Property management bookkeeping services are specialized accounting and financial recordkeeping services focused on property managers. They are more than just bookkeeping for businesses, as property management requires handling others’ finances, collecting rent on their behalf, holding security deposits in trust, and sharing net income after expenses.
The major responsibility is that every transaction is accurately recorded, all accounts are regularly reconciled, and each owner has accurate, easily understood financial statements. These requirements can be quite different from those of a general bookkeeping service, and it is this property-specific bookkeeping service that is the essential service a general bookkeeper may not provide.
Why Commercial Property Management Demands Specialized Bookkeeping?
As a commercial property owner, you’re likely seeing NNN leases, CAM charges, lease escalation clauses, and several tenants in several buildings. All of them generate monetary transactions that must be properly documented.
You also have funds to manage for property owners. That implies you’re accountable to them, legally – you have a fiduciary duty to deal with their money properly and correctly. When books have a problem, it’s a problem for them. It impacts your owners, your tenants, and even your license.
Property management bookkeeping services provide you with a system to manage everything properly. You don’t have to piece together something in a spreadsheet or in your head; instead, you have a consistent, clear process for each financial chore.
Core Services Included in Property Management Bookkeeping
A full property management bookkeeping service handles a variety of tasks. Those usually involve the following:
- Rent tracking: Noting rent rolls, rent collected, rent still to be paid and late fees for each tenant for each property.
- Accounts payable: Managing vendor, contractor & utility bills, ensuring bills are paid accurately and timely.
- Bank Reconciliation: Month-to-month comparison of your internal financial records to your bank statements. This is helpful to trap errors before they become larger issues.
- Trust Accounting: The separation of owner funds and tenant deposits from operating accounts. This is a legal requirement in most states, and one of the most critical components of property management compliance.
- Three-way reconciliation: Reconciling at the same time your software records, your trust account ledger, and your bank statement. This is the best possible way to ensure the accuracy of trust accounting.
- Owner statements: Monthly or quarterly statements to owners reflecting gross income, all expenses, and net distributions.
- CAM reconciliation: Reconciling year-end Common Area Maintenance expenses with the estimated expense to the tenants. This is a requirement in commercial leases, often on an annual basis.
- Month-end Close: Finalizing all transactions at the end of each period, reconciling all accounts, and preparing clean financial reports.
The Consequences of Getting Bookkeeping Wrong
But for commercial property managers, the ramifications of bad bookkeeping go far beyond the cluttered books. Trust accounting errors can put your real estate license at risk. When the reconciliations are incorrect, it can lead to tenant disputes and legal liability. Delays and missed owner statements will reduce the trust owners have in you as their management partner.
It’s the little things that add up to issues that will take a long time to resolve and cost you money. Correcting avoidable bookkeeping errors is time away from managing properties, serving tenants, and growing your business.
An important principle for commercial property managers: Your books are not only an internal record. They form the foundation of all owner discussions, all financing requests, and all compliance checks. Correct books are not a back-office matter – they’re a front-office business asset.
In-House Bookkeeping vs. Outsourced Property Management Bookkeeping Services
There are two options for property managers: do their own bookkeeping or use an outsourced bookkeeping service. They can both be effective, but each will have trade-offs that need careful consideration.
Having in-house bookkeeping means you have control and immediate access to your team. But it will involve hiring staff with real estate accounting expertise, investing in training, and dealing with the potential loss of key personnel who take institutional knowledge with them. In smaller portfolios, in-house bookkeeping means one person handling tasks that really need to be split between two people.
Outsourced bookkeeping services for property management provide the expertise you need without the added expense of hiring your own staff. An effective outsourced provider will have experience with various property management systems, a streamlined process, and the ability to accommodate volume fluctuations as your portfolio expands. The benefits of outsourcing include enhanced accuracy, a quicker turnaround, and lower overall cost for many commercial property managers.
Software and Technology in Property Management Bookkeeping
Appropriate property management bookkeeping today relies greatly on the proper software. Property management accounting platforms, such as AppFolio, Yardi, Rent Manager, Buildium, and Sage 300 CRE, are purpose-built to manage tenant ledgers, owner distributions, trust reconciliations, and financial reporting, things that general accounting software simply can’t do.
Software skills are a must when considering a bookkeeping service or developing an in-house process. Working within your property management platform rather than entering data into a separate system will eliminate errors, save time, and keep your financial data in sync with your operational data.
What to Look for When Choosing a Property Management Bookkeeping Service
Not all bookkeeping companies are capable of going the extra mile. If you’re searching for the perfect fit, these factors come into play:
- Real estate experience: They should know about commercial leases, CAM reconciliation, and owner trust accounting — it’s not just business finances.
- Software expertise: They need to be familiar with the software that your company uses to manage properties.
- Compliance awareness: They should be familiar with the trust accounting regulations in your state and adhere to them regularly.
- Well-structured reporting: You should be able to get good reports that are regularly delivered to you without having to ask for them, and you should get them without them having to be sacrificed.
- Responsiveness: Bookkeeping questions occur at random times throughout the day. Your provider should be readily available and responsive.
- Scalability: They should be able to manage larger amounts of information in your portfolio without compromising on quality.
Bookkeeping as a Driver of Owner Retention
For owner-occupied businesses, the key to success is owner retention. When owners get the right, timely financial information, month in and month out, it builds their trust in their property manager. The confidence that leads to long-term management agreements, more properties under management, and to other owners.
Any other type of financial problem, though, is much harder to resolve: if a statement arrives late, an expense shows up with no record of it, or a reconciliation doesn’t make sense, for example, those doubts can be hard to assuage. That trust ensures your financial reporting is always clear enough for owners to review easily, always on time, and always accurate with property management bookkeeping services.
Final Thoughts
Bookkeeping services for property management are essential for any business that manages commercial property and are a critical component of a successful, compliant, and scalable business. Whether you have a few commercial properties or a large mixed-use portfolio, the financial recordkeeping standard is the same – clean books, timely reporting, clean trust accounting, and the skills to account for the unique challenges of commercial real estate.
One of the most practical steps a property manager can take to safeguard their business, to look after their owners, and to establish a reputation that will ensure long-lasting growth is to invest in the right bookkeeping process, in-house or outsourced.
