We all make mistakes. In this article, we will take you through how you can make a correction to a trust transaction in Actionstep.
In almost all jurisdictions, it is not permitted to let a user simply delete a trust transaction. Trust authorities don't mind mistakes but they want to see when they happen and the steps you take to correct them.
This is why in Actionstep, to correct an error with a trust transaction you will have to reverse that transaction and re-enter the transaction correctly.
This will result in three transactions:
- Your initial transaction that had an error
- Your reversal transaction
- Your re-entered transaction without the error
A reversal transaction is a transaction that cancels out the incorrect transaction. It might help to think of it as a negative transaction.
EXAMPLE OF A REVERSAL
Terry entered a trust receipt of $500 against a matter with the date of 1 July. There were no funds in the matter beforehand. After saving the transaction Terry realised the date should have been 31 June.
Terry will reverse the deposit which creates a negative deposit (like a withdrawal). The amount of the reversal is -$500 and has the same date (1 July).
Terry then enters the transaction again using the correct date of 31 June.
The result will look like this:
Note that the total balance is still correct ($500) at both the 31 June and 1 July. While the balance is inflated to $1000 by the second transaction above, the third transaction (the reversal) reduces the balance back to $500.
How to process a reversal
You can start a reversal from the 'Transaction details' screen. The Transaction details screen gives all the detailed information you would ever need to know about a trust transaction.
To access this screen for a transaction from a matter, go to the matters 'Transaction history screen, find the transaction you want to reverse and click on the blue or red value showing in the amount column.
To access the transaction history screen from a list of transactions (such as the 'Received funds List' or 'Payments List'), click on the blue type or number to the left of the transaction.
At the bottom of the 'Transaction details' screen will be the option to reverse a transaction.
Click 'Reverse entry' then 'Click here to Reverse this entry'.
On the resulting screen, confirm the date then select the reason for the reversal.
New entry date
Confirm the date o the reversal. By default, this will be the same date as the transaction you are trying to reverse.
Reason for Reversal
The reason for reversal allows you to save pre-set reasons for faster entry. If you need to enter a unique description for the reversal.
You are able to use the button to upload any supporting documentation you have in relation to the reversal. This can be accessed later to help explain the reason and to show the due process you followed.
You will have to tick the box beside 'Confirm entry reversal' before you can save the transaction.
If you are reversing a transaction that involves funds moving from one bank account to another (either trust to trust or trust to business) then you will only be reversing the entry for the trust bank account. See the Reversing a transaction between bank accounts in the considerations section below.
Considerations for reversing trust transactions
You can't reverse a reversal
If you have made a mistake by creating a reversal, you are not able to reverse that reversal.
Instead, consider re-entering the transaction again. The reversal will cancel the original transaction. If the original transaction turns out to have been correct, just enter a new transaction that is the same as the original.
You can't reverse a transaction more than once
Some mistakes have complex repercussions and you might need to do more than one reversal to correct all issues on a matter but typically the more reversals you do the harder it is to reconcile what the original mistake was. To help keep things as simple as possible, Actionstep does not allow you to reverse a transaction more than once.
Reversing a transaction between bank accounts
Any time you make a trust transaction that takes money from one bank account and puts it into another bank account, Actionstep will create two transaction entries. When reversing such a transaction, be aware that you may only be reversing one of the entries at a time.
When this happens, you will see a warning message at the top of the reverse transaction screen such as the one below.
You will have to tick the 'I understand the warning' box to be able to save the reversal.
What should you do?
You can complete the reversal that you are working on as normal but take note of the transaction. After you have finalized the reversal, you will have to find the other transaction entry and reverse or delete that entry as a second step.
Why is this happening?
When you create a transaction that goes from one of your bank accounts into or from a trust bank account Actionstep will create one transaction that is for the money coming out of the bank account and another separate transaction for the funds going into the other bank account.
This can happen when transferring from one trust bank account to another, like moving funds from a trust current to a trust investment account or vice versa.
It can also happen when transferring funds from a trust bank account to a business account (or vice versa).
Transactions that this will happen to are:
- A transfer from one trust account to another within the same matter
- An Invoice payment (excluding invoice payments made to firms interest in trust)
- An adjustment to the firms interest in trust
Why does Actionstep do this?
There are times, not often, when one side of a transaction is accurate, but the other side is not. In these instances, you can correct the side that is wrong without affecting the other.
Also, since this includes trust transactions to or from one of your business accounts, you may prefer to delete the business account entry of the transaction rather than deleting it. By keeping the transactions separate you can achieve this.
Using a different reversal date from the original transaction
In most situations, it is better to enter a reversal in for the same date as the transaction that you are trying to reverse.
There can be times when you can't use the date or the original transaction, such as when the date falls under a period that has been reconciled. In this instance, we recommend that you enter in the reversal as at today's date but make sure that the reason for reversal clearly states:
- Which transaction you are reversing
- The date of the transaction you are reversing
- The reason why the reversal is not dated the same day
- The usual reason why the transaction is being reversed
You cannot have a negative balance in your trust bank account or matter
There may be times that a reversal of a transaction would cause your matter or your entire trust bank account to go into a negative balance. Actionstep does not allow a matter or trust account to have a negative balance.
When this happens you will see a warning message appear on the reverse transaction screen.
There are different ways that you can deal with these issues depending on the situation. You may be able to change the date of the reversal, enter in the transaction again correctly first, then process a reversal or a handful of other option. Please reach out to Actionstep support if you would like some help.
While Actionstep staff have an excellent understanding of trust functionality within Actionstep and we try to maintain a good understanding of regulations, we are not authorities in your trust jurisdictions regulations. You may want to get in touch with your law society or regulatory body to clarify the best processes.