If you’ve ever had the (dis)pleasure of experiencing a real estate audit, you know what a massive headache it can turn out to be. Thankfully, there are ways that you can be proactive in planning and preparing in advance so that when that time inevitably comes, you’ll have all your ducks in a row. Here are a few tips from our property management experts on how to make your business audit-proof.
Benefits of Being Audit-Ready
There are many laws that govern the property management industry. Audits ensure that your business remains in compliance with all of these rules and regulations. Being ready in advance, before you receive a notice of intent to audit, will provide the following key benefits:
- Save time and money
- Alleviate stress and anxiety over the audit process
- Make the entire experience much faster and easier
- Ensure ongoing business operations within state/federal guidelines and regulations
- Improve bookkeeping accuracy
- Get a head-start in preparing for end-of-year tax reporting
- Opportunity to foster trust with owners and investors
- Reduce legal and financial risks
How to Become Audit-Ready
Leverage technology as much as possible. Today’s tools, like property management software, are designed to make audits as straightforward as possible. They enable you to track everything from expenses to income to tenant and partner communications and more. Don’t waste time keeping physical files. Take advantage of the advanced digital options that are available to you.
Be diligent and detailed. Anyone who has suffered through a tedious audit will tell you, it always seems to be the one thing you’ve misplaced or miscalculated that the auditor focuses on. Avoid this risk by being meticulous about record-keeping. For instance, most property management programs provide ample opportunity to document and take notes. Do so and you’ll have far less to worry about in the end.
Emphasize consistency. Audits can become complicated and messy when they involve transactions from multiple team members. You can prevent this by setting specific guidelines and requiring everyone to consistently adhere to those guidelines. For example, everyone should be following the same protocol when entering data into the tracking software. This will prevent deviations that could prove costly when it comes time to examine your collective records.
Conduct routine in-house audits. Staying on top of your own records and internal documentation can help you stay a step ahead of the official audit process. Create and use an audit checklist that includes regular bank reconciliations. Routinely review business licenses and other regulatory information to ensure compliance. Doing a little at a time can help prevent a major issue from arising when the auditor shows up.
Get help if you need it. As a property manager, you wear many hats. If you’re stretched too thin or there are key areas that aren’t your particular forte, such as accounting, don’t try to be a hero. Enlist the help of others. Hire an office assistant or bookkeeper. Delegate important audit-related tasks to others on your team who have more bandwidth or more relevant skillsets. Admitting you need help may be tough, but when you get that green stamp of approval on your audit, swallowing your pride will have been well worth it.