When property managers start their careers, many are optimistic about the help they will be able to provide to their clients. They are eager to recommend changes that could make life better for hundreds of owners. They might even have aspirations to shape the property management industry.
While we don’t have the numbers, we know that far fewer managers get excited thinking about accounting. Though managers must take on this challenge in order to excel in their role (boards generally dislike this responsibility even more than managers) accounting can be profoundly complex and time-consuming.
Accounting challenges
- Problem #1: Getting cheques to vendors on time
- Problem #2: Reconciliation
- Problem #3: Working exclusively with paper
- Problem # 4: Processing the bills twice
- Problem #5: Collecting payments from residents
- Problem #6: Preparing 1099s
Accounting impacts almost every aspect of property management — from maintenance, to collecting fees, to moving community business forward. A condo or HOA would unravel at an alarmingly quick rate if money was not being managed properly.
The good news is, accounting doesn’t have to be as painful as it might currently be for you right now. With efficient and consistent accounting workflows, and some extra help from accounting software solutions, you will find that errors occur less frequently, which results in fewer caffeine-fueled late nights.
Problem #1: Getting cheques to vendors on time
You are perfectly aware of when your vendors expect to be paid, but no matter how hard you try, you just can’t seem to get cheques in the mail on time. This leads to angry service providers, and could result in damaged relationships or fewer opportunities to access preferred rates.
The problem is not you or your board. It’s the workflow you’re using. Before you can even think about cutting a cheque, your team must review and approve physical invoices. This can take weeks when multiple people are involved, and sometimes, those invoices go missing.
By the time this stage of the process is complete, you may only have a few days left to get those cheques out. But since they are only cut on certain days, payments that should have been made on Friday won’t go out until two weeks from now.
How to make it better
Find a system that allows you to pay vendors online and get rid of the cheques altogether. Condo Control has an AP platform exclusively for condo and HOA communities. The platform gives you and your team the ability to share, process and approve invoices online. Instead of hoping cheques make it to their final destination, payments are made securely through Condo Control.
This process is incredibly efficient and secure, and it’s the best solution to keeping your vendors happy.
Problem #2: Reconciliation
Account reconciliation requires you to compare a balance sheet with supporting financial documents like bank statements, sub-ledgers, or other financial records. Often this process calls for double data entry, and that can create opportunities for errors or inconsistencies. If the two balances don’t match, you, or an accountant, will need to look into why there is a discrepancy.
How to make it better
Software is the best solution for this challenge. Many software platforms will have an accounts payable and receivable solution which helps teams get a handle on money coming in and money going out.
Property managers can take things one step further and adopt an accounting software program such as QuickBooks. These solutions, while not specifically designed for condos or HOAs, are used and trusted by countless small businesses and non-profit organizations. Accounting software can be configured to automate several processes and make bank reconciliations effortless.
It may be possible to integrate accounting software with property management software so that more work can be accomplished from one system. Just make sure you stick to one or two management solutions for the sake of simplicity; the programs should be making your life easier, not more complicated.
Problem #3: Working exclusively with paper
Relying exclusively on paper purchase orders, invoices and recipients is not only hectic, but it can also be risky. Paper records get lost, misplaced in the wrong files, and can fade or deteriorate over time.
Moreover, you have to be in the same place as the paper document in order to use it. Sharing and updating information can also be more challenging when it’s recorded on paper.
How to make it better
While you probably won’t be able to part with paper completely, digitizing important documents is becoming essential. You may choose to scan and upload financial information, or digitize some of your items completely so you can skip that process altogether.
That means sending out digital invoices, contracts, etc. Ideally, these records will be stored in a cloud-based system or program so that you, and others, can access them from any computer.
Not only is it easier to locate digital items, but it’s easier to edit and update them too.
Problem # 4: Processing the bills twice
It happens to even the most detail-oriented individuals. A vendor sends a duplicate bill, forgetting they already submitted it last week. They might even change the invoice date or invoice number, so it gets processed twice. As a result, the vendor is paid two times, or the mistake is eventually caught after someone spent more time than they should have looking for it.
How to make it better
To prevent duplicate bill processing, create a workflow that prompts you to cross-check the past three months of billing so that you will notice if you’ve already made payment for a service delivered.
Checking billing history periodically also provides managers with the chance to review rates and the cost of goods. If you notice that prices are trending upward, you may look into whether it’s time to find a more cost-effective service provider.
Problem #5: Collecting payments from residents
There is always a handful of people who don’t make payments on time. They might have forgotten, or maybe they hope no one notices. Either way, late payments impact the community’s cash flow, and must be collected as soon as possible. Managers may have to try multiple times before they get the payment they are owed, and this process uses up valuable time.
How to make it better
Managers should start by introducing an online payment option if that isn’t already available. Online payments provide additional convenience to residents, and many people prefer to pay fees or rent online. In most cases, they will have an option to set up recurring monthly payments, ensuring fees are paid on time.
Once payment is made, it goes directly into the condo or HOA’s bank account, reducing the workload for the person or people responsible for depositing payments at the bank.
Property managers may still have to follow up with a few people regarding late payments, but the issue becomes less burdensome when online payments are an option.
Problem #6: Preparing 1099s
Condos and HOAs that hire vendors or other service providers who are not employees of the association must fill out a 1099 form. This is a legal requirement, and non-profits that don’t do this could be dealt heavy penalties from the IRS.
How to make it better
Some managers elect to outsource this work. Provided financial records are in order, this can save them a lot of time and headaches.
Some accounting software will automate the process of preparing 1099s, which reduces the chances of you entering an incorrect number or extra zero somewhere.
Conclusion
Accounting does get easier with practice, but without good systems in place, and a bit of help from software, it will always feel like a difficult chore. Don’t hesitate to get help or offload some of the work. Software never needs a day off!