Most commercial leases include Common Area Maintenance expenses. This means at least annually, you must complete CAM reconciliation.
If you use QuickBooks, CAM reconciliation is a manual process. However, there is another option that automates this process, and you can still continue to use QuickBooks. You can do this through a connection to STRATAFOLIO. But first, let’s quickly talk about what CAM.
What Does CAM usually include?
What’s included in CAM varies from lease to lease. But, generally, CAMs are shared costs by tenants for indoor and outdoor spaces. The indoor spaces commonly include hallways, lobbies, public restrooms, and elevators. Outdoor spaces include parking lots, open green spaces, sidewalks, and even public signage areas.
In most cases, tenants are charged CAM fees based on their portion of the property – also known as pro-rata percentage or share. Pro-rata means that if the tenant takes up 50% of the building, they are responsible for 50% of all the expenses.
Then, once a year, management must reconcile what they have billed the tenant for to cover their CAM expenses against the actual expenses incurred. The difference results in either a credit to the tenant or an additional payment the tenant must make.
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To complete the reconciliation process, you must clearly identify the costs associated with your common area maintenance. We address this topic in-depth when we talk about setting up a good chart of accounts (COA) for your commercial real estate. You must separate your overhead costs from your recovery costs so your CAM process is clean and goes smoothly. Let me explain more.
The space you occupy as the owner/manager likely has utility expenses. Those utility expenses are applied to overhead expenses. The tenant has no responsibility for covering those costs, at least directly. However, the space the tenant occupies is also using utilities. We refer to the utilities the tenant uses as a reimbursable expense. Meaning, the landlord/owner should be reimbursed or should be able to recover those specific expenses from the tenant.
Once STRATAFOLIO connects to each of your company QuickBooks companies, we map the expenses. Once this mapping is complete, we can see how each of the reimbursable expenses is tracking against every tenant’s actual expenses.
Then, at the end of the year, when it’s time to do CAM reconciliation, it’s a fast process to pull a report which can be shared with your tenant. The pro-rata percentage is already calculated. The entire process literally takes seconds. The resulting report out of STRATAFOLIO can be emailed to your tenant. STRATAFOLIO automates the entire CAM process making your life much easier and much more likely to recover all the expenses.
How Else Can STRATAFOLIO help Commercial Real Estate Owners?
Owners that have commercial properties have a lot of activities to manage with their existing tenants and buildings. Here are just a few of the activities that STRATAFOLIO can help you with:
- Management of lease escalations
- Complete collection of all your assets in one spot
- A centralized hub of leases and loans
- Alerts for lease expirations and other important activities
- Tracking work orders
- And, really so much more
Reach out to STRATAFOLIO to learn how you can automate your CAM reconciliation process and still use QuickBooks.
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