How do you minimize accounting risks in property management?

2 Segregate duties

Another important practice to minimize accounting risks is to segregate duties among your staff or contractors. This means that different people should be responsible for different aspects of your accounting functions, such as collecting rents, making payments, recording transactions, reconciling accounts, and auditing records. This way, you can prevent fraud, theft, or misuse of funds by creating checks and balances and reducing the opportunity for collusion or manipulation. You should also establish clear roles and responsibilities, train your staff on accounting policies and procedures, and monitor their performance and compliance.

3 Implement internal controls

Internal controls are the policies and procedures that you put in place to ensure the accuracy, completeness, and validity of your accounting records and transactions. These internal controls can help you detect and prevent errors, frauds, or irregularities that could have a negative effect on your financial performance and reputation. For example, you can require authorization and approval for transactions above a certain threshold or involving sensitive accounts; maintain proper documentation and evidence for transactions and operations; perform regular reconciliations and reviews of accounts and reports; conduct internal and external audits and inspections; and use encryption, passwords, backups, and firewalls to protect your data and systems.

4 Stay updated on regulations

As a property manager, it is essential to comply with federal, state, and local regulations that affect your accounting practices. Neglecting to do so can lead to fines, penalties, lawsuits, or loss of business. To avoid these consequences, stay informed of the changes and updates in the regulations that apply to your business. This can be done by subscribing to newsletters, blogs, or podcasts that cover property management accounting topics, joining professional associations or networks for education and resources on property management accounting, and consulting with experts such as accountants, lawyers, or consultants who can advise you on best practices and compliance issues. By following these tips you can minimize accounting risks in your property management business while improving financial performance and reputation. Accounting risks are unavoidable but they can be managed through the proper use of tools, processes, and policies.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?