Login
iscover
Cash flow management is a vital aspect of commercial property management. Owners rely on regular payments from their properties so they can pay loans or cover other expenses. Of course, they would prefer a steady, monthly stream of income rather than depend on the ebb and flow of funds. So, how do you achieve that?
There are two main methods for calculating remittances for owners.
Pay the balance of the funds in the property at the end of the month.
Pay the balance of the “owner funds” to the owner. This consists of rent received excluding GST and excluding outgoings, GST received (on rent and outgoings), less owner expenses, less GST paid on all expenses.
The first method usually results in varying payment amounts to the owner. This is largely a result of outgoing payments for the property fluctuating from month to month.
The second method of payment usually results in a steady stream of income for the owner on a monthly basis. This is ideal.
If the property has vacancies then adjustments need to be made, so the owner funds any variable outgoings related to such. However, owners do not like being asked to pay back funds into their property.
To prevent this from happening, property managers need a specialist software program which is powerful and easy to use and can prevent this situation.
The following are examples of different cash flow management challenges that can be addressed:
- Statutory outgoings payments.
- Recovery from tenants is normally monthly; however, the payment in the expense is normally in one, two or four instalments.
- The requirement to pay certain Recoverable Expenses before you recover amounts from all tenants.
- Paying for all common area expenses (outgoings) when there are vacancies in a property, without asking the owner to pay in.
- Dealing with tenants’ prepayments of rent in a manner that ensures the owner receives a consistent flow of funds month to month.
Many real estate agents like to overly complicate matters when they don’t need to. They over-service their clients by giving daily or weekly remittances. A high-quality service can still be provided to clients in a more structured and efficient manner.
Newsletter
