Read time 3 minOne of the toughest processes to deal with in real estate is CAM reconciliation. Many owners and landlords struggle with their annual reconciliation. This is because of the intricacies involved, poor tracking of expenses, and the variation in the payment that we see every year. Common Area Maintenance is essential for owners, and missing this could lead to significant financial losses. Erroneous lease calculation can further compound the CAM reconciliation process. But stepping back for a moment to look at the problem can be the best solution. Let us look at other solutions that can create a great impact and offer tremendous benefits.
Solutions for efficient CAM reconciliation
Standardization is one area where most companies struggle. So, let us walk you through the types of standardization and their significance.
Lease standardization
Writing a clear lease is crucial and the primary thing to note in CAM reconciliation. It is necessary for both parties to clearly understand what is included and what is not included in the recovery of operating expenses. To mitigate financial losses and confusion, it is wise to check the previous disputes and the common places where errors tend to occur. We all need standard leases, but a hole in it can ruin the entire process. Thus, look for holes in the standard lease and find a way to fix them in the upcoming leases. Doing this will not only save time but also reduce the complexities and headaches moving forward. Leases are standard and fresh. Find out sections that you think need extra care and attention and focus on them.
Accounting record standardization
If the lease documentation is clear and precise and the work orders and maintenance tickets are accurately kept, then bookkeeping can be done effortlessly. So, keep a few things in mind. Consistency is the key. Having a clear and consistent accounts chart across all your companies will help a long way by reducing errors. Then, develop a standard procedure for accurately coding the expenses. This procedure must cover freshly coded costs since it makes it easy to draft the receipts. The next step is to complete the reconciliation of monthly bank and credit cards, as this can quickly and easily identify problems. The final step is to work on the development of internal controls for approvals and payments. These tips can simplify the task and can take the stress out of CAM reconciliation.
Work orders/maintenance standardization
Keeping a record of all the repair works and maintenance activity is indispensable when it comes to CAM reconciliation. Track the hours for the activity and the associated cost and maintain a well-organized and structured report. Ensure to track the type of repair or maintenance activity, hours, and the cost involved to carry out the work and frame a consistent process. All this should be recorded on the day the work is completed. If you still think that the process is not being followed by the employees or contractors, take stringent measures until they start following. This approach has seen great success as none of the contractors or employees want to get their pocketbooks to be impacted in a negative way.
When CAM reconciliation has to be done
In most leases, reconciliation has to be completed within the specified time. It is usually either on the 31st of December or by the end of the 1st quarter. This means it is really hard for the staff members to complete the reconciliation on time. They must work on both CAM reconciliation and taxes simultaneously. Once the lease is signed, it is impossible to change the date unless any amendment is made. Changing this data in future leases can ease the task for both the owner and the landlord. Performing reconciliation on the 30th of November lets the landlord close the reconciliation process before the holidays. By doing so, you can get ample time to focus on other core tasks and get the work done, allowing the tenants to prepare for any adjustments in the operating costs. For tenants, knowing that there is a considerable amount due to the landlord and then knowing that there is an increase in the current year can cause additional stress and be a burden.
Conclusion
CAM reconciliation is imperative for both the tenants and the landlord. Any erroneous calculation or missing critical elements can result in a costly affair. Therefore, bringing the best practices into action can help streamline the reconciliation process in the longer run. Identify gray areas and try to find appropriate solutions to them. You can also try using the latest software to make computation much quicker and easier. Alternatively, you can also choose to outsource CAM reconciliation tasks to us. The experts at Springbord can efficiently handle reconciliation and usher you to move on the path to profitability.
