Those involved in property management must be sensitive to maintaining properly documented and organized client and business files. There are laws that designate exactly how long you should keep your tax, business, and financial statements. These vary from state to state. Efficient documentation and effective organizational skills can make your property management business more effective. It will also make internal and external audits easier and less stressful. Here are some general areas that you should pay close attention to in your business.
Bank Statements
The bank statements of the property management company should be reconciled once per month. Additionally, someone without access to the company account or accounts should be the person who does the reconciliation or spot check. This would be an effective safety measure to reduce the chance of embezzlement. Many accounting programs offer a feature to help with the reconciliation.
Keep Track of Bank Records
All of the banking statements, deposit slips, canceled checks, and other financial instruments should be kept together. Client money should be kept in a trust account. That money should be moved to the company account once it has been “earned” by the business. Additionally, do not use the money of one client to pay for the upkeep of someone else’s property investment. Keep a record of every purchase made. Some expenses are tax deductible. Consult with a qualified accountant about what you may be able to deduct as a write-off.
Documentation Practices
Stay on top of updating and documenting company activity on behalf of the client. This protects against the risk of forgetting to add something to a client file because you decided to “do it later.” If you perform a lot of property inspections, then you should invest in property inspection software. Many will run directly from smart phones and eliminates the physical paper involved in the inspection process. It also makes preparation of reports easier. Easier reports means saving time on documentation.
Always adhere to company documentation practices. These practices are put in place for a reason. By performing documentation on a regular basis and following the company’s guidelines for doing so, you are preparing for audit without officially taking the time to prepare for an audit. Audits can be stressful if you aren’t prepared.
Ask Questions
If you are unsure about a documentation practice or if you believe that it is incorrect, then you should ask questions about it. If you have a direct supervisor, that is the person to ask. You can work your way up the chain of command if need be. If you are the owner of the property management company and you aren’t sure what the best practices are, then you should look for an industry expert. Experts can include attorneys and CPAs in addition to those who work within the industry. Attorneys know the laws that will directly affect your property management business. They can answer questions about how long you should keep your client files or other business documentation. CPAs can answer your questions regarding your financial and tax records.
