Most commercial leases include Common Area Maintenance (CAM) expenses. This means that you must complete CAM reconciliation at least annually.
To manage CAM reconciliation through QuickBooks, we recommend clearly separating your expenses into the accounts that are to be reimbursed through CAM reconciliation and those that are overhead-related expenses. Use these accounts to track expenses throughout the year.
This helps you calculate and distribute CAM charges to tenants based on their share. You can improve this using QuickBooks’ custom fields to add tenant information for CAM calculations. Regularly review and reconcile the CAM accounts to ensure everything is accurate.
However, another option automates this process, and you can still continue to use QuickBooks. You can do this through a connection to STRATAFOLIO. But first, let’s discuss what CAM is.
What Does CAM usually include?
What’s included in CAM varies from lease to lease. But, generally, CAM charges 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 based on their portion of the property – also known as pro-rata percentage or share. Pro-rata in commercial real estate 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 to cover their CAM expenses against the actual costs incurred. The difference results in either a credit to the tenant or an additional payment the tenant must make.
Save Time Using STRATAFOLIO to do your Next CAM Reconciliation
To complete the CAM 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. Allow me to elaborate.
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 that 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 reimbursable expense 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 that 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
If you looking for other suggestions on how to set up QuickBooks correctly from the beginning, check out our article on the Commercial Real Estate and QuickBooks: The Best Ways to Get Started.
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CAM reconciliation is essential for property owners and managers, as it ensures financial accuracy, transparency, and fairness in managing shared spaces. You can significantly reduce the risk of errors and disputes by meticulously following each step in the reconciliation process, from data collection and cost allocation to reconciliation preparation and final adjustments.
Are you ready to optimize your CAM reconciliation process? Reach out to STRATAFOLIO to learn how you can automate your CAM reconciliation process while still using QuickBooks.
