PayProp
A property rental portfolio requires ongoing care and maintenance to run effectively, profitably and with the necessary controls to prevent mismanagement. A disorganised portfolio, which is weighed down by junk data, loose ends or lax processes, can disrupt the normal flow of operations, reduce productivity and put the business at risk.
PayProp recommends that rental portfolio administrators and principals follow a strict five-point security ‘health’ check when it comes to the ongoing management of their portfolios:
1. Check for damage deposit consistency
All tenant damage deposits are, by law, required to be placed in an interest-bearing account separate from your business account. Active tenants who don’t have deposits should be reviewed. Unless there’s a valid reason for it, the situation must be rectified to protect them and landlords should a significant portion of tenant funds be needed later on, for example, in the case of damage to the property. A regular check will clear up any confusion around absent or oddly valued deposits and can be the starting point for a deeper investigation that may reveal other irregularities.
Equally, inactive tenants with damage deposits against their names require frequent attention. Check your trust account for this regularly to ensure deposits are paid out as soon as possible after a tenant has moved out. It’s important to ensure your books are always tidy to safeguard against client account issues cropping up later.
2. Verify credit and debit notes
Credit and debit notes, memos, journals, and entries – no matter what they are called in the business – should only be used to correct mistakes or when funds from another source (such as a damage deposit) were used to reduce an outstanding balance. Excessive or unexplained credit and debit notes pose a risk to the business.
Clear, detailed transaction visibility is needed for the business property practitioner principal to see how many credit notes were created in relation to the number of invoices generated for the same period and to make sure that each one includes a clear description of why it was created, avoiding any misunderstandings. Any discrepancies are worth investigating.
3. Monitor credit balances
It’s important to not only check tenant statements to see if specific accounts are in credit but, even more critically, whether any are in arrears. A portfolio becomes messy when arrears are not handled promptly, and the messier it gets, the harder it is for the principal to analyse or recoup outstanding amounts, which increases risk.
PayProp’s advanced arrears technology automatically flags when a payment is missed and allows agencies to chase any outstanding amounts over email and text messages. The platform’s arrears messages mean that 64% of tenants respond within 48 hours. In addition, PayProp automatically segregates your clients’ money down to individual properties, landlords and intended purpose, and of course, from your business fund flows. This makes spotting outstanding payments or credits a cinch.
4. Monitor direct deposits
Agencies using a system like PayProp can accept Pay@ payments, instant EFTs through OZOW, and debit orders and, therefore, benefit from automatic reconciliation. However, direct deposits require some manual work and, thus, require regular checks to ensure accuracy. For that reason, it is important to keep an eye on in-branch deposits into the agency’s trust account, as well as EFTs, ATM payments and international payments. Monitoring these transactions means that any incorrect reconciliations will be highlighted.
5. Users and permission management
Always keep an eye on current users and their permission settings. This is to ensure that all users have been given the appropriate permission settings to ensure that they can do their tasks and afford the necessary business oversight to protect your reputation. Remember to delete any users on the system as soon as they leave your employment or if you no longer want them to have access to your portfolio. Careful consideration should also be given to what permissions are given to each user. Finally, dual permission and separation of duties might be advisable with high-risk actions and transactions, such as creating and amending beneficiaries or payments.