Yes, I get it: accounting isn’t sexy. Plenty of people picture an accounting department as a bunch of nameless Excel jockeys, and all that matters is that the columns add up correctly at the end of the month. But from my position as the Director of Financial Services and a VP for NAI Elliott, I’m going to contend that accounting is the mortar to the bricks, the glue to the model airplane, the bun to the burger: the element that holds everything together.
Anyone with any business acumen understands that the numbers have to be right, but it’s surprising how little time some property owners spend considering the difference between seeing the numbers and understanding who and what are behind them—and the implications of not being more aware.
One size actually does fit all
You might own one building, with one tenant; you might have a large portfolio of properties. You might own one small business; you might be a franchise with space leased all over. NAI Elliott is structured and equipped to work at all these scales, equally well and equally diligently. Even if you’re a “smaller fish in the pond,” you should still feel like you’re getting the attention you need. Our accounting department is like a pyramid: there are people taking care of the financial details on the ground level. That work is reviewed by someone with comprehensive knowledge of the property. And that reviewer is reviewed by someone with an even bigger-picture view. So whether you’re that solo business entrepreneur or the real estate magnate, you should know your bean-counters are watching your money… fiercely.
Dangling from the chain
We manage so diligently because owning a property or business is like a chain; the links are made up of things like the physical location, the managers, and the tenants or customers. You have to rely on all the links to be strong, because if any one of them lets go, the whole thing drops to the floor. And accounting is a crucial link, near the top, with the ability to wreck the links below it. Let’s say there’s a mistake on a report. You get the report, read it, trust it, make a decision based on it. That decision snowballs, and a tenant isn’t paying the correct amount. That mistake could persist, unnoticed, until someone grasps that income is not covering expenses. Extreme worst-case, you could default on a loan.
So, what controls does your business have in place to prevent this? At NAI Elliott we have a review process with multiple layers; different eyes look at different parts of every report, and it doesn’t go out until everyone is satisfied it’s right. That’s because accuracy equals trust. If we do make a mistake, it’s very hard to get trust back; we might not get a second chance. So we make it our mission to get everything right the first time; yes, that’s a cliché, but we do this because it’s our passion. None of us here ended up as accountants because we couldn’t think of anything else to do.
Left hand, meet right hand
It would be easy to silo the accounting department in a busy firm. But that would be a truly bad move, even if it were unintentional. It’s critical to communicate and share knowledge between all our teams. For example, we have our budgets and our revenue and expense numbers plugged in for all the properties, but our property managers are out there every day having conversations with clients and tenants—conversations we’re not part of. So we never put out a report or invoice without having our on-the-ground colleagues review it to make sure it’s still current and correct.
I don’t think this is extraordinary service; it’s a necessity. And everyone involved shares that responsibility. You might just trust that the numbers are accurate, but we make sure. And you should still be checking the work, every time. If you don’t involve yourself, you can get taken advantage of. How many times have you seen a story of some kid sports league where the treasurer was (finally) caught embezzling, because everyone had trusted the information on paper?
The cycle doesn’t wait for anyone
An accountant can pore over data for weeks, ensuring every number is irrefutable – but by then the numbers might be irrelevant. It’s incumbent on us to be timely, because data has to be useful – it has to be actionable at the moment you get it. Say tenant rent payments don’t get recorded on time. That creates a cascade of uncertainty; how do you really know where you stand at any given point? If your accountants are behind on recording rent payments, a tenant could move out and disappear virtually overnight, still owing you money.
We have an internal calendar that’s extremely detailed – we’re accountants, right? But there are two keys to that calendar being useful to you. One is us having enough resources to stay on track. The overall NAI Elliott team is intentionally large enough that there’s no corner-cutting needed, or allowed. The second key is how our property managers refine and use the data: review, comment, negotiate, adjust. Data is useless if it’s not both accurate and timely.
Your bottom line – and ours
Here are some questions you should ask yourself about your accounting resources and process:
• Are your property financials accurate and complete? Are they produced using an appropriate internal review process? When your management team presents you with final financials, you should know they’ve gone through a rigorous and complete process to ensure quality, accuracy and completeness.
• Do the operational realities of the management team match the financial story told by the accountants? The two should integrate tightly, in order to produce quality experiences for tenants and successful outcomes for clients.
• Do large and small get equal attention? From a single-tenant NNN property to a multi-tenant retail or office property, every financial report should receive the same attention and deliver the same quality result.
When we produce financials on time and we’re certain they’re accurate, we’re a happy bunch. That’s what our clients hired us to do. But a whole lot goes into that—people, resources, organization, communication and expertise, for starters. We have people in place who are excelling individually, and that adds up to success for everyone. I’m confident you’re getting the best information possible, and that’s how you should feel about your accounting team. Don’t settle for anything less.
