Service Charge Account production starts and ends with the managing agent, who holds the key to whether accounts are completed efficiently and on a timely basis. This comes down to two things:
- Ensuring the financial records are accurate as possible
- Ensuring adequate information is captured to make analysis quicker
By doing these two things well agents not only save time for the service charge accountant but save themselves time. Often, we see an agent’s financial staff tearing their hair out trying to get records complete and accurate so that they can send the records to the accountants, correcting data and forever chasing property managers for information/ confirmation.
The simple steps below, if done consistently reduce this burden on the finance staff and help speed up the process:
Load a digital copy of the invoice into the system
Ensure you have a robust process so that all invoices are captured when they arrive in the office and loaded as quickly as possible onto your system. Make sure you upload a digital pdf or image of the invoice for future reference as well as for the ability to send the documents to the accountant as easily as possible. In Blocks Online we send all invoice images for the period concerned to accountants using our Service Charge Online Accounting Package (SCOAP) at the click of a button when doing service charge accounts.
If you know you have captured 100% of invoice pdf/images, then this costs you no extra effort. It also saves you time chasing down digital copies later when collating the information for the service charge accountant. Blocks Online supports uploading these pdf/images directly
Enforce discipline to supplier invoice line items consistently
The discipline of creating a good supplier invoice line-item description is often overlooked, but the description is key to quick processing. Two pieces of information should always be loaded into the description if known:
- If it is an insurance policy or long duration service contract, enter the start date and end date of the cover/service – this facilitates a quick calculation of pre-payments.
- Enter the location of works on multi block sites – avoids a later chase of the property manager to work out which schedule the costs might apply to and the property manager spending time looking through paperwork to remember what happened.
Pre-define schedule allocations for each service where possible
On multi schedule blocks, 50%+ of expense items for a particular block e.g. electricity goes to either a single schedule or are split in a pre-defined manner across schedules. When this is the case, you do not want to be splitting every invoice for electricity you receive manually across the schedules. Use your system to define allocation rules for service/expense categories such that it automatically allocates the costs across schedules – eliminating this ongoing task.
Within Blocks Online we have an area to define rules such that you can specify which percentage allocations to use where. Once defined, invoices for those service/schedules never have to have their schedule allocations processed manually every again, which reduces workload and also avoids manual loading errors.
Have the Property Manager allocate schedules as soon as possible
For invoices that can only be split across schedules manually based on knowledge of the work/service performed, it is critical to avoid waiting to the year end to do this split. The Property Manager is the person who is best placed to know the split/allocations and needs to be ‘forced’ to do this split/allocation as soon as possible after the invoice is loaded. This avoids unnecessary stress further down the line, as they may not remember the details a few months after the works were completed, and may either guess the split or may have to spend time re-reading correspondence.
Property Managers rarely see such financial processing as important and generally will not get around to this task in a timely fashion, leaving it to be ‘cleaned up’ at year end, which is time consuming for all and leads to poor data.
The best way to do this is to use the likes of the feature in Blocks Online that forces all invoices to have their schedule split allocated before they can be approved for payment by the Property Manager. This works because Property Managers know that suppliers won’t get paid until the split is done, giving them a strong incentive to complete the task promptly, resulting in better quality financial records.
Have a standard process for collecting exceptional accruals
Implement a standard process in the finance function to reach out to the Property Managers at year end, asking them to provide details of any exceptional accruals. These are not the accruals for a missing monthly cleaning invoice, but the accrual for a material works invoice that has not been lodged. This is information the Property Manager will know, but not the finance staff and therefore, can easily be missed. Often this is just a case of sending a standard email to the Property Manager after year end, laid out for them to reply in a simple way.
Make sure you identify and review what is to be paid from reserves
Often, we come across situations where the service charge accountants are determining what is to be paid from reserves based on an invoice description and amount. The agent has completely abdicated this responsibility, which leads to very poor assessments and hence impacts leaseholders. It is therefore key as part of year end, to have a standard process to ensure Property Managers confirm which invoices should be paid from reserves at year end.
In Blocks Online we support this with the ability to tag supplier invoices as to be paid from reserve funds and then run a special report of all expenses in the period that are covered by reserve funds, which can be run and passed to the Property Manger to sign off. This report is part of the standard pack passed to the service charge accountant, letting them know what should be allocated as paid from reserves.
