statement should contain a deposit and a withdrawal of equal value so that the correct account balance is maintained, and if the corrections are not completed promptly it will not be forgotten about.