If you manage other people’s rent and deposits, you’re a fiduciary—full stop. That means zero room for sloppiness with client funds. The gold standard is a triple tie-out (also called a three-way reconciliation). Done monthly, it keeps you compliant in Illinois and gives owners and residents the confidence that every dollar is exactly where it should be.
What is “triple tie-out”?
A triple tie-out matches three numbers—and they must agree to the penny:
Bank statement balance (after outstanding items)
Book/GL balance for the trust account
Sum of all sub-ledgers (owner ledgers + resident security-deposit ledgers)
When all three match, your trust account is truly reconciled. This isn’t just an accounting nicety—industry best practices (e.g., NARPM standards) treat monthly three-way recs as mandatory hygiene. NARPM+1NARPM+1
In Illinois, rules require sponsoring brokers to reconcile each escrow/trust account within 10 days of receiving the monthly bank statement—and that reconciliation must compare the bank, journal, and ledgers (i.e., a triple tie-out). Keep the worksheet for 5 years. Legal Information Institute+1Legal Information Institute+1
Why owners should care
Prevents commingling & fraud: Matching bank → books → ledgers quickly exposes wrong accounts, double receipts, or missing funds.
Faster, accurate owner payouts: Clean trust books mean distributions land on time with audit-ready support.
Audit defense: If IDFPR asks, you can produce the reconciliation, ledgers, and bank statements—fast. Illinois General Assembly
Why residents should care
Deposits are safe and traceable: Security deposits remain segregated, accounted for, and returned on time with an itemization when required by law.
Less billing drama: Rents, utilities, credits, and late fees post accurately to the resident’s ledger—the third leg of the tie-out.
Trustworthy operations: When money is handled right, maintenance moves quicker and disputes drop.
How we triple tie-out (the 20-minute monthly routine)
Bank → Book: Reconcile the trust bank statement; clear outstanding checks/deposits.
Book → Ledgers: Sum the owner and resident sub-ledgers; confirm the total equals the book balance.
Lock & file: Save the worksheet + bank statement + GL + sub-ledger export; lock the period.
Spot-check ledgers: Randomly open a few owner and deposit ledgers; fix oddities (negative balances, orphan credits).
Document exceptions: Any variance = no owner distributions until resolved.
(Using platforms like AppFolio/Buildium? They include a “triple tie-out” or three-way rec checklist to enforce this flow.) APM HelpAppFolio Bookkeeping
Red flags that should make an owner pause
Trust account “reconciled” only to the bank—not to sub-ledgers
Negative balances on owner or deposit ledgers
Unclaimed credits or open “clearing” accounts month after month
No written reconciliation worksheets or inability to produce them quickly
What to ask your property manager (and expect to see)
“How soon after the bank statement do you reconcile?” (In Illinois, the benchmark is within 10 days.) Legal Information Institute
“How do you safeguard security deposits?” (Segregated, fully tracked ledgers; Chicago/RLTO or local rules observed where applicable.) American Legal Publishing
The business upside (beyond compliance)
Lower risk = lower cost: Catching errors in days—not quarters—prevents snowballs that become regulatory headaches.
Cleaner data = better decisions: Accurate owner statements let investors price renewals, plan CapEx, and underwrite new deals with confidence.
Reputation moat: Transparent money handling earns trust with residents and owners—and that shows up in renewals and referrals.
Helpful resources (a few, not a flood)
Illinois Admin. Code 68 §1450.750 & §1450.755 – escrow/trust reconciliation & recordkeeping requirements. (Plain-English summary via Cornell LII.) Legal Information Institute+1Legal Information Institute+1
NARPM standards – monthly “three-way” reconciliation is the norm. NARPM
AppFolio/Buildium guides – practical walkthroughs for triple tie-out in modern PM software. AppFolio BookkeepingAPM Help
In short
Triple tie-out is the seatbelt of trust accounting. It protects owners’ capital, safeguards residents’ deposits, keeps you compliant with Illinois rules, and makes your whole operation run smoother. If your manager can’t produce last month’s three-way reconciliation on demand, that’s not a paperwork issue—it’s a risk issue.
