Why Unclaimed Property Compliance Matters

In the world of corporate finance, we’re trained to focus on the big picture—cash flow, forecasting, audits, and compliance. But there’s one area that often flies under the radar until it becomes a problem: unclaimed property. 

While it might seem like a minor back-office issue, unclaimed property presents both a strategic risk and an opportunity. 

Key Takeaways  

• Unclaimed property is a significant, often overlooked, financial and reputational risk for businesses that calls for proactive management, not just reactive compliance.
  
  
• Ignoring unclaimed property can lead to costly multi-state audits, substantial penalties, and interest that far exceed the original asset value.
  
  
• Implementing robust data hygiene and documented policies is essential to achieve compliance, improve financial clarity, and mitigate audit exposure.
  
  
• By addressing unclaimed property strategically, finance leaders can not only reduce risk but also enhance financial processes and reunite funds with rightful owners.

What Is Unclaimed Property? 

Unclaimed property refers to assets a company owes to other customers, vendors, and employees that haven’t been claimed. These can include: 

• Uncashed checks 
• Customer refunds or A/R credit balances 
• Unidentified remittances received 
• Dormant accounts 
• Gift cards with no activity
• Royalty and dividend payments that have never been cleared 

After a specific dormancy period, states require these assets to be reported and remitted. States are aggressively seeking to decrease the length of dormancy periods to fill budget gaps. Companies that fail to report unclaimed property promptly face penalties and interest that, over time, can dwarf the amount of the original asset.   

Why Accurate Records are Important for Unclaimed Property  

Keeping your accounting records in order is essential for maintaining financial clarity, making informed decisions, and maintaining long-term organizational health. When outdated checks or stale transactions linger in your records, they create confusion, distort cash flow visibility, and can lead to inaccurate financial reporting. This not only hinders day-to-day operations but also complicates audits, tax filings, and strategic planning.

Clean, up-to-date books reflect a well-managed organization and build trust with stakeholders, lenders, and investors. In contrast, disorganized records can signal poor oversight and lead to missed opportunities or costly errors. 

The Risk of Unclaimed Property Audits  

Many companies' first real encounter with the seriousness of unclaimed property compliance is receiving an audit notice from a third-party auditor representing several states. This typically requires the production of records spanning 10 or more years, much of which may predate current systems. 

Unclaimed property audits are not only time-consuming, but also expensive, requiring you to: 

• Reconstruct historical data 
• Justify accounting treatments 
• Defend your policies (or lack thereof) 

It's at this point that unclaimed property is clearly understood as more than just a compliance issue; it's a significant financial and reputational risk. 

How to Address Unclaimed Property Risks Proactively  

To effectively mitigate these risks, it’s important to:  

Develop an unclaimed property audit defense strategy 

• Design and document robust unclaimed property policies and procedures 
• Create a detailed data hygiene plan 
• Initiate Voluntary Disclosure Agreements (VDAs) to minimize penalties  

If you’re a Controller, CFO, or another finance leader, you need to:  

• Act before an audit notice arrives  
• Treat unclaimed property like any other compliance risk 
• Use it as an opportunity to clean up your books and improve your processes 

Beyond the financial and risk management benefits, there’s a significant human element. By prioritizing unclaimed property compliance, you not only improve financial clarity and reduce risk to your company and also reunite money and property with the former employees, customers, and vendors to whom it belongs. These are generally people who may not have otherwise known they were owed money or how to claim it. That’s a win for everyone. 

Get Personalized Planning and Guidance 

At EisnerAmper, we are driven by four core principles: responsiveness, accountability, integrity, and relationship oriented. These principles empower us to craft a personalized approach that guides each client through unclaimed property voluntary compliance programs while inspiring proactive planning to reduce unclaimed property exposure. We act as a one-stop shop for all of your unclaimed property needs.  

Connect with our team using the form below to get started.