Reconciling a property management escrow account is different from reconciling a normal business checking account. You’re holding other people’s money, whether that’s tenant security deposits, owner reserves, or prepaid rent. Every dollar has to be accounted for at all times, and the standard method is a three-way reconciliation done monthly.

Three-way reconciliation means three numbers must match. First, your adjusted bank balance, which is the bank statement balance after accounting for outstanding checks and deposits in transit. Second, the sum of all individual owner and tenant ledger balances from your property management software. Third, the trust liability total on your general ledger. When all three equal the same number, the account is reconciled. When they don’t, something is wrong.

Start with the bank. Pull the month-end statement and reconcile it against your records. Account for checks that haven’t cleared, deposits still in transit, and any bank fees or interest. That gives you the adjusted bank balance.

Next, run a report from your property management software showing every owner’s balance and every tenant’s trust balance. Security deposits, maintenance reserves, owner draws not yet paid out. Add them all together. This total represents what you owe to other people from the funds sitting in that account.

Then look at your general ledger. The escrow or trust liability account should show the exact same total. If every receipt and disbursement flowing through the escrow account was recorded correctly in your books, it will.

When the numbers don’t match, you dig in. Common causes include transactions entered in the property management software but not yet recorded in the general ledger, bank fees that reduced the balance without being posted anywhere, checks recorded on an owner’s ledger that haven’t cleared the bank yet, or a disbursement coded to the wrong owner. Sometimes it’s a timing issue that clears up when outstanding items are accounted for. Sometimes it’s a real error that needs correcting.

Wisconsin regulators expect trust accounts to balance. A property manager who can’t demonstrate that escrow funds are properly tracked risks disciplinary action. This isn’t a once-a-year task. Monthly is the minimum, and managers with high transaction volume should consider doing it more often. Document every reconciliation by saving the three reports that show the matching balances, noting the date, and filing them. If a regulator or auditor ever asks, you want to hand them a clean file instead of scrambling to reconstruct months of work.

Keep escrow funds completely separate from your operating account. Never use trust money to cover a business shortfall, even temporarily. That’s commingling, and it’s one of the fastest ways to create regulatory problems regardless of your intent to pay it back.

If your escrow reconciliation hasn’t been done in a while or your general ledger doesn’t match your property management software, the gap gets harder to close over time. Facility services bookkeeping requires this kind of precision, and catching up sooner saves significant headaches later. Working with Beaver Dam accounting services that understand trust accounting can help you get the reconciliation process set up correctly and keep it running smoothly month after month.