Are you ready to reconcile? No, we’re not talking about the scenario where you make up and forgive someone after a big fight. Reconciliation is actually a process that’s crucial for anyone who manages finances.
The most common type is known as two-way reconciliation, but for property management purposes, it’s important to add that extra layer and do three-way reconciliation.
We’ll explain what this all means, why three-way reconciliation is a must, how it works, and how to make the process simple with OJO Bookkeeping.
Let’s start here first. Two-way reconciliation is simply the act of comparing two sets of records to ensure both are accurate and in agreement. It’s used for both personal and business purposes. If you are old enough to remember how to balance a checkbook, then you have done a reconciliation before! You compare the bank statement with your checkbook and adjust any checks or deposits that have not cleared yet. By the same token, businesses use reconciliation to maintain their general ledger, prevent any balance sheet errors on their accounts, and ensure there is no fraud.
Three-way reconciliation: A must for property managers!
You probably have heard of 3-way reconciliation if you own or are running a property management company. If you don’t know what it is though, you are definitely not alone! Many property managers are either completely unaware of it or are misinformed about the process. And, unfortunately, many property management companies are not keeping up with their monthly reconciliations. One careless and seemingly minor mistake could cause much greater (and costly) issues down the road.
What are the three parts?
Because you are a property manager, this means you are managing a trust account on behalf of the property owner, adding to the third layer of reconciliation. It’s important to match up:
- Your internal books
- Your trust account bank statement
- The client ledger balances
You’ll be able to monitor the cash and property balances of your clients through your preferred property management software, whether it’s Appfolio, Buildium or Rentvine.
If all three elements are equal at the end of the month, that means you are 3-way reconciled.
The importance of three-way reconciliation
It is important to reconcile every month in order to find any errors and resolve them quickly. Some common errors are undeposited funds or an uncleared check that you gave to your contractor. Without completing these reconciliations in a timely manner, you will not have accurate books. If you are ever audited by your state, you will need to have clean books in order to avoid a painful and expensive result.
What do I do if I’m behind on my reconciliations?
We get it, things are extremely busy, you are juggling the needs of multiple properties and units at once, and it’s difficult to keep with the accounting aspect of everything when it’s not your area of expertise.
That’s exactly why we’re here! OJO Bookkeeping was created to take the bookkeeping and accounting responsibilities off of your shoulders, so that you can focus solely on your properties.
As experts in Appfolio,Buildium, Rentvine and Quickbooks, we help get our clients’ reconciliations corrected and up to date in no time.
We offer a complimentary Initial Financial Health Check Review for every client who signs up with us. It’s similar to an audit and shows you where your books currently stand, so that there are no surprises moving forward! From there, we will review what needs to be corrected and begin the process of getting you current and staying current going forward.
Schedule a free consultation for more info!