{"id":55383,"date":"2025-01-29T11:38:32","date_gmt":"2025-01-29T11:38:32","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/real-estate\/top-property-management-accounting-challenges-how-to-solve-for-them\/"},"modified":"2025-01-29T11:38:32","modified_gmt":"2025-01-29T11:38:32","slug":"top-property-management-accounting-challenges-how-to-solve-for-them","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=55383","title":{"rendered":"Top Property Management Accounting Challenges &#038; How to Solve for Them"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p>\t\t\t\t\t\t\t\t<!-- Showing the last modified date and the author name --><\/p>\n<p style=\"margin-bottom: 0;\">Published on January 9th, 2025<br \/>By <a href=\"https:\/\/www.appfolio.com\/blog\/author\/matthew-kaddatz\/\" title=\"Posts by Matthew Kaddatz\" rel=\"author\" itemprop=\"author\" itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/Person\">Matthew Kaddatz<\/a><\/p>\n<p><span style=\"font-weight: 400;\">How does your property management company stay compliant and efficient when it comes to accounting and reporting? <\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a previous owner and operator of a property management company, I can attest to the fact that accounting is one of <\/span><i><span style=\"font-weight: 400;\">the<\/span><\/i><span style=\"font-weight: 400;\"> most complex and time-consuming workflows. It\u2019s also the most critical, as it impacts almost every aspect of your business \u2014 from owner retention to leasing to maintenance. When my business processes weren\u2019t efficient and consistent, errors occurred more frequently, which resulted in many late nights. <\/span><span style=\"font-weight: 400;\">As the owner of a property management business, you can\u2019t afford to get accounting wrong! Between the risk of failing an audit to the risk of losing customers because of financial inaccuracies, there isn\u2019t room to make mistakes and there\u2019s a real need to be efficient.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this post, I\u2019m going to detail some of the most pressing accounting challenges I faced while operating a property management business \u2014 many of which I\u2019m sure you have also encountered \u2014 and share with you how you can overcome them by pivoting your strategy and incorporating automated, digital tools.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While this article contains helpful information, I am not providing legal advice and you should consult a qualified tax attorney for any specific questions about your accounting processes or taxes.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Challenge #1: Collecting rent<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">A lot of property managers I talk to struggle to collect rent from all of their renters in full and on-time. This is a common issue, but over time it can quickly impact property NOI, owner cash flow, and ultimately stunt your business\u2019 growth. Some of the reasons collecting rent is difficult is because many businesses are still only accepting paper checks or money orders, which need to be collected by hand, and then deposited at the bank and manually input into the system, which takes extra time and requires double data entry.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Solution: Offer online rent collection<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Rather than collecting paper checks and processing rent by hand, consider transitioning to online payments. <\/span><a href=\"https:\/\/www.appfolio.com\/blog\/embracing-technology-online-payments-grow-your-business\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Online payments<\/span><\/a><span style=\"font-weight: 400;\"> not only save your team time and increase the likelihood that rent will be paid on time and in full, but are also more convenient and preferred by renters. Millennials and Gen Zers make up the majority of renters today, and are accustomed to using technology to carry out many of their daily tasks, and that includes paying their rent and bills.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Online payments are also better for your owners, because they get money into their accounts faster. For instance, JC Register of <\/span><a href=\"https:\/\/www.appfolio.com\/case-studies\/register-real-estate\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Register Real Estate<\/span><\/a><span style=\"font-weight: 400;\"> uses direct ACH deposits to expedite payments to his owners. As a result, they\u2019re able to transfer their money within 12-24 hours. JC adds:<\/span><\/p>\n<blockquote>\n<p><span style=\"font-weight: 400;\">\u201cI tell owners that if they come on board, they don\u2019t have to wait for a check. The money is in their account within 12-24 hours. They really like that.\u201d\u00a0<\/span><\/p>\n<\/blockquote>\n<h3><span style=\"font-weight: 400;\">Challenge #2: Reconciling books<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Back when I was running my business, we used limited systems like QuickBooks and Excel spreadsheets to reconcile accounts. This required us to do a lot of double data entry, which often led to errors and inconsistencies that required a lot of time to resolve. These systems don\u2019t force every transaction to be tied to a property, so it took a lot of effort to ensure we had accurate property-based P&amp;Ls. Additionally, they aren\u2019t set up for trust accounting, so there was a need for manual Excel double entry. This made reporting a very manual challenge.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Solution: Automatic reconciliation features on your primary property management platform<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Your primary property management software should really be recording every bank transaction that takes place. In today\u2019s day and age, there\u2019s no reason users should be manually doing this. When choosing a primary property management platform, make sure that it\u00a0<\/span><span style=\"font-weight: 400;\">imports bank transactions daily and offers a centralized view of your bank activity alongside your property management records. Automation and AI can be applied to make bank reconciliations effortless. It\u2019s now possible to receive automated reports with your bank activity, and handle transaction-matching in one simplified step. All of this can help your team avoid having to spend time untangling errors at the end of each accounting cycle. You can read about the bank reconciliation solution offered within AppFolio Property Manager <\/span><a href=\"https:\/\/www.appfolio.com\/articles\/automated-bank-reconciliations\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">here<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Challenge #3: 1099s and year-end close<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">One of the tasks I used to dread all year was preparing and sending 1099s. It was always a very tedious, complex, and time-consuming process. However, if I didn\u2019t submit them on-time, I could have faced <\/span><a href=\"https:\/\/smallbusiness.chron.com\/file-1099-same-time-business-taxes-4093.html\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">heavy penalties<\/span><\/a><span style=\"font-weight: 400;\"> from the IRS \u2014\u00a0as much as $30-$100 per late 1099 form \u2014 and opened my business up to an audit. Closing our books was another cumbersome workflow, yet it was absolutely necessary to calculate how much money I received from owners and paid to vendors, which in turn made it possible to understand how my business was performing.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Solution: Prepare 1099s with a digital system<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">\u00a0A single digital system of record makes preparing 1099s and closing books so much easier, and also removes the risk caused by manual data entry errors. There is tremendous value in preparing 1099s digitally and to have accompanying reports, as it saves time, and ensures dollar amounts are accurate, clear, and transparent to owners.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s simpler and <\/span><a href=\"https:\/\/www.appfolio.com\/blog\/end-of-year-reporting-1099s\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">faster to prepare your 1099s<\/span><\/a><span style=\"font-weight: 400;\"> when all of your vendors\u2019 and owners\u2019 information is in the system. By sure your accounting platform also provides support for the1099-NEC form, which is now required to report on vendor earnings.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Challenge #4: Owner packets<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Lastly, preparing owner packets was always a challenge for me and my team. It was a very time-consuming process, and when I didn\u2019t have accurate data that was easy to access, I worked well into the night to avoid customer confusion and owner dissatisfaction.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Solution: Adopt reporting tools<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Reporting tools instantly analyze property data that lives on your property management platform and compile them into owner reports, saving time and enabling you to get a clearer picture of your finances in minutes. Consider switching to a platform that has these tools, along with built-in analytics that can spot errors or inconsistencies in your data, and the ability to <\/span><a href=\"https:\/\/www.appfolio.com\/blog\/tips-and-tricks-for-customizing-your-appfolio-reports\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">customize your reports<\/span><\/a><span style=\"font-weight: 400;\">. A digital system also makes it easier and faster for you to share reports and owner packets instantly, all online \u2014 no more paper, envelopes, and stamps.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As you and I both know, accounting definitely comes with its own set of challenges. However, if you standardize your processes and put automated, digital tools to work, you can save time, increase accuracy, and stay compliant. Make the most of the solutions I shared above and you\u2019ll be able to set your business up for success \u2014 not only for this tax season, but the entire year.\u00a0 To learn more about how you can optimize your accounting operations. Check out this guide.<\/span><\/p>\n<p><a href=\"https:\/\/info.appfolio.com\/APM-CD-ASSET-AccountingReporting_2022_etb_content_download_form_lp.html\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" loading=\"lazy\" class=\"alignnone size-full wp-image-14443\" src=\"https:\/\/blog.appfolio.com\/wp-content\/uploads\/2022\/12\/appfolio-automation-blogfooter-1140x380-1.png\" alt=\"accounting challenges guide\" width=\"1140\" height=\"380\" srcset=\"https:\/\/blog.appfolio.com\/wp-content\/uploads\/2022\/12\/appfolio-automation-blogfooter-1140x380-1.png 1140w, https:\/\/blog.appfolio.com\/wp-content\/uploads\/2022\/12\/appfolio-automation-blogfooter-1140x380-1-300x100.png 300w, https:\/\/blog.appfolio.com\/wp-content\/uploads\/2022\/12\/appfolio-automation-blogfooter-1140x380-1-1024x341.png 1024w, https:\/\/blog.appfolio.com\/wp-content\/uploads\/2022\/12\/appfolio-automation-blogfooter-1140x380-1-589x196.png 589w\" sizes=\"auto, (max-width: 1140px) 100vw, 1140px\"\/><\/a><\/p>\n<h3><span style=\"font-weight: 400;\">About the Author<\/span><\/h3>\n<p><i><span style=\"font-weight: 400;\">Matthew Kaddatz is the Sr. Director of Product at AppFolio Property Manager. Matthew has spent the past 15 years working in the property management industry with experiences that include founding and operating a property management company, as well as building technology for property management companies. In his current role, he is responsible for ensuring AppFolio is continually building innovative tools that help property management businesses grow and become more efficient.<\/span><\/i><\/p>\n<p><!-- AddThis Advanced Settings above via filter on the_content --><!-- AddThis Advanced Settings below via filter on the_content --><!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons above via filter on the_content --><!-- AddThis Share Buttons below via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->\t\t\t\t\t\t\t\t\t<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Published on January 9th, 2025By Matthew Kaddatz How does your property management company stay compliant and efficient when it comes to accounting and reporting? As a previous owner and operator of a property management company, I can attest to the fact that accounting is one of the most complex and time-consuming workflows. It\u2019s also the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":55384,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[99],"tags":[12843,11117,5984,14928,7387,213],"dealstore":[],"offerexpiration":[],"class_list":["post-55383","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate","tag-accounting","tag-challenges","tag-management","tag-property","tag-solve","tag-top"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Top Property Management Accounting Challenges &amp; How to Solve for Them - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=55383\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Top Property Management Accounting Challenges &amp; How to Solve for Them - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"Published on January 9th, 2025By Matthew Kaddatz How does your property management company stay compliant and efficient when it comes to accounting and reporting? As a previous owner and operator of a property management company, I can attest to the fact that accounting is one of the most complex and time-consuming workflows. 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