Understanding Trust Accounting for STR Businesses with Clearing

In this episode of the Hospitable Hosts podcast, we are joined by Ashley Hagel, Customer Success Manager at Clearing, a trust accounting and automated bookkeeping platform tailored for STR property managers.

In the episode, Ashley explains what trust accounting is and why property managers should care. She also discusses the day-to-day challenges STR operators face with financial workflows, reporting, and accounting, and shares how Clearing helps them simplify their processes and ensure compliance.

Press Play now to find out how Clearing helps property managers streamline financial management, supporting their growth.

If you prefer to read the highlights, we’ve got a summary of the key takeaways below.

What Trust Accounting Means for STR Managers

Ashley says that if you are starting to run your own STR property and need to keep track of your basic finances, including income and expenses, a spreadsheet might be able to carry you for a while. But you need trust accounting when you’re managing properties for someone else because it means you’re managing other people’s money.

“The spreadsheet's not necessarily going to understand who that money belongs to. And I think an important part of trust accounting is understanding that all the money you have doesn't actually belong to you—it belongs to other people—and how much of it belongs to one person versus another. As soon as you have that kind of complexity, with all these transactions for different properties and different owners, that can get really hard to track in a spreadsheet.”

Ashley says that, at its core, trust accounting means you're being trusted with other people's money and need to handle it responsibly. She notes that most states require that you have a separate deposit trust account for those funds.

“The practice of trust accounting is tracking and understanding who all of that money belongs to, and how much belongs to each person. And that's where compliance really comes in, because in a lot of places you need an audit trail to track back where that money came from and how you arrived at the amount you then paid out to this person.”

What Does Clearing Do?

Ashley explains that Clearing is trust accounting and automated bookkeeping software built specifically for STR property managers. It helps you automate trust accounting, including bookkeeping and reconciliation, and ensures these steps work together.

“The whole purpose is to give as much time back to property managers as possible, while also giving them the confidence that their finances are accurate and compliant,” Ashley emphasizes.

When Does Trust Accounting Software Make Sense?

Ashley shares her opinion on whether working with Clearing makes sense for someone who only manages one or two properties.

“I think it really depends. If you have one property that you're managing for yourself or for another person, you might not be ready yet, and that's totally fine. But if you know that you're in an area or state where you're planning on growing, and it has complex compliance rules, then it's often a lot easier to get everything set up when you're only at a couple of units. That way you learn how to do everything the right way, and it makes growing so much easier.”

Ashley also highlights signs that you need trust accounting software. She emphasizes that it’s all about the complexity. You need specialized software when your current manual methods or the tools in your PMS are not enough to ensure compliance, for example, when it comes to collecting and remitting lodging taxes.

You also need specialized software when you are trying to scale because manual methods consume significant time and are unsustainable as your portfolio grows. You need to have a system in place that will allow you to automate owner statements.