Thanks Mark for your response. Very interesting answers. Nice try Mr.
ChatGPT. This seems to be a typical ChatGPT response, overwhelmed with
words (no picture), mixing different subjects together (accounting
workflow and management workflow), and not answer the questions
specifically to GC. One credit I do have to give to ChatGPT is that it
makes sense to set up the Rental Receivable under asset instead of under
income. Other than that, all CPAs can feel relieved that they don't
have to worry about job security for a long time.
After several tries, I realized that I had to do the renter invoice with
split of rental passthrough and management fee, instead of do the split
on the owner's bill part (as a matter of fact, it is impossible to do
the split on the bill). Other than that, the workflow will be the
same. Giving the current GC features, I do have to create both renter
invoices and owner bills individually. It seems there is no other easier
ways to do that, unless someone can help me understand the SQL needed to
create an automation script to streamline the workflow...
-- JC
On 9/22/23 3:56 PM, Mark at Lorimark wrote:
well...
I don't know how to answer your question, but considering what I would
do if I were asking the same questions...
I went to ChatGPT and asked the big AI. Here is what it said;
My Prompt (from you):
I am trying to set up GC for a small property management business.
There are three actors involved: Renter, Property Owner, and Property
Manager. Renter pays rent on a monthly basis to property management,
and the manager pays the property owner after taking out certain
percentage of management fee. write a workflow to process that.
ChatGPT
Setting up a workflow for a small property management business
involving Renters, Property Owners, and Property Managers requires
careful consideration of the steps and interactions between these
actors. Here's a workflow to help you process rent payments and
management fees:
Workflow: Rent Payment and Management Fee Processing
Renter Pays Rent:
On a monthly basis, the Renter pays their rent to the
Property Management company.
Rent can be paid through various methods, such as bank
transfers, checks, or online payment portals.
Rent Receipt and Acknowledgment:
The Property Management company issues a rent receipt or
acknowledgment to the Renter upon receiving the rent payment.
The receipt should include details like the payment amount,
payment date, property address, and a unique reference number.
Record Rent Payment:
The Property Manager records the rent payment in the property
management system or accounting software.
Ensure accuracy in recording payment details for future
reference and reporting.
Deduction of Management Fee:
After receiving the rent payment, the Property Manager
calculates and deducts the agreed-upon management fee percentage.
The remaining amount represents the net income from rent.
Payment to Property Owner:
The Property Manager initiates a payment to the Property
Owner for their share of the rent income.
This payment is typically done through bank transfers or
checks, and it should include a breakdown of income and deductions.
Monthly Reporting:
Prepare monthly financial reports for both the Property Owner
and the Property Manager.
The report should detail rent collected, management fees
deducted, and any expenses incurred on behalf of the property owner.
Reserve Fund Allocation (Optional):
If agreed upon, allocate a portion of the rent income to a
reserve fund for property maintenance and repairs.
Maintain transparency by documenting the allocation and use
of these funds.
Communication with Property Owner:
Keep open lines of communication with the Property Owner
regarding rent payments, property maintenance, and any issues that
require their attention.
Ongoing Property Management:
Continuously manage the property, address maintenance
requests, and ensure the property is well-maintained to retain tenants.
Annual Financial Statements and Tax Reporting:
Prepare annual financial statements and provide necessary tax
documentation to Property Owners for tax filing purposes.
This workflow ensures a systematic and transparent process for
handling rent payments, management fees, and property owner payments.
It helps maintain good relationships with both Renters and Property
Owners while ensuring financial accuracy and accountability.
Additionally, consult with legal and financial professionals to
ensure compliance with local regulations and tax requirements.
My Follow-up Prompt:
User
can you express those elements as they pertain to accounting steps
ChatGPT
Certainly, let's break down the workflow into accounting steps for
your property management business:
Accounting Workflow: Rent Payment and Management Fee Processing
Renter Pays Rent:
Debit: Rent Receivable (Asset Account)
Credit: Rental Income (Revenue Account)
Rent Receipt and Acknowledgment:
Issue a rent receipt with details of the payment, including
the rent amount, payment date, property address, and reference number.
Record Rent Payment:
Debit: Bank Account (Asset Account)
Credit: Rent Receivable (Asset Account)
Deduction of Management Fee:
Calculate the management fee as a percentage of the total
rent received.
Debit: Management Fee Expense (Expense Account)
Credit: Rental Income (Revenue Account)
Payment to Property Owner:
Debit: Management Fee Expense (Expense Account)
Credit: Owner's Equity or Due to Property Owner (Liability
Account)
Issue a payment to the Property Owner, including a breakdown
of income and deductions.
Monthly Reporting:
Prepare monthly financial reports, including an income
statement and a balance sheet.
Include details of rent collected, management fees deducted,
and any other property-related expenses.
Reserve Fund Allocation (Optional):
Debit: Reserve Fund (Asset Account)
Credit: Bank Account (Asset Account)
Allocate a portion of rent income to a reserve fund for
property maintenance and repairs. Document the allocation and use of
these funds.
Communication with Property Owner:
Maintain open communication with the Property Owner regarding
financial matters, property maintenance, and any financial reports.
Ongoing Property Management:
Continue to monitor and manage the property, tracking any
additional income and expenses.
Annual Financial Statements and Tax Reporting:
Prepare annual financial statements, including an income
statement, balance sheet, and cash flow statement.
Provide necessary tax documentation to Property Owners for
tax filing purposes.
By following these accounting steps, you can maintain accurate
financial records for your property management business while
ensuring compliance with accounting principles and regulations.
Proper accounting practices help you track income, expenses, and
profitability, which is crucial for the success and transparency of
your business. Consult with an accountant or financial advisor for
further guidance on your specific accounting needs.
On 9/22/23 13:36, Jediator wrote:
Dear GC users,
I am trying to set up GC for a small property management business.
There are three actors involved: Renter, Property Owner, and
Property Manager. Renter pays rent on a monthly basis to property
management, and the manager pays the property owner after taking out
certain percentage of management fee. Here is the workflow I came up
with:
Renter(Customer) --> Invoice --> Accounts Receivable
↓
Rent Payment ---------------> PM Escrow (Income Account)
------------------
Check to Owner
Issued↓
Owner(Vendor) ------> Bill -------> Acct Payable (Rental
Passthrough) ------> Rent Passthrough (Expense Acct)
| (split)↓
-----------> Acct Payable (Commission)
--------------> PM Commission (Income Acct)
Could anyone please comment on if this is workable? Creating both
invoices and bills every month is kind of tedious. Any suggestions
of how to simplify/optimize the process?
I really wished that GC would have the option to link Vendor/Customer
to a transaction without creating a bill or invoice. Any future
development plans for this feature?
Thanks in advance! -- JC
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