A buyer should reconcile a trail book in three directions: each loan-level entitlement should roll into the aggregator or lender statement, each statement’s net payable amount should trace to the bank, and every difference should have a documented explanation. Agreement at only one level is not enough. A bank deposit proves cash arrived, but not which loans produced it; a loan file proves a loan exists, but not that trail was paid.

Build the reconciliation by payment period and retain an exception schedule. The aim is not to force three datasets to match artificially. It is to distinguish legitimate timing, fees and adjustments from missing loans, unsupported income or data-quality problems before those amounts enter the acquisition forecast.

Understand the three evidence layers

Australian law defines trail commission broadly as indirect remuneration contingent on a consumer’s conduct after entering a credit contract or lease, including remuneration dependent on the amount or number of repayments (Federal Register of Legislation). The precise commercial calculation still depends on the applicable lender, aggregator and broker arrangements.

ASIC’s mortgage-broker remuneration review found that the lenders it surveyed paid trail monthly, calculated as the monthly allocation of an annual percentage of the ongoing loan amount while the loan continued, and stopped paying after repayment. ASIC also observed lender and aggregator variation in commission rates and the on-payment of commissions from aggregators to broker businesses (ASIC). That history explains why a buyer should not apply one assumed rate across the book.

Treat the evidence as three separate layers:

  • Loan-level data: the population said to generate trail, including a stable loan identifier, lender, settlement date, relevant balance, status, applicable rate or tier, gross trail, adjustments and net trail.
  • Trail statements: the payer’s calculation for a period, including line items, totals, fees, revenue shares, reversals, clawbacks or other deductions.
  • Bank receipts: the cash actually credited to the seller’s account, including value date, payer reference and amount.

Also obtain the commission schedules and aggregator agreement that explain how one layer should become the next. A spreadsheet supplied by the seller is a useful index, but it is not independent evidence merely because its totals agree with management accounts.

Request a controlled data set

Ask for consecutive monthly data covering a period long enough to show normal payment cycles and non-routine adjustments. The appropriate span depends on the book and the transaction; gaps should not be patched with annual totals.

For every period, request:

  • original statement files and any downloadable line-level statement export;
  • bank statements for the receiving account, not cropped screenshots;
  • the loan-level trail file as at the same cut-off date;
  • lender and aggregator commission schedules, including rate changes and effective dates;
  • a chart of all fees, splits, deductions, minimum charges and tax treatment applied in the statements;
  • records of corrections, withheld amounts, clawbacks, disputed commissions and later settlements; and
  • a mapping table for renamed lenders, migrated loan IDs, split loans and aggregator system changes.

Preserve the raw files and perform transformations in a separate working copy. Record the source file, import date, row count, fields changed and reason. This makes the work reproducible and prevents a later “clean” data file from concealing the original exception.

Loan-level records can contain personal information. The OAIC says vendors and prospective purchasers must protect privacy during business-sale due diligence, recommends de-identified information where possible, and notes that limited electronic data-room access can help the vendor retain control (OAIC). Use masked borrower identifiers for reconciliation unless identity is genuinely necessary, restrict downloads and agree a return or destruction process.

Build the monthly reconciliation bridge

Use one row per payer and payment period, then build two bridges.

Bridge one: statement to bank

Start with the statement’s gross trail total. Deduct the amounts the statement identifies—such as aggregator fees, broker splits, reversals or other adjustments—to reach its net payable figure. Match that figure to the bank receipt using payer, amount, reference and value date.

Do not assume the statement month equals the cash month. Record the statement period, statement issue date and bank value date separately. A payment received just after month-end may be a timing difference; it should remain an exception until the later receipt is sighted. If several statements are batched into one deposit, obtain the remittance advice and prove that the components add to the receipt.

Bridge two: loan-level data to statement

Sum the statement’s loan lines and compare them with its control total before matching them to the seller’s loan population. Use a stable payer loan identifier wherever possible, rather than borrower name. Classify each record as matched, statement-only, data-only or matched with a value difference.

For a sample across lenders, vintages, balances and exception types, reperform the calculation using the governing schedule. Depending on the contract, this may require an eligible balance, applicable annual rate, day or month convention, revenue share and specific exclusions. Do not substitute a simple balance × rate ÷ 12 formula unless the terms support it.

Investigate differences instead of netting them off

Create an exception register with the amount, source records, owner, explanation, corroborating document and resolution date. Common explanations include:

  • statement and bank cut-off timing;
  • one deposit covering several payer statements;
  • aggregator fee or broker revenue-share deductions;
  • rate-tier or lender-policy changes;
  • discharge, refinance, arrears or non-paying status;
  • loan-number migration, split facilities or lender acquisition;
  • prior-period correction, reversal, clawback or disputed amount; and
  • duplicate, omitted or manually overridden loan records.

Do not net a positive exception against an unrelated negative one. A $5,000 overstatement and a $5,000 omitted receipt do not become good evidence merely because the total is zero.

Hypothetical example: an aggregator statement shows $42,000 gross trail, $2,100 of identified fees and adjustments, and $39,900 net payable. The bank shows $39,900 two business days later, so the cash bridge is supported. The loan-level file totals only $40,800 gross. The remaining $1,200 is still an exception until the buyer identifies the statement lines, proves whether the loans belong to the sale population and determines whether the mismatch recurs. The supported bank receipt does not resolve the incomplete loan file.

Turn the results into an acquisition decision

Summarise the reconciliation by month and by lender. Show gross statement trail, loan-level supported trail, net payable, cash received, timing items, explained adjustments and unexplained differences. Then calculate what portion of the income used in the buyer’s model is supported consistently across all three layers.

Patterns matter more than a single clean month. Repeated statement-only loans may indicate an incomplete data extract; repeated data-only loans may signal non-paying or exited accounts; recurring bank shortfalls may point to deductions or disputes not reflected in the forecast. Ask whether identified weaknesses can be cured before completion and whether the sale agreement, completion accounts or price mechanism should address unresolved amounts. Lawyers, accountants and transaction advisers should determine the response; a reconciliation is evidence, not a valuation or legal conclusion.

Questions buyers often ask

Does matching the annual trail total to the tax return complete the test?

No. Annual agreement may support a high-level revenue figure, but it can hide timing, payer concentration, omitted loans and offsetting errors. Retain the monthly, loan-level bridge and reconcile it to cash and the accounting records.

Should every loan be recalculated?

That depends on data quality, risk and materiality. Begin with full-population matching and targeted recalculation across lenders and exceptions. Expand testing if error rates, missing identifiers or unexplained differences make the initial sample unreliable.

What if historic statements cannot be exported at loan level?

Seek original reports, remittance files and read-only system access, then use alternative evidence such as lender-level totals and selected loan confirmations. Record the limitation explicitly; reconstructed seller spreadsheets should not be treated as equivalent to original payer records.

Sources

Disclaimer

This article provides general information only. It does not constitute legal, tax, accounting, financial, credit, valuation or other professional advice. Circumstances differ. Obtain advice from appropriately qualified advisers before acting or entering a transaction.