Top 9 Best Practices For CAM Reconciliation

Mon, 23 Aug 2021 09:00:00 -0400

Common Area Maintenance (CAM) reconciliation sounds simple. Just add up all common area expenses and divide them among all the tenants. But in reality, it is a complex and time-consuming process.

You might miss certain expenses or end up overcharging your tenants. Additionally, any error in CAM reconciliations has a negative impact on property management. You can’t miss out on having a thorough reconciliation process.

While the task is tedious, our list of best practices helps make your CAM reconciliation more accurate.

Impact of a good CAM reconciliation process

The money recovered from CAM reconciliations is used to operate and maintain common areas. An accurate CAM reconciliation process has various benefits other than just a financial boost.

Better tenant relationship

A transparent and timely reconciliation makes tenants trust you more. They will also be motivated to pay rent on time and also be responsible for maintenance. If the tenants are kept in the loop of the process, it leads to fewer CAM-related disputes. Through a good CAM reconciliation, you can build a better brand image and also get more referrals from trusting clients.

Be ahead of competitors

With around 2 million real estate agents in the US alone, the industry has become very competitive. To stand out, property managers need to provide additional amenities to tenants. Having control over the CAM expenses can help cover the costs of such amenities and also improve your brand image.

Negotiate leases

Lease negotiations need to be profitable for both the property manager and the tenants. A good CAM reconciliation process covers all property management costs while also giving tenants the best amenities.

Tips for CAM reconciliation

Common area maintenance expenses usually include:

Repairs and maintenance expenses
HVAC and other utilities
Property tax and other fees

Salary of property staff such as janitors and security services.
Cost of new amenities

To cover these costs and fairly divide them among your tenants, you need to follow these tips for CAM reconciliation.

Budget for your CAM

A CAM reconciliation starts with budgeting. One of the best ways to get a budget estimate is to look at the previous year's reconciliations. Or, if your property is new, you can also do a thorough expense review. This step is essential to avoid missing any expenses. If you detect any errors after submitting the report, then changing it would be difficult.

Apart from the usual expenses, your CAM reconciliation should also include pro-rata shares that have changed during the term.

Calculate your occupancy

One of the typical mistakes in CAM reconciliations is calculating the expenses by considering 100% occupancy. Some costs like security services and amenities might not change depending on the number of tenants.

But others like water, electricity, and janitorial services will vary with occupancy. You need to also consider the number of days a tenant has stayed on your property. Consider a tenant who has signed the lease in March. It would be unfair if they had to pay expenses for the whole year. In this case, you need to exclude the first two months of the year for that tenant's expenses.

Document all changes

It is not uncommon for property managers to exclude minor repairs and maintenance from their CAM reconciliations. But eventually, these charges add up as discrepancies in your final report. To avoid this, document every change you have made to the properties, and add this to your CAM reconciliation.

Include property management fees

Tenants are also liable to pay a monthly fee to their property manager. Depending on the number of units, property managers can charge anywhere between 4% to 12% of the monthly rent.

Ensure timely invoices

If you want to ensure you are paid on time, then you also need to send timely invoices to tenants. Your invoices should reflect the various expenses to ensure transparency. Make sure that you follow up and collect the fees within the due date. Timely payments make reconciliations easier and help avoid discrepancies.

Obtain all third-party information

Third-party information like bills from insurance and janitorial service providers and reports from utility companies are all required to make the CAM reconciliation more accurate. Obtain any such information to make sure your reconciliation process can finish on time. Keep track of all missing information as it is easy to miss something small, especially if you handle multiple properties.

Review the reconciliation

Verifying your ledger can be time-consuming. But it is also crucial to avoid any errors in the reconciliation. You can start by comparing your reconciliation report to the previous year's reports. This highlights any major mistakes, especially if the costs have a drastic difference.

Next, you also need to check if the details mentioned in the reconciliations reflect in the actual leases. Make sure you are not charging the tenant something, not on the lease.

Also, check for any missing entries or unpaid invoices from tenants and vendors.

Use property management software

Property management software has many features you can use to make CAM reconciliations easier. You can keep track of the expenses, save invoices and payment details, and communicate with your tenants.

For example, Yardi Breeze has specific tools to help with CAM reconciliations. It allows you to set up tenant details for all properties and create payables for the same. It also lets you run a reconciliation by creating balancing sheets for each property. You can reach out to a Yardi consultant to know more about its features.

Outsource your CAM reconciliation

As a property manager, you will have many tasks that require your attention. If you cannot handle CAM reconciliations or want an expert to take care of them, you can reach out to an outsourcing company.

Simplify CAM reconciliation with Assetsoft

CAM reconciliations have little room for error. At Assetsoft, we help clients simplify their CAM reconciliation processes. Our team of experts understands the legal and functional aspects of common area maintenance.

By outsourcing your CAM reconciliations to us, you can maintain common areas better while also reducing the overall fee. With platforms like Yardi and MRI, we make sure that the reconciliations are justified and the expenses are fairly divided.

To outsource your leasing processes, reach out to Assetsoft!

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