Rentancy are leaders in working with 3rd party financial software packages to help streamline operations for landlords and propcos.
We have extensive knowledge with team members having used Xero for over 12 years. Here are our 7 tips to help you assess if you are using Xero efficiently for your property business.
First a quick word on Xero. Our team is happy to work with any ledger software, but we have found Xero to be one of the easiest and simplest to set up, configure and use. It is a little-known fact they have 3.5 million customer subscribers and 4,500 staff working at Xero. That’s quite an achievement for a financial general ledger piece of software. It shows the success of the solution in the market not just in property but across many business sectors.
Tip 1. Automate arrears chasing
We often see landlords bookkeeping teams spending time chasing down payments from tenants and lessees.
If you are in the UK we recommend setting up Go Cardless and ask all payments to be automated through this system. Yes, there is an additional processing fee, but the time saved and reduced admin is worth it.
Getting the invitation to the tenant or lessee needs a bit of setup, but once running you receive a notification if the funds collected bounce and you do not need the tenant or lessee to do anything further. Once set up you can also collect ad-hoc payments and in the future rent increase amounts etc.
Tip 2. Reconcile daily at a property, estate or block level
Residential and commercial tenancies/leases provide a continuous stream of both invoices to receipt and bills to pay. But also specific agreements on when to pay a bill, and how much to pay can quickly become complex. There is a temptation to leave it to the end of the month, but in reality, if you can block some time out each day, it means everything is up to date and you know exactly the position of every property day by day.
Rentancy can even help you reconcile daily as a remote service if needed.
Tip 3. Think carefully about how you set up your chart of accounts
Does your chart of accounts give you a useful analysis of your portfolio? It is not simply there to help you prepare your end-of-year accounts and tax returns. Do you know the profit per property, block or estate?
We have worked with a variety of income models that post each property income to a separate ledger code or post to one income ledger account but using cross-tracking references. Both ways can help you improve reporting and know where your operating profit is monthly.
Tip 4. Batch process payments out to save time
If you have many payments to make in 1 go, we recommend using some of the handy banking apps that are now connected to Xero. For example, Xero has a good integration with TransferWise. You can select which payments to make, and process them all in one go. Transfer wise sends a payment request and splits the funds to each of the beneficiaries. We also understand that soon Modulr will be connected to Xero too.
Even if you pay out manually from a bank account, we recommend preparing a formal payment schedule and getting approval (basically a second pair of eyes) before sending funds. Good old-fashioned accounting controls are still needed. As it can be easy to send incorrect amounts.
Tip 5. Use 3rd party apps to help automate the raising of bills
Often landlords or propcos will have a number of in-house maintenance, project management staff that are continuously incurring expenses using a credit card or signing for receipt of goods delivered.
We have found 3rd party applications such as Hubdoc can help save time and improve the accountability and transparency of staff. These applications provide the ability to take a picture of the original invoice or receipt document, add tags that help accounts identify which property or unit they relate to and also enable them to be synchronized as submitted but not yet approved.
This gives the finance team the ability to review and approve without having to rekey paper bills or pdfs sent by email from staff. It leaves an accounts team free to focus on the review, approval process and to decide, if not already paid, when to pay and how to reclaim too. E.g. a tenant caused damage etc or after vacating a commercial lease recovering costs for the demise.
Tip 6. Export and analyse the data
Xero has powerful export functions that allow you to analyse property performance in spreadsheets or even in 3rd party Business Intelligence (BI) tools. We recommend pulling together a monthly review to help with decision-making.
Some propcos are now more focused on build-to-rent models, while others historically can realise value at the sale of a property after renovation or completion and taken occupation.
We can help you prepare spreadsheets and provide BI advice to support further analysis. Plus we can also help you combine financial data with operational data. E.g. rent review dates, renewal dates, break notice deadlines as well as analysis of jobs/tasks incurred per property.
Tip 7. Challenge your setup once a year
Often just getting the basics running smoothly can be a major achievement. And with that in mind, a mindset of 'if it ain’t broke - don’t fix' etc. In our experience, property business models are changing annually. And while we agree there is no need to change something that is fundamentally delivering what you need.
We would propose at least making an annual review. This is a useful task for the accounting team to look around them for business improvements. Plus Rentancy often publishes productivity tips that you can read at your convenience.
How can Rentancy help?
Rentancy can provide both advice and processing help with accounts. We have seen propcos and landlords having to handle regular staff turnover. Or a new development comes on stream and your long-serving bookkeeper is becoming overworked. We are available to help and improve your business.
Why not contact our expert team to discuss your Xero setup? Please, feel free to drop an email to email@example.com or message us on WhatsApp at +44 330 321 3500.