Why you need specialist property accounting
There’s no doubting the popularity of online accounts packages such as Xero, Sage and Quickbooks.
All three reported double digit growth last year, and between them they claim around six million subscribers worldwide.
But can these packages cope with the specialised accountancy needs of professional property managers? Even if you attach one of the various property management plug-ins that are available?
The answer, we’re afraid, is no.
1. You can’t configure the General Ledger to provide the reporting you need across the portfolio
Every large portfolio has multiple complexities in its structures of tenancies and ownerships.
All these need to be reflected in General Ledger coding, if you want to achieve useful financial reporting.
Without this flexibility, you certainly can’t manage multiple clients, or investors, or even cost centres, each of which might need separate GL structures.
And you can’t achieve full compliance with industry best practice, such as service charge management, RICS funds testing, IFRS16, or even the complex property tax rules that govern VAT, the Construction Industry Scheme and non-resident landlords.
2. Indeed, you can’t accommodate complex services charges at all
In a portfolio of any significant size, service charge management soon becomes overwhelmingly complex.
Capped leases, different schedules in multiple tenancy buildings, uneven contributions, and budgeting, all need to be directly integrated into the accountancy function if they are to be managed with absolute accuracy. These functions simply cannot be kept separate in an adjacent property database.
Nor can you easily prove compliance with new RICS service charge apportionment matrices, and ARMA-Q standards such as segregation of funds.
3. You can’t test future investment scenarios
If property information and financial transaction data are held in separate databases, it becomes impossible to test the various ‘what-if’ scenarios that make for a successful property business.
For example, if you want to look at the potential yield of a portfolio, you need to compare the capital valuation of each property against the associated transactional details relating to income and expenditure.
No online accounts package, even with associated plug-ins, can achieve this level of sophistication. Nor can they produce such reports automatically. Instead, you have to extract data from multiple sources and work on it in complex spreadsheets.
4. You can't even accommodate the peculiar foibles of the British property year
British property management mandates an astonishing number of different accounting periods; some, such as Quarter Days, date from medieval times. Others derive from more modern bureaucracy, such as service charge periods, VAT accounting quarters, and tax years.
Because the online accounts packages are designed for standard small businesses, they make no provision for the more obscure accounting periods.
And on this issue, spreadsheets are no help whatsoever.
Trace’s solution: property accounts and property data, all in one place
The current crop of online accountancy packages do provide good financial tools for small businesses.
But none of these packages has been designed with either property management or the larger enterprise in mind.
The accounts functionality in Trace software, on the other hand, has evolved over many years to support some of the UK’s largest and most successful property management companies.
Because our software is mission-critical to these companies, it provides everything they need, faultlessly and comprehensively.
You can code the general ledgers to reflect the unique structures of your property portfolio, and you can manage your business processes, including service charges, compliantly, in a British-focused frame of reference.
Best of all, once configured, the management of your portfolio ‘just works’, keeping your business running smoothly and providing the full flexible reporting you need.