Correcting (Reversing) a Trust (or Client) Transaction

In this article:

• Understanding Reversals
• Reversing a Transaction
• Considerations for Reversing Trust Transactions

In Actionstep, to correct an error with a trust transaction you must reverse that transaction and re-enter it correctly. This workflow can help ensure you are adhering to rules defined by most legal jurisdictions and allows trust auditors to view the original transaction and the steps taken to correct it. 

Understanding Reversals

A reversal transaction is a transaction that cancels out the incorrect transaction. It might help to think of it as a negative transaction. The process of reversing a trust results in three new transactions:

1. The initial transaction that had an error
2. The reversal transaction
3. The newly re-entered transaction without the error

For example, let's say you enter 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, you realize the date should be 31 June. You can 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). You can then re-enter the transaction using the correct date of 31 June. The result would 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.

Reversing a Transaction

To do this:

1. In Actionstep, view the matter with the transaction you need to correct. (See Editing a Matter for help.)
2. Click the Trust account menu icon. The Trust page appears.
3. Click Transaction history in the left-side list of options.
    The Trust Account Transactions page appears.
4. Find the transaction you want to reverse and click the link for the value showing in the Amount column. The Transaction Details - Receipt page appears.
5. At the bottom of the page, click the Reverse entry tab.
   
6. Click the Click here to Reverse this entry link. 
7. On the page that appears, confirm the New entry date. By default, this will be the same date as the transaction you are trying to reverse.
   NOTE:  In most situations, it is better to enter a reversal for the same date as the transaction that you are trying to reverse. However, there may be times when you can't use the date or the original transaction, such as when the date falls during a period that has been reconciled
8. Click the Reason for reversal drop-down list and choose the reason. Include as much detail as possible.
   TIP:  Click Create a new template to set up a pre-defined option that can be suggested for future reversals. 
9. Optionally, click Please select a file to upload any supporting documentation.
10. Select Confirm entry reversal to confirm you want to complete the reversal.
11. Click Save to save your changes.

Considerations for Reversing Trust Transactions

Please consider the following when reversing trust transactions:

• You can't reverse a reversal: If you have made a mistake by creating a reversal, you can't 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.
  
  
• You can't 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 the transaction again correctly first, then process a reversal or a handful of other options. Please reach out to support if you would like some help.
  
  
• Editing a trust reversal: After you reverse a trust transaction, you cannot edit it.
  
  
• Using a different reversal date from the original transaction: In most situations, it is better to enter a reversal 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 the reversal as of 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
    
    
• Reversing a transaction between bank accounts: When you create a transaction that goes from one bank account to another, Actionstep creates 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 you're 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

Because of these two transaction entries, when reversing 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 page like this: To save the reversal, you'll need to select I understand the warning. You can then 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.

Related Articles:

• Getting to Know the Trust (or Client) Account Settings Page (Admin)
• Transferring Trust Funds