The Journal Spring 2014
GETTING MORE OUT OF YOUR COMMERCIAL LEASING SOFTWARE
[author-style]By Anupam Goradia, CPA, CISA, CITP[/author-style]
Modern commercial real estate lease accounting software provides ample features to make day-to-day management of leasing businesses less complicated. Software enables “management by exception,” whereby management can focus on issues that require attention and follow-up. While the month-to-month rent billing features are widely used by most landlords, most software typically has other features that are either readily available or require minimum customization. Using these features has the potential of eliminating manually-kept spreadsheets, reduces the risk of misinformation and could free up hours for resolution of issues rather than identification of issues. Listed below are some features that may be of use to implement best practices:
MANAGING RENEWALS
A leasing system should be able to provide management with alerts on when a tenant’s renewal is due. Generating a weekly report of all upcoming renewals for the next three to six months and the status of such renewals will help keep them on schedule.
MONITORING VACANCY
Similarly, generating a report of all vacant units and their aging (i.e. how long they have been vacant) is another efficiency measure worth implementing.
AUTOMATING RENT STEP-UPS
Establish automated rent step-ups in the system. Thus, there will be no need to manually maintain a separate list of tenants whose rents are due for step-up. The system will automatically use the increased rent from the rent schedule set up at inception of a new lease. If the rent step-ups are not fixed at the time of agreement, and if they are dependent on contingencies, the system will usually have a trigger on specified dates to flag that a rent step-up is due.
AUTOMATING LATE FEES
The process related to the calculation of late fees and providing late fee notifications can be automated. The system may be capable of calculating late charges both as a fixed sum and/or as a percentage of an unpaid balance and can generate late fee letters at the click of a button. The process may just require setting up the required formula for late fees at inception of the lease set up in the system.
BILLING FOR TENANT EXTRAS
Some leasing systems have property management modules where tenant requests for additional billable work are recorded and tracked for completion. Some landlords prefer to use separate systems for such work. Sometimes, the amounts spent on additional work get entered when the invoices are paid in the accounts payable module. It may be possible to import such amounts into the billing system and then modify them as necessary for any mark-ups or discounts.
ANNUAL RECONCILIATIONS FOR COMMON AREA MAINTENANCE CHARGES, TAXES, INSURANCE, ETC.
Annual reconciliations continue to remain one of the most complicated and time-consuming tasks for an accountant in the commercial leasing business. While a complete automation of the process can be a long, drawn-out process, bits and pieces of it such as generating preliminary data, adjusting for gross-up percentages or calculating tenant shares, generating letters to tenants for final amounts, etc. can be automated relatively easily. This allows management to obtain an exception report of all tenants whose reconciliations were not completed and can help ensure that the reconciliations are done in a timely manner.
TRACKING OTHER TENANT REQUIREMENTS
Apart from rent and other charges, commercial tenants typically have other obligations such as maintaining insurance as specified in the lease or maintaining a line of credit or a guarantee in good standing. Tenants’ insurances need to be monitored for expiration and follow-up for when renewal is needed. Guarantors’ information should be confirmed periodically. Many systems allow such information to be stored in separate data fields for the generation of reports to help track and follow-up on these types of items.
USING STANDARD REPORTS
Most software has a number of standard reports such as tenant history, leasing statistics, vacancy reports, etc. Management should invest time in becoming familiar with standard reports and determine which reports provide useful information or can replace manually-maintained information. Most software also provides the ability to export reports into Excel spreadsheets, which then allows for customization.
ENHANCE SEGREGATION OF DUTIES
Many systems can facilitate segregation of duties by restricting access to different modules within the system. Setting up access in accordance with the responsibilities of each individual who has access to the software improves the control environment and integrity of the data in the system for both management and audit purposes. For example, the ability to give tenant credits should be restricted to only select authorized personnel. Once the billing is set up, there should be restrictions around who can change billing schedules in the system.
INVESTING TIME WITH YOUR SOFTWARE PROVIDER
The next time your software provider wants to renew its contract or sell you an upgrade, spend some time with them to understand the features that you do not use. Have them train your staff so that the existing system is used to its maximum potential — most users only rely on a fraction of features that their current software provides — features you may be currently paying for.
Even the slightest improvements in the automation process can improve efficiency and reporting. Every upgrade can offer an increased level of automation and convenience. Every business needs do its own cost-benefit analysis before it spends more on technology; it may not take a large investment to improve your processes and get more out of your existing system and software.
For additional information on this issue or any of the topics discussed, please contact your local WS+B advisor.
BEST PRACTICES FOR MANAGING STAFF DEVELOPMENT
[author-style]By Puja Shastri[/author-style]
The dynamics of an organization and its management team can influence the choices employees make regarding their career goals and can provide the motivation needed to go above and beyond in the workplace.
LEADERSHIP
The way leaders of an organization treat their employees influences how the next tier of management performs. Compassionate leadership involves being approachable by employees at every level and relating to them on a personal basis. When a manager takes the time to get to know an entry-level staff member and offers guidance in his or her professional development, it demonstrates that the employee is a valued member of that organization.
CAREER VS. JOB
Creating a workplace in which people know that there is the opportunity for advancement is of utmost importance. Those with the most satisfaction in the workplace view what they do as a career, not just a job. Managers must clearly define the criteria necessary for employees to reach the next level and provide the training required to achieve those long-term goals. A career means different things for many people at various stages in life. Managers can assist in defining roles that are appropriate for each individual throughout his or her career.
ACCOUNTABILITY EQUALS PRODUCTIVITY
People must feel accountable in their careers, and a good manager will ensure that employees take responsibility for the work that they are asked to perform. When a job is well done, positive reinforcement goes a long way. Taking ownership and seeing a project through to completion can be very fulfilling. The level of accountability employees have in their careers ultimately drives productivity levels. Knowing that their actions have a direct effect on the success of the organization and that they will be recognized for their accomplishments will inspire employees to put in the hard work.
DIFFERENT PERSONALITIES
Different personality types in the workplace can enhance creativity and lead to new ideas. However, it can also lead to communication problems and sometimes conflict. Managing these personalities can be a difficult task and requires patience and understanding for each point of view. The best way to manage these differences is to focus on each employee’s strengths and encourage open communication.
CONCLUSION
While an employee may initially feel overburdened in the beginning of his or her career, learning new skills with the proper guidance leads to the creation of a sense of autonomy and empowerment. Individuality in one’s occupation is a powerful force, which leads many people to think in terms of a career rather than a job. An employee may have an interest in developing a subject or industry expertise. Acquiring and applying knowledge builds satisfaction and creates effective team members and future leaders.
Helping employees achieve a sense of purpose, independence and autonomy contributes to a more driven workforce. Compassionate leaders of an organization who invest in their employees on a deeper level will witness the benefits as these employees build a loyal, long-term career.
Creating a workplace in which people know that there is the opportunity for advancement is of utmost importance.
For additional information on this issue or any of the topics discussed, please contact your local WS+B advisor.
NEW JERSEY SALES & USE TAX AUDIT ISSUES YOU NEED TO KNOW
[author-style]By Thomas A. Girone, CPA[/author-style]
Audits of New Jersey businesses by the Division of Taxation are on the rise. These audits can be costly and will likely consume a great deal of time to resolve. The main focus of these audits is often use tax. If you are purchasing taxable items and are not being charged sales tax by the vendor, it is your responsibility to remit use tax on those items.
It is important to be aware of some of the common issues that accountants encounter on these audits to help avoid being audited and also to be successful in defending your business should an audit occur. The following are some questions that you should be asking and tips that you should be aware of:
Are you filing quarterly ST-50s with the state? Do you remit use tax with those filings? When we speak with NJ auditors, a very common reason for our clients being audited is the fact that use tax was never paid.
Do you do reconciliations between your ST-50s and bank deposits? Auditors will do their own reconciliation and require that you provide support and explanations on any material discrepancies.
Do you keep invoices readily available for at least the last four years? NJ auditors are required to examine all invoices for the purchase of items that were capitalized and depreciated over the four-year audit period.
Do you review purchase invoices and question why you were not charged sales tax? Many out-of-state vendors are not required to charge sales tax, but this does not mean that you are exempt from self-assessing the tax.
Do you have specific descriptions and codes on invoices for taxable and non-taxable sales? It is important to make sure that your invoices are worded properly to avoid issues during an audit.
Are you charging your customers sales tax on all taxable items? If it is determined during an audit that you should have charged sales tax on invoices to your customers, you will be responsible to pay the state the tax, including interest and penalties. You can then attempt to recover the tax from your customers which is difficult in most cases.
Are you selling products outside of NJ? If so, you should evaluate the filing requirements in each state at least annually to ensure that sales tax is being charged to the correct state and/or jurisdiction.
Do you purchase or sell software or maintenance contracts? It is important to have proper documentation on your invoices or contracts explaining how the software is delivered and if the maintenance is done at your NJ location or remotely. Generally, you should always charge sales tax on sales of taxable items unless your customer provides you with a state-approved exemption/resale certificate.
Do you have locations and sales in Urban Enterprise Zones (UEZ)? It is important to have detailed logs on these transactions that show the inventory items being handled by those locations.
If your business does not sell a taxable item or provide a taxable service, you might not be registered with the state to collect and remit sales tax. The state has an annual sales tax filing form (Form ST-18B) that can be used to remit use tax. This form can be used if your business had an annual use tax liability for the previous three-calendar years that did not exceed $2,000.
If audited, the state will impose interest and penalties in addition to the tax assessment. The interest and penalty component is typically 20% or more of the tax imposed.
It is important to follow the points above and to keep detailed records to help limit your exposure during an audit.
For additional information on this issue or any of the topics discussed, please contact your local WS+B advisor.
OUT OF COLLEGE AND INTO THE REAL WORLD
[author-style]By Irfan A. Raza, CPA[/author-style]
As a young professional reflecting on the early years of my career, I now realize how unprepared I was coming into the “real world.” College had prepared me for the educational part of my career and allowed me to strengthen my credentials by preparing me for the CPA exam. However, college did not prepare me for other aspects of my career.
After college graduation, I soon found out that a job and a career are completely different. A job is a place where you work, and in return, you are paid —nothing more. A career is where you build yourself as a professional while making a living. There is an added sense of dedication and a drive to succeed in a career. The following are some helpful tips for young professionals venturing out into the real world:
Wardrobe change. Jeans will most likely be replaced by pants; T-shirts by button-down, collared shirts; and sneakers by dress shoes. However, casual Fridays and weekend wear will enable you to hold on to your old wardrobe.
No call/no show is a “no-go.” Communication to supervisors is of upmost importance when you will be out of the office due to client obligations, absences and vacations. Make sure to keep managers informed of your schedule.
Client Interaction. Interaction with clients and other professionals may be different than what you’re accustomed to. Providing world-class service involves putting clients’ interests as a top priority, understanding their needs and anticipating their concerns.
Deadlines. School deadlines are well communicated through a syllabus. Deadlines in your professional life happen often, and sometimes without much notice. This creates a need to adapt to the situation by working overtime and changing personal plans to get the job done.
Specialization. Most people beginning a new career have very limited experience, if any. Therefore, you have to work your way up the corporate ladder and build your knowledge base. Once you have a well-rounded understanding of your position, becoming a specialist in a particular field or industry will make you a more valuable asset.
Travel. Traveling for work is different from vacation travel. When out of town, you are expected to complete tasks in a fixed amount of time, which may require additional hours. Making the best use of your travel time can pay big dividends.
Education. Education does not stop in school. Many professionals are expected to attend some type of continuing education courses. Self-learning can help by reading professional journals and attending industry organization meetings.
Networking. As a professional, you must build a network of people who can help you in your career and vice-versa. Make sure to continuously develop and grow these relationships.
Personal budgeting. Decisions about 401(k), flexible spending, car payments, rent and insurance now have to be made. Take the time to understand your options.
These are a couple of the things I wish I had known before making the jump from college to a career. Over the past five years, I have had many learning experiences that I can now pay forward by mentoring younger colleagues entering the real world.
For additional information on this issue or any of the topics discussed, please contact your local WS+B advisor.
[featured-content title=”WS+B Welcomes Hutchins, Meye & Dilieto, PA, and Walsh & Borresen, LLC”]
Two accounting firms have joined the WS+B family in 2014. Toms River-based CPA firm, Hutchins, Meyer & DiLieto, PA (HMD), has combined its practice with WS+B effective January 15, 2014. The union added 15 professionals to WS+B’s roster, with the HMD staff relocating to WS+B’s Toms River office located at 1144 Hooper Avenue. The HMD professionals provide accounting and tax services to businesses, specializing in real estate, healthcare, technology, life sciences, restaurants and not-for-profits, as well as litigation support and valuation services, and wealth management services to high-net-worth families.
In addition, Walsh & Borresen, LLC (WB), based in Morristown, NJ, has merged its practice with WS+B effective March 1, 2014. Ten professionals have joined WS+B and will be relocated in the spring to WS+B’s Morristown office located at 465 South Street, Suite 200. The WB professionals have experience in many diverse industries and provide primarily tax services to businesses and business owners, specializing in inbound international taxation for both entities and individuals, corporate tax accounting services, transactional advice and tax services to high-net-worth individuals.
“We have been seeking the right strategic partners to enhance our presence in both Ocean County and the New York Metropolitan area. Hutchins, Meyer & DiLieto and Walsh & Borresen were a perfect match with our firm in terms of expertise, geographic location and culture,” says Bill Hagaman, WS+B managing partner and CEO. “Our new colleagues pride themselves on providing clients with excellence and integrity, aligning with the commitment made to all WithumSmith+Brown clients.”[/featured-content]
The Journal is published by WithumSmith+Brown, PC, Certified Public Accountants and Consultants, for clients and friends of the firm. The information contained in this publication is for informational purposes and should not be acted upon without professional advice. Please contact any one of our offices with your inquiries.
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