Discover how Keyrenter manages your rental property’s finances with our comprehensive full month accounting service.
Full Month Accounting Overview
So, what is Full Month Accounting, and why are so many property management companies moving their accounting practices to it?
Full Month Accounting is essentially the concept of processing statements and payments to a property owner at the end of a month rather than mid-month.
Mid-month accounting traditionally has caused much confusion for owners and accountants regarding the monthly owner statements. One of the biggest reasons for the confusion was how the statement dates were run. When an owner is paid in the middle of the month, the owner statements run in overlapping months. For example, let’s say an owner was paid on November 10. This means their statement would run from October 11 to November 10. Mid-month accounting and having statements run in overlapping months make the statements confusing and often difficult to understand.
With Full monthly accounting, owner statements run from the first to the end of the month. For example, on January 31, an owner would receive an owner statement showing income and expenses from January 1st–31st. Since income and expenses often trickle in throughout the month, net funds are also disbursed to owners at the end of the month to coincide with the statement date. Many property management companies use this method, as it is a much cleaner and simpler approach to property accounting.
Benefits of Full Month Accounting for the Property Owner
- Payments made to the owner come in at the very first of the month, regardless of the sometimes sporadic tenant payments. This consistency gives rental owners peace of mind and a less stressful experience.
- Owner statements run from the 1st to the end of the month. This means owner statements are much cleaner and easier to understand. A year-end statement for December 31 is also better for income tax filing purposes.
- If a tenant does not pay the rent, the owner will know 30 days in advance. This way, the owner can be better prepared for such an event, instead of knowing a few days before you are scheduled to receive your deposit. It makes an unfortunate situation much less stressful.
- No more waiting for lingering utility or partial payments from the tenant throughout the month since all payments will be collected and pooled for the end-of-month payment.
- Since owner funds come well before a mortgage due date (most mortgages are due by the 15th of the month), the owner will have plenty of time to make their payment and not be rushed to wait on the rent deposit to make a payment deadline.
- The property management company will have enough funds to pay for repairs. With mid-month accounting, the PM cannot pay if a larger bill comes in. Since the PM company needs to pay vendors and contractors promptly, having funds available prevents delays when an owner sends in money. Not having enough funds to manage a property is inefficient and leads to unnecessary delays.
Frequently Asked Questions
Q) Won’t the property management company earn much interest on my money?
- A) First, understanding the very low rates on liquid checking accounts, the interest would not be much. Second, property management trust accounts are either non-interest-bearing or the bank would simply use any interest earned to offset banking costs.
Q) I can’t afford the property management company to hold my funds for a few weeks. How is this fair?
- A) When property owners hire a property management company, they willingly relinquish some control. This requires the property owner to be financially stable and able to afford a few weeks initially. After the initial “holding period,” owner proceeds are paid to the owner like clockwork by the first of each month. If a property owner cannot afford this initial period, they may need to reconsider owning a rental property. This is based on some of the principles found in our 13 Keys of Rental Success.