The Three Most Common Mistakes People Make With Property Management Accounting
Anequim has the privilege of getting under the hood of many property management companies books through our new bookkeeping service and we have gleaned a lot of knowledge from this process.
BOS, or Back Office Solutions, helps Rent Manager clients with their back office needs including accounting and vendor management.
We have noticed there are three mistakes property management companies are making with their accounting procedures that really cost them dearly in time, energy and headaches and we have some ideas on how to fix them. Here they are:
Get Those Receipts in NOW
The root cause of most reconciliation problems is waiting to put the financial information into the system. Enforcing a policy where all receipts for the company are put into the system either by scanning them in or by taking photos of the receipts and entering them in through an app in real time is crucial for accurate bookkeeping. Doing daily credit card and bank reconciliations with receipts/invoices attached solves so many problems and takes the entire activity of “finding” the piece of paper, the receipt, the bill, the invoice out of the equation. Not having to “find” anything because the policy requires receipts to be entered in real time, and books are to be reconciled daily is a mind-blowing game changer for the businesses we have worked with.
We always think we are going to remember to do it later and then when we don’t we are wracking our brains to remember what an expense is for and which client to pass the cost on to. We are left at the end of the month searching, calling maintenance technicians, looking for the email to get the books reconciled and it is a waste of time, and energy. Also there is pretty much nothing more uninspiring or more soul-destroying than slogging away at that kind of unproductive work.
Creating a culture where there are consequences for not entering the information in the system right away is key to making sure everyone does it.
Overly Complicated System
Many property management companies are using too many software packages and this makes accounting really difficult. For example, if you are using a specialty software to manage your maintenance process but it doesn’t pull service ticket numbers from your main property management software then your accounting team has to spend a lot of time matching up vendor invoices with the correct service ticket. This manual matching process is inefficient and has room for mistakes through human error. If you can manage your maintenance process through one software, you can have the service ticket number follow the maintenance activity seamlessly through the accounting process substantially reducing the possibility of error. We see people buying expensive maintenance software to save time in the maintenance process just to add to time in the accounting process which is often more expensive per hour.
Another area where there is unnecessary duplication is when companies use two different systems for bookkeeping. Many companies are using a property management software for their trust account and then a separate accounting software for their business books. Having two different software products means two different accounting processes for managing all of those bills and invoices. When there are too many software products and a lot of manual processes it is hard to systematize, organize and prevent mistakes.
We have found that using one software and maximizing its use is far more efficient and cost effective than using more than one that may have an extra bell or whistle but do not talk to each other. Using one software system results in fewer mistakes and thereby keeps clients happy, allowing for a smoother, simpler process.
Lao Tzu. “Simplicity is the ultimate sophistication.”
Stick to a Payables Schedule
Sticking to a process and a schedule and holding people accountable for executing it on time and with accuracy is the key to success. For example, all receipts have to be in the system (scanned or pictures taken of them) on the date the receipt or invoice was received. Not the day after, not that week, but on that day. If people do not do that they get dinged some way.
Property managers approve bills on Thursdays. Not Wednesday and not Friday but on Thursday and vendors get paid on Fridays. Sticking to a system, a time frame and holding people accountable keeps unnecessary calls at bay, keeps people relaxed and allows for predictability. For instance, when a vendor calls to check in on an invoice any customer service agent can answer the question for when the check is going to be sent, which means the agent doesn't have to call someone else to figure it out. That's the efficiency you, your clients, staff and vendors deserve. It also keeps your books super organized.
When organizations do these three things we find that the chaos in their company goes way down, financial outcomes are easier to meet, staff is less frustrated, and the business runs far more smoothly which is money in your pocket.
If you are looking for help with your accounting system don’t hesitate to reach out to our team. Helping businesses get their financials on track trips our trigger. We can do an audit and help you identify where your accounting could improve based on our experience of looking at countless property management companies systems and books. Reach out today!