appfolio webinar: is your business ready for an audit?
TRANSCRIPT
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AppFolio
Complete Solution Includes:
• Property management and accounting
• Online rent collection (free)
• Prospect / guest card tracking
• Vacancy Marketing
• Website
• Online applications & lease
• Resident Screening
• Mobile Inspections
Web-Based Property Management Software
…So You Run a More
Successful Business
5
Agenda
• What to do when the audit
notice arrives
• Record keeping
• Understanding your
business financials
• Best practices
7
I Got the Audit Notice…Now What?
• Not hoping for problems
• Checking for compliance
with your states
regulations
• Be ready and having
things organized adds
creditability
Don’t Fear the AuditorHave Reports Printed and Ready to Review
• Make sure you have any
supporting
documentation available
Invest the necessary time to be ready
• The more prepared
– the easier it is to
review- the faster
they leave!!
8
The Best Way to Show Compliance
• Clean & organized records
• Understand your data
• Understand your exceptions
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Clean & Organized Records
• Data
o Electronic / Software
o Manual records
• Supporting Documentation
o Bank Statements
o Cleared Checks
o Leases
o Communications
o Invoices
o Other financial reports
10
What Do I Need to Understand?
• Review Current Processes
• Understand your data
oWhere things go
oReports
• Understand your exceptions
oWhat they represent
oResolution??
12
Review Current Processes
• Keep a close eye on property
balances
o Negative balances =
Red Flag for auditors
• Be sure to pay your management fees
on a regular basis
o Commingling funds =
Red Flag
13
What Should I Understand
• Trust Account Balance
• Trial Balance
• Delinquency Report
• Aged Receivable Detail
• Security Deposit Detail
• General Ledger
• Bank Reconciliation
14
Financial Reports
Trust Account Balance Report:
Listing of the current balances of all accounts
held in trust
• What to understand
o This balance should tie to the “Cash” account of the
balance sheet of the same date
• Exceptions
o Negative cash balance
• Supporting Materials
o Bank Statements
o Balance Sheet
15
Financial Reports
Trial Balance:
Summary of financial results
• What to understand
o What are and where to find details of each
transaction
• Exceptions
o Debits/Credits do not balance
• Supporting Materials
o General Ledger
16
Financial Reports
Delinquency Report:
Summary of delinquent residents
• What to understand
o What the delinquencies are and path to resolutions
• Exceptions
o Old balances
o Old credits
• Supporting Materials
o Receipts Journal
o Tenant Ledgers
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Financial Reports
Aged Receivable Detail:
Detailed report showing specific of all aged receivable
activity
• What to Understand
o What the receivables are and path to resolutions
• Exceptions
o Old balances
o Old credits
• Supporting Materials
o Receipts Journal
o Tenant Ledgers
o Balance Sheet
18
Financial Reports
Security Deposit Detail:
Detailed report showing details of all security deposits
• What to Understand
o Report’s total will tie to Security Deposit Liability
account on the Balance Sheet
• Exceptions
o Report does not tie to Balance Sheet
o Old deposits from past residents
• Supporting Materials
o Balance Sheet
o Receipts Journal
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Financial Reports
General Ledger:
Detailed report show all financial transactions
• What to Understand
o What represents income versus expense
o Where initial transaction came from
• Exceptions
o Unusually large balances
o Accounts that show incorrect balance (credit v debit)
• Supporting Materials
o Disbursements Journal
o Receipts Journal
20
Financial Reports
Bank Reconciliation:
Reconciles bank account to financial statements
• What to Understand
o Balances from the statement tie to the Cash
account on Balance Sheet
• Exceptions
o Old outstanding checks
o Missing Deposits
• Supporting Materials
o Disbursements & Receipts Journal
o Bank statements with cancelled checks
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3-Way Tie Out
• Bank Reconciliation Report
o Reconciles bank account to
financial statements
• Bank Account Activity
o Receipts and Disbursements
• Bank Balance Detail
o Trust Account Report
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Best Practices
• Review your reports monthly
o Tie back to other reports
• Balance Bank Accounts monthly
o Always be within 30 days of the last
reconciliation
• Address exceptions as they occur
o Have procedures around older transactions
• Have a software that is easy to understand
o Make review and knowing your business much
easier