Common area maintenance is crucial in accounting management. CAM is also known as Operational Expense Recovery includes the maintenance of communal area and repair charges if any. In real estate accounting, CAM can be tricky as every tenant and their costings are different.
To clear errors and collate bills with accuracy, involve the following tips in your accounting practice.
Be aware of different CAM structures
Operational expense recovery is different for every tenant and you need to be aware of different CAM structures. Research on the different structures available and opt for the right one for you and your tenants. There are different structures like year over base compounding caps, year over base cumulative caps and year over year caps.
Though there are different structures for CAM calculations, standard CAM calculations are still available, for which tenants will be paying a fixed amount monthly or yearly. For tenants with non-fixed CAM, structures can go for different structures to maintain the cost fluctuations with accuracy.
Verify square footage for reconciliation purpose
No matter what the tenant’s CAM structure is, either a standard fixed structure or other, verify their square footage occupied. Because it directly affects the total operational recovery expenses. Doing this will increase accuracy while calculating and also in the process of any renewal of the lease. Tenants may negotiate for paying with the question that whether it is their responsibility. Verified square footage will be helpful to provide for tenants and in the process of reconciliation.
Gross up calculations based on categories
The gross calculations for tenants are calculated based on the occupancy of the property. There are categories in the calculations in which some like electricity services and janitor services are included in the occupancy. Other services like landscaping are not included. While accounting it is essential to gross up the calculation based on the categories.
Look after the records for auditing
Ensure that the expense and distribution-related properties are properly managed and documented. It will be helpful for further CAM reconciliation process and to provide to the tenants when they ask for reports.
Although the process is time-consuming for you to check keenly on every calculation, it is nothing less to compromise on. Do you need assistance to manage your CAM calculations and reconciliation process? Smartfin can assist you in maintaining the CAM process and in addition to it, smartfin can provide world-class accounting features based on your business needs. Smartfin with a decade of experience provides end-to-end accounting services for business, contact us to know more about our accounting features.