Most managers these days put their customers above everything, going out of their way to provide services, and bailing them out from unfortunate situations and crisis. However, while these acts of generosity help them build goodwill and reputation, they are also detrimental to the business.
Property managers get so involved in hospitality that they forget the main objective of their business and incur heavy losses in due time. We often encounter property owners lending loans to the tenants during their financial troubles or see them floating rents for months, depending on the condition of tenants. They, however, need to pay the owners from their pocket. Sometimes, long time tenants and property managers develop a special relationship. So, the property owners provide them with special privileges instead of charging for services. While helping people is good, some people take unfair advantage of kindness. Moreover, you might lose a lot without bookkeeping. For example, a tenant might have borrowed money long back, and you won’t even remember it.
Bookkeeping makes sure that you minimize your risks. Consider the fact that some tenants are freeloaders, who stay at a property for a couple of months, stalling rent, and moving to other places without notifying property managers. Bookkeeping ensures that you don’t drown in losses while providing tenants with your services. So, without further ado, let us look into the bookkeeping basics to provide successful property accounting.
1. Follow the Right Set of Rules
Local real estate committees and state agencies have a set of rules on property management. Property managers should follow these rules which dictate how they should use the money from clients. They should be the foundation for your company to have proper property accounting.
2. Reconciliation of Bank Account
Property managers must follow and tally bank accounts, to make sure that parties involved are on the same page. The bank account may have typos, duplicate entries, missing entries, and bank errors. A monthly bank reconciliation will enable compliance and make sure that the bank account is accurate. Monthly audits are essential for managing the company bank account effectively.
3. Keep Collections Current
Property managers often pay for client expenses ranging from repair bills to management fees before collecting rents and overhead dues from tenants. Hence, they have to expend a lot of time and energy to collect the rent later. It is wise to set up a calendar reminder for collection of fees. Following a regular schedule will help in collecting rent and overdue fees. This practice will ensure that your business is on the right track.
4. Review the Company Income Statement
Property management is a particularly slow income field with collecting late fees, late regular management fees and property maintenance services adding up as liabilities. While the income flow is slow, proper planning will help to cut expenses and make a steady profit. It is necessary to prepare the company income statement and review to calculate spending. Controlling these expenses will help to make a profit in the business. Reviewing the company income statement is essential in property accounting since it helps in balancing savings and expenditures.
5. Keep Cash Flow Positive
Make sure that you make more money than you expend. It may not always mean that you need to stay in the black at all times. Making a worthwhile investment which earns more, in the long run, is a profitable investment, rendering the business cash flow positive. Investing in security is also good protection from liability. Although it involves spending some money for security deposits, it guarantees the safety of our assets.
Bookkeeping helps us realize, control, and counteract bad financial decisions. It is beneficial in property management because it minimizes loss and increases profitability. Thus, Bookkeeping sets the cornerstone of good property management.
OHI is a fifteen-year-old real estate services company working with 50+ commercial and residential real estate developers, funds and property management companies across USA. Our deep expertise in real estate accounting, financial analysis, lease administration and asset management has helped clients cut associated costs by 40-50%. We currently provide these services to a portfolio of 50000 units across clients.
We invite you to experience finance and accounting outsourcing through us.