There's no way to get around the most dreaded time of the year when you're running a property business which is CAM reconciliation. There are chances where you either end up billing more than the actual amount to your tenants or have to pay the excess amount charged individually.
Either way, it's a long, tiresome process. So, if you've been in that situation once or are new to property management, here are the top 10 things to know about CAM reconciliation.
The Top 10 Things to Know about CAM Reconciliation
CAM Reconciliation is the amount other than the base rent that the tenant pays for common areas. But to avoid missing expenses or overcharging tenants, you need to know and follow some of the best practices to stay in the safe zone and have a better relationship with your tenants. So, let's take a look at some of the things that you must keep in mind.
1. Keep all the records intact
Documenting all your expenses is crucial when it comes to the CAM reconciliation process. The minute you miss any one of them, you end up spending more time to make things right. The main thing to keep in mind is to stay organized and keep all the documents in one place, so it's easy to review and estimate the CAM costs in the end. Have all the invoices organized monthly and keep tabs on the missing ones to cross-check again. Ensure your previous years' cost and the current years' cost dont differ greatly, so you know everything is going in the right direction.
2. Accuracy While Calculating
Once all your invoices are with you, it's time to calculate the CAM charges. Though it takes a long time to do, it's a must to do it right. Miscalculating can lead to major downsides which you don't want to deal with. Handle the calculations well, and you're halfway through the process. Re-check and review the calculations for better accuracy in the end.
3. Cross-check lease
This step is important and shouldn't be missed. You need to ensure all the tenants have paid their lease and CAM fees on time. And you must also see if you've overcharged or if the fees paid is less. It's essential to keep a check on all this for a smooth CAM reconciliation process.
4. Review Expenses
It's always better to review the expenses so that you know you haven't missed anything. Try to scan the invoices and keep a copy of them as a backup. Having a backup is always great to not lose anything in the end. There are times when just before the reconciliation process, invoices go missing, which becomes a hassle to calculate expenses. So, to avoid all that, have a backup and review the expenses regularly.
5. Check if the deadlines are met
Generally, it's during the months between January to March when the CAM reconciliation process happens. So, you must take care of your expenses and calculate CAM charges well before the specified date. You need to ensure tenants have paid it on time to avoid any losses in the future. So, always stay ahead with the processes and keep everything ready before the deadline.
6. It’s Important to Create a Budget
Budget appropriately to avoid overcharging your tenants. Keep track of the monthly transactions made by your tenant and the CAM fees, so you know you're heading in the right direction. Budgeting accurately cannot be stressed enough here because your CAM reconciliation process will be a smooth sail in the end when it's done right.
7. Interpret the Legal Terms Right
The CAM charges are based on operational expenses agreed on the terms mentioned in the lease contract. And currently, the real estate market is getting more and more complex with new terms, and it's important to stay updated with the market. To avoid affecting the bookkeeping and your relationship with your tenant, get your legal terms right and cross-check before jumping on to the next step.
8. Check for timely invoices
Invoicing your tenants is important but invoicing at the right time is crucial to have a good relationship with your tenants. You can stay ahead of the deadline and keep everything ready, and also can get long-term tenants. So, never delay invoicing your tenants. If you want your CAM reconciliation process to be less complex, this is the first thing that you must do right.
9. Have all the Historical Records in Hand
Having all your previous records can help you predict the expenses of the current year and see if there are any significant differences in the calculations. Having a document of disputes will also help in solving similar disputes in no time. In the end, data is what drives the business, and any past data that you can safeguard can be a boon someday. So, never miss any document at any cost.
10. Keep Proper Records of the Audits
Keep track of the costs, calculations, and every audit record of your property. Always stay organized and have all your records with you to avoid major conflicts in the end. As a property owner, the important thing is to get through the CAM reconciliation process is you need to keep every record intact to avoid disputes with tenants later.
Final Thoughts
CAM Reconciliation process may seem to be a complex process, but it doesn't have to be so when you follow some of the best practices. Track, maintain and manage your records, and it'll be all fine in the end. Know more about how we can make CAM reconciliation simpler for you. Talk to us today!