How To Avoid Property Management Accounting Mistakes

noviembre 06, 2023

Property Management Accounting Mistakes

Everyone makes mistakes, even landlords. And many new landlords/property managers might not see the common pitfalls that await them.

It could be we make mistakes because we’re simply not aware of the common traps and practices that leave us vulnerable to them. Just a little warning or foresight could go a long way to helping with a startup’s survival.

If mistakes result in a property manager losing a valued client, then it’s worth it to review these top 20 suspect causes.

Big Accounting Mistakes in Your Future

Automate Recurring Charges with ManageCasa

As a landlord, Realtor, property manager, or association manager, you’re likely not an accounting expert. That and disinterest/carelessness can lead to penalties, extra fees, and embarrassing losses. Unfortunately, today when managers don’t have the right accounting tools it can leave them vulnerable to a variety of big and small mistakes.

Losing client accounts, breaching licensing requirements, legal action with Trust accounts, extra bank fees, and tax penalties are only a few of the painful consequences of making accounting mistakes.

20 of the Worst Accounting Mistakes You can Make

Let’s take a look at top 20 mistakes property managers make which you should avoid.

Commingling Personal and Business Accounts: Mixing personal and business accounts can lead to accounting confusion and potential legal issues. So it’s a risk you don’t need and it could result in lost property owners. And not separating your own business account from landlord/property accounts makes financial reporting unreliable.
Processing Duplicate Bills and Paying Invoices Twice: Manual processing sometimes leads to inputting an invoice twice or paying out twice on the payable. This can be embarrassing to a landlord or property manager and result in fees and wasted time in resolving the overpayment. Your property accounting software (and HOA accounting software) can help you avoid duplication.
Using Paper Invoices and Collecting Paper Checks: Handling paper documents can be time-consuming and prone to errors. Migrating to a pro-level digital accounting solution can reduce data entry errors, automate, and cut admin time.
Paying HOA Fees Late: Property managers making late HOA fees can result in penalties and strained relationships with homeowners and HOAs. Automating payments and setting up digital alerts will help avoid late fees due to your distraction, fatigue, or workloads.
Duplicate Entries and Omissions: Accurate and detailed record-keeping is essential to prevent both over-reporting and under-reporting expenses or income. Finding errors and omissions quickly is a big value add with digital accounting software.
Losing or Not Receiving Important Invoices and Supporting Documentation: Missing invoices and supporting documents can lead to incomplete records making it difficult to verify expenses. A systematic, error-proof document management process within an all-in-one dashboard keeps your documentation under control.
Not Accruing Expenses: Failure to recognize and record expenses that are not yet paid can distort financial reports. Accrual accounting ensures a more accurate financial picture.
Data Entry Errors: mistakes via leases, invoices, and journal entries often do result in accounting discrepancies which take time to resolve manually. Regular monthly reviews and account reconciliations can help detect and correct errors. Your digital accounting tools will make this much faster.
Failure to Record Adjusting Entries: Adjusting entries are necessary to accurately reflect the financial status at the end of an accounting period. Neglecting them can lead to inaccuracies in financial statements.
Not Reconciling the Books and Bank Accounts each Month: Frequent reconciliations of ledgers and bank accounts ensure that financial records match bank statements and help detect discrepancies before owner reports and tax forms are sent.
Not Reconciling Sub-Ledgers with the General Ledger: Failing to reconcile sub-ledgers with the general ledger can lead to discrepancies and make it challenging to identify and correct errors.
Using Spreadsheets Instead of Automated Property Management Accounting Software: Manual spreadsheets are error-prone and time-consuming. Using specialized software which integrates financial management and transactions, helps streamline accounting processes and reduce time-consuming mistakes.
Depositing Funds into the Wrong Account: Depositing rent or other funds into the wrong account can create accounting complications and inconvenience for tenants. Implement clear manual procedures for fund deposits, or better still, automate your accounting processes.
Not Sending Security Deposits to Renters by the Deadline: Timely return of security deposits is often required by law and failing to do so can result in legal issues and fines.
Problems in Processing 1099’s: Incorrectly filing 1099 forms for vendors or contractors can lead to tax-related complications and anger from those vendors. Careful review and accurate filing is crucial.
Inaccurate Expense Allocation: Assigning expenses to the wrong property or category can lead to inaccurate financial reporting and budgeting.
Mismanaging Association Reserve Funds: Inadequate management of reserve funds can result in financial instability, and unmet emergencies, especially for HOAs. Properly funding and managing reserves is essential especially it may impact your creditworthiness.
Ignoring Local Regulations and Tax Laws: Failing to comply with local property management regulations and tax laws can lead to legal issues and penalties. Achieve better compliance with your digital property management software.
Sending Incomplete or Inaccurate Financial Reports: Providing property owners or HOA boards with incorrect or incomplete financial reports can damage trust and lead to misunderstandings.
Not Acquiring Software for Internal Control Processes: Utilizing software with internal controls can help prevent and detect accounting mistakes, ensuring a more accurate and secure accounting process.

Automated Property Accounting

You can’t automate all property accounting activities to avoid errors and mistakes, however you can tame the complexity and tedium of transactions using a professional-level property accounting application.

It’s nice to automate, and it keeps workloads under control so you’re sharper about managing the demands of modern accounting practice.

Upgrading from QuickBooks or spreadsheets is a must-do for 2024. With costs rising and revenues falling, your dedicated property accounting software can help optimize your budget, streamline transactions, provide more reliable, error-free reports, and better inform decisions.

Take a closer look at ManageCasa’s Professional Level Accounting Solution now.