![\"Are](\"https:\/\/www.rentecdirect.com\/blog\/wp-content\/uploads\/2020\/11\/Are-You-Ready-for-a-Real-Estate-Audit.jpg\")
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Property management is a complex business with many moving parts. Instead of dreading the request for a real estate audit, you can have peace of mind that the business complies with state regulations and the strictest accounting practices by becoming audit-ready today.\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n Some of the different terms used for these real estate audits vary from state to state based on licensing and business structure. A property management audit could also be known as a:\u00a0<\/span><\/p>\n Regardless of the name, the nature of an audit is all the same which is a review of documentation and records to ensure the actions and business practices comply with state regulations.\u00a0<\/span><\/p>\n Depending on the state, you may be subject to a routine audit or be required to provide monthly accountability check-ins and reports.\u00a0<\/span><\/p>\n In other areas of the country, you might be subject to a random audit or only when a complaint is filed.\u00a0<\/span><\/p>\n If you are operating in a state with no clear audit schedule, you are still not immune to an unexpected request.\u00a0<\/span><\/p>\n Even if at the state level you have escaped the experience, at the federal level the IRS can request an audit of your financial records and business and banking documentation at any time.\u00a0<\/span><\/p>\n Compliance means your bookkeeping, records, and practices are within the regulations set by your state. The importance of being audit-ready:<\/span><\/p>\n Over-all, being audit-ready saves time, money, reputation, and protects the business.\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n How do you know you\u2019ll pass an audit? By being audit-ready.\u00a0<\/span><\/p>\n Emily Dickenson puts it best when she wrote:<\/span><\/p>\n If you take care of the small things, the big things take care of themselves. You can gain more control over your life by paying closer attention to the little things.<\/span><\/p><\/blockquote>\n An audit may feel like a huge undertaking, full of anxiety and stress. But by making the small everyday details the big things in your business, it shrinks an audit down to a manageable moment in time.\u00a0\u00a0<\/span><\/p>\n First, set your goals in line with the state regulations. Then, you\u2019ll want to be sure your systems and protocols complement the goal of compliance.\u00a0<\/span><\/p>\n Best practices rely on proper documentation and accountability routines such as checks and balances within the organization. Using robust property management software can help keep that all organized and at the ready.<\/span><\/p>\n It may seem counterintuitive but it\u2019s imperative to slow down and insist on complete accuracy in documentation and business practices:\u00a0<\/span><\/p>\n Auditors are looking for accuracy and accountability. But that doesn’t mean they are looking to trip you up. This is not a pass\/fail scenario and the relationship between your rental business and the state housing commission doesn\u2019t have to be one of contention or fear.\u00a0<\/span><\/p>\n It’s best to think of the audit process as a tool to help your business be the best it can be. The auditor is on your side and is there to help and not hinder. <\/span>They, just like you, want you to be in compliance for the good of your business as well as for the benefit of those you serve such as your tenants, owners, and investors.\u00a0<\/span><\/p>\n Many real estate audits focus mainly on the bookkeeping aspect of the business. The questions you may encounter would revolve around your accounting and bookkeeping practices.\u00a0<\/span><\/p>\nThe Different Types of Property Management Audits<\/b><\/h2>\n
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Property Management Audit Timing<\/b><\/h2>\n
The Importance of Being Audit-Ready<\/b><\/h2>\n
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How to be Audit-Ready<\/b><\/h2>\n
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\nThat might look like closing down the office for a short time and letting calls go to voicemail.\u00a0<\/span><\/li>\n
\n<\/span>Most property management accounting software gives you ample areas to document checks, transactions, invoice numbers, and memos. Enter notes in the software for phone conversations and correspondence. Set detailed reminders in the rental software for updating business licenses and other compliance documentation.\u00a0<\/span><\/li>\n
\n<\/span>For example: recreate bulk deposits in your software using an undeposited funds ledger and bulk deposit tool to mirror what happened at the bank level. Remember, bookkeeping becomes simplified when it\u2019s documented in a way that replicates the flow as it occurred.\u00a0<\/span><\/li>\n
\n<\/span>Sometimes it means getting to know your property management software better. Make sure everyone using the software understands posting transactions, uploading files, moving tenants in and out, receiving and returning security deposits, and the like. A good trust accounting software will have the resources you need such as property management training videos<\/a>, webinars<\/a>, and a robust knowledge base<\/a> available.\u00a0<\/span><\/li>\n
\n<\/span>Your owners and investors deserve to see accurate and detailed ledgers. Transparency also helps avoid even the appearance of mismanagement, commingling, and fraud.\u00a0<\/span><\/li>\n
\nHire a bookkeeper, hire an office assistant, create an internship for a college student, delegate tasks to others to free your time.<\/span><\/li>\n\n
What are Auditors Looking for?\u00a0<\/b><\/h2>\n
The Audit Process<\/strong><\/h2>\n