Client Accounting Musts Within the Property Industry

In the dynamic and fast-paced world of property, client accounting plays a vital role in ensuring financial transparency, trust, and efficiency. Whether it’s managing rental properties, handling transactions, or overseeing property portfolios, accurate and well-managed client accounting practices are essential for success in the property industry. This article explores the key client accounting musts that property professionals must prioritize to maintain their clients’ financial integrity and achieve long-term business growth.

Must #1. Establish Clear Financial Policies

Property firms should start by establishing clear financial policies and procedures to guide their clients’ accounting practices. These policies should outline how financial transactions will be recorded, managed and reported to clients. It is crucial to ensure compliance with local and international accounting standards such as Financial Reporting Council (FRC) and International Financial Reporting Standards (IFRS) as well as any industry-specific regulations such as standards of The Royal Institution of Chartered Surveyors (RICS), Money Laundering Regulations (2017), The Housing and Planning Act (2016) and other.

Must #2. Implement a Robust Accounting System

To streamline client accounting processes, property professionals should invest in robust accounting systems. These systems can automate various tasks, such as recording rent payments, tracking expenses, and generating financial reports. By leveraging technology, property firms can significantly reduce the risk of errors, improve data accuracy, and save time and resources.

Must #3. Segregate Client Funds

Such separation ensures that the client’s money is protected and readily available when needed. Property professionals should establish separate bank accounts for each client and strictly adhere to these segregated accounts for all financial transactions related to clients’ properties. This can also be achieved by providing a balanced report showing the breakdown of funds across the entire bank account to the penny at any one point in time.

Must #4. Accurate Rent Collection and Management

For property management firms, accurate rent collection and management are critical aspects of client accounting. Implementing a reliable system for rent collection, recording and tracking is essential to ensure that rental income is properly accounted for and allocated to the respective property owners. Property professionals should also establish robust mechanisms to handle late payments, enforce penalties, and manage arrears effectively.

Must #5. Transparent Expense Tracking

Property professionals must maintain transparent expense tracking systems to accurately record and categorize property-related expenditures. This includes expenses such as maintenance and repairs. By meticulously tracking expenses, property firms can provide clients with detailed financial reports, allowing them to monitor their property’s financial performance.

Must #6. Timely Financial Reporting

Regular and timely financial reporting is a key component of client accounting within the property industry. Property professionals should provide clients with comprehensive financial reports, including:

– income statements,
– balance sheets,
– cash flow statements.

These reports should be generated on a scheduled basis, such as monthly or quarterly and provide a clear overview of the property’s financial performance and any relevant transactions.

Must #7. Compliance with Regulatory Requirements

The property industry is subject to various regulatory requirements and adherence to these regulations is crucial for maintaining ethical business practices. Property client accountants must stay updated on relevant financial and accounting regulations, such as tax laws, property disclosure requirements, and anti-money laundering provisions. Compliance with these regulations not only protects the firm’s reputation but also ensures that the client’s financial interests are safeguarded.

Must #8. Engage Professional Accountants

To ensure the highest standards of client accounting, property firms should consider engaging professional accountants with expertise in the property industry. Experienced accountants can provide valuable insights, help navigate complex financial matters, and ensure compliance with accounting standards and regulatory requirements. Their expertise can enhance financial accuracy, mitigate risks, and support strategies.

Common Mistakes in Property Accounting

If you are new to accounting in any industry, it is natural to make a few mistakes as you become familiar with managing financial records and developing a bookkeeping system that aligns with your personal style and requirements.

Here are some of the most prevalent property accounting mistakes and strategies to avoid them:

Always Ensure File Backups:

Regardless of whether you store information in a cloud-based system or use alternative methods such as paper or spreadsheets, it is crucial to have a reliable backup system in place. Activate automatic backups for your cloud-based system, and if you opt for physical files, develop a duplicating system. It is essential to avoid the headache of searching for critical information and being unable to locate it.

Avoid Lump Sum Expense Categorization:

When itemizing expenses to maximize tax benefits, it is incorrect to assume that each expense category is the same. Unless you possess tax expertise, consider hiring a professional to guide you in determining which expenses should be grouped together and which should be filed separately. Seeking professional advice ensures accurate categorization and optimized tax deductions.

Effective Communication with Involved Parties:

Property income involves various individuals, such as brokers, agents, and investors, who play a role in closing deals or managing investments. Do not assume that these individuals understand your specific accounting requirements without clear communication. Verbalize your needs and provide timely reminders for submitting necessary documents, tax statements, or proof of purchase. Clear communication minimizes misunderstandings and ensures smooth accounting processes.

Want Your Accounts Done Right? Rentancy can help!

Rentancy has an expert team of highly qualified bookkeeping and property professionals with collectively 50-years experience.

Consulting:

• Advice on setup and structuring of bookkeeping processes
• Help resolve balances in existing accounts
• A Balance scorecard of how well an agent is operating

Client Accounting Services:

• Daily bank reconciliations
• Rent collection
• Process contractor payments
• General accounts query handling
• Process landlord payments
• Producing and sending landlord statements
• Manage property expenses & invoices
• In-arrears chasing
• Monthly KPI reporting
• Revenue Assurance

Property Management:

• Coordinating day-to-day maintenance
• Keeping up to date with ongoing compliances – GSC, EICR, EPC
• Arranging periodic inspections – carried out by 3rd party
• Working on tenancy contracts renewals
• Working on the end-of-tenancy contracts
• General query handling
• Legal notices
• Deposit returns
• Negotiate dilapidations
• Right to Rent Checks

Interested in our help? Submit your inquiry to talk to an expert. Or message us on WhatsApp at +44 330 321 3500.

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