Back-Log and Clean-Ups of Accounts of Property Management Company
The client is a property management and real estate investment company that specializes in acquiring and renovating underperforming multifamily properties. Operating primarily in Arizona, USA, they specialize in managing a portfolio of value-add units.
Needs:
The company was struggling with a backlog and was disorganized in its accounting process, leading to inaccuracies and delays in financial reporting and decision-making. The client asked us to take care of all their books. It also had very complex accounting, communication, multiple re- classified transactions. OHI faced some challenges in completing the project, such as:
Overview
Challenges
- Multiple Payments for Single Transactions: Payments were recorded multiple times for a single transaction, leading to inaccurate financial reports and difficulty in tracking transactions.
- Incorrect Income GL Mapping: Misclassification of income streams due to incorrect mapping of Income General Ledgers (GLs) compromised financial statement accuracy.
- Unreconciled Mortgage and Escrow Balances: Failure to reconcile mortgage and escrow balances created inaccuracies in financial statements, affecting financial decision-making.
- Unreconciled Tenant Balances: Tenant Accounts Receivable (AR), Prepayments, and Security Deposits were not reconciled, leading to inaccuracies and potential tenant disputes.
- Incomplete Bank and Credit Card Reconciliations: Many bank and credit card transactions remained open and uncleared, obscuring actual cash positions.
- Unpaid Vendor Invoices: Extended unpaid periods for vendor invoices led to a backlog, affecting vendor relationships and risking late fees and supply chain disruptions.
- Misposted Fixed Asset Transactions: Fixed asset transactions were incorrectly posted directly to the Property Management company instead of individual properties, complicating asset management.
- Payroll Liabilities: Payroll expenses were managed by the property management company without proper liability accounting towards properties, affecting cash flow and GL reconciliation.
Solutions
Multiple Payments for a Single Transaction:
Solution: Implement a thorough review of payment processes and categorized transactions
based on AP’s, CC and JE’s. Enhance reconciliation procedures to detect and correct any
discrepancies promptly.
Incorrect Mapping of Income GLs:
Solution: Conduct a comprehensive review of the GL mapping and ensure alignment with
the correct revenue streams. And created some necessary GLs to organize income/dues
from the tenants.
Unreconciled Mortgage and Escrow Balances:
Solution: Establish a dedicated reconciliation process for mortgage and escrow accounts.
Asked for the necessary mortgage statements and create the spreadsheet to record and
reconcile the balances and deductions.
Unreconciled Tenant’s AR, Prepayment, and Security Deposits:
Solution: Reviewed all the GLs and find out the manual transactions as a primary reason for
the unreconciled balances and thereafter removed/reclassified those manual transaction
and directed not to make any manual posting.
RESULTS
1)
Now we are tackling All the AP’s, Utilities, Vendor management, reconciliations.
2)
Organized the communication process with the property managers.
3)
We are now helping the client on cash management and balancing inter-company liability.
4)
Created SOP’s for the processes so that all of us remain on the same page.
If you are interested in knowing more about how OHI can help your organization, reach out for a customized cost-benefit analysis tailored to your needs.
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