January 01, 2019
5 Rental Property Management Accounting Tips and Tricks
Happy New Year! To help your business have a fiscally healthy and prosperous 2019, we’ve put together some property management accounting tips to boost your success and revenues.
Prevent Rogue Spending
Staying in control of company finances is mission critical. Knowing how much money is being spent across all departments and suppliers is vital. Rogue spend can be financially draining, inefficient and ineffective.
The first step is to accurate monthly reporting and up-to-date expense tracking that is accessible to key stakeholders. This ensures transparency and that everyone is on the same page. Use your maintenance portal to keep a qualified list of all approved vendors. This prevents unauthorized vendors, and helps you to negotiate the best terms and capture the most discounts. (More on this in the next section.)
Also, enable three-way matching, by using your maintenance portal to generate purchase orders straight from work orders. No more guessing what deliveries were for what jobs – it’s fully transparent, efficient and organized. And, you can then match the vendor’s invoice to the purchase order to ensure that the materials quantities and work are the same on both. Paper and people-based processes lead to higher AR/ AP costs and missed business opportunities.
Capture All Discounts
Discount capture means that you can take advantage of the standard discount terms of “2% 10, net 30,” to reduce your costs and suppliers can speed up their cash flow cycles.
By keeping a list of approved third-party vendors, and automating as much of the AP cycle as possible, you can shrink AP cycle time, an important measure of efficiency. Reducing cycle time permits property management companies to negotiate discounts for early payment and curtail any harm to the relationship caused by late payments.
Be Prepared for Variable Cash Flow
The property management business tends to have more revenue ebb and flow due to vacancies, late payments and surprise maintenance costs. And especially for smaller property management firms this can present cash flow problems. For example, if you only manage 20 property units, and four are empty, you may have 20% less cash rolling in every month. Toss in a late payment or two, and a repair, and suddenly, there’s less cash on hand to cover expenses.
In addition to the obvious savings account or line of credit waiting to help smooth over these bad times, the best way to anticipate problems is to plan for them. Picture a few worst-case situations and crunch the numbers for those scenarios. Figuring out what you would need in the short term in case a tenant breaks their lease, or a new appliance is needed, will help you prepare financially so you can set aside money on a monthly basis to be able to respond to worst-case scenarios and fluctuating cash flow.
Do Everything to Increase Cash Flow
The flip side of planning for the worst is enabling tools and technologies to increase time-to-bank. If you are still processing checks, you are slowing cash flow. Think about the multiple steps:
- The resident mails the check or drops it by the office.
- It is received and sent to accounting for deposit.
- Someone fills out a deposit slip and goes to the bank.
- The checks take time to process, as there may be an NSF.
That’s a huge delay in getting revenue into your account. By allowing your tenants to pay rent online, you are vesting reducing the time it takes cash to get into your account. You are also reducing the associated costs of processing checks.
Store Documentation in the Cloud
Digital documents instantly eliminate a vast amount of paper documentation, which both cuts down on the associated costs and hassles of physical paper printing, storage and filing. It also saves time by reducing the time to find and retrieve documents, and ensures documents are never lost.
But digitalizing your documentation and storing it online isn’t just a productivity boost, it’s also a security measure. And, it keeps all financial records, owner records, vendor data and tenant data safe and accessible. It makes sure that in case of any business interruption or emergency, your files are safe. It prevents unauthorized access and limits any potential fraud.
If you’re looking for a robust property management accounting solution that can track, manage, reconcile and report, talk to us. Check out our prices and book a demo.