How Technology is Modernizing Service Charge Management in Real Estate?

Legacy service charge management processes can be very frustrating. The most common challenges cited include lost receipts, general spreadsheet chaos and lengthy back-and-forth emails between management stakeholders.

These challenges often compound and lead to bigger issues like delays, errors and tenant disputes, which, understandably, everyone wants to avoid. Luckily, there is a viable solution that can sort out this problem: modernising charge management using technology and AI.

In this article, we will focus on how tech and AI can be used to modernise service charge accounting – a core financial component of service charge management – and the advantages of embracing them for the future of property management.

What is Services Charge Accounting?

As mentioned, service charge accounting refers to a specialised financial function within the service charge management. In itself, service charge management is an umbrella term that defines organising, collecting and spending shared costs in multi-occupancy properties.

To give it more context, a service charge manager will deal with things like scheduling work and dealing with contractors. However, a service charge accountant will focus more on how those costs are recorded, allocated and reconciled.

How AI and Technology are Used in Service Charge Accounting

Automating Cost Allocation

One of the ways to use AI-powered systems in service charge accounting is to automatically divide shared costs. These shared costs include the likes of maintenance, utilities and cleaning fees. They are usually divided across tenants based on things like lease agreements, square footage and usage.

Of course, you can complete cost allocation using spreadsheet calculations. But, it is too much work, and there is an increased risk of errors due to the higher human input. By automating the process, you not only reduce the time it takes but can also ensure the charges are allocated fairly and consistently. Automating comes in handy, especially in large buildings with complex tenant mixes.

Forecasting and Budget Planning With AI

In addition to automating cost allocation, services charge accountants can use AI tools to analyse historical data to predict expenses and budget more effectively. Good examples of tasks you might need these predictions for include seasonal maintenance work and paying recurring energy bills.

With such predictive analytics, it becomes a lot easier to predict accurate annual budgets. In other words, it minimises the risk of under-budgeting or over-budgeting, which can help improve tenant trust in the property management.

Automates Accounts Reconciliation

Traditional accounts reconciliation can be a time-consuming and error-prone process. Imagine trying to manually match what was billed and what was spent?

It will not only take a lot of time but will probably need a few more people in the team, depending on the number of documents to go through. But with an automated system, you can significantly reduce the stress involved in this process. By automation, we mean the system can match actual invoices to budgeted figures while flagging discrepancies instantly.

These systems also auto-generate year-end reports with a clear breakdown. Generating such reports typically involves thorough scrutiny and compilation of all financial documents. As such, by automating (and eliminating the manual work), there is a chance the reports will need a smaller team and the fees will be a lot lower as well.

Real-Time Dashboards

One of the major challenges with legacy service charge accounting is access to information and general transparency for involved parties. For instance, when some maintenance work is ongoing, the landlord may not get information about purchases as fast as they would like.

But with AI, that might just change for the better. These new technologies facilitate cloud-based service charge platforms where accountants, landlords and property managers can access data in real time. For example, in our case, the landlord will be able to see all the invoices and purchases in real time.

With such a level of access to important data, you can expect improved collaboration between the important stakeholders and, as a result, faster decision making.

Creating Digital Audit Trails

One of the biggest parts of any accounting work is ensuring legal compliance, and service charge accounting is not an exception. Compliance with relevant legal regulations often requires that your documents be in order for auditing. But ensuring your financial documents are in order may not be very easy with legacy service charge accounting systems.

Luckily, you can use AI automation tools for compliance support. When you switch to these modernised systems, compliance will be more straightforward because they automatically create a digital trail of every transaction within the system.

Such a detailed approach to keeping records creates a reliable digital trail that minimises the risk of missing documents or misreported figures.

Benefits of using Tech and AI for Service Charge Accounting

When applied in the ways highlighted above, AI and Technology bring significant improvements to service charge accounting. Here are a few of the key benefits:

Improved Accuracy

One of the benefits of using AI in service charge accounting is improved accuracy. As mentioned, AI brings automation, which eliminates the human factor in calculations, allocations and reconciliation.

In addition, AI systems employ consistent rules across all tenants. That means there will be fewer mistakes that need corrections and back-and-forth clarification.

Time and Cost Efficiency

Legacy service charge accounting approaches consume a lot of time and money due to all the tasks you have to handle manually. But with the alternative (use of AI automation), data entry, invoicing, reconciliation and other repetitive tasks can be handled a lot quicker.

This allows for some time for your accountants to analyse and work on more important things like strategic analysis or customer service. Apart from time saved, it has also served to cut operational expenses by bringing down the cost of manual work.

Encourages Transparency for Tenants

As discussed earlier, automation gives assurance that charges are fairly shared amongst tenants. In addition to fairness, these digital platforms also enable tenants to access important information such as service charge breakdowns.

Such openness will nurture trust and reduce the possibility of misunderstandings or disputes. This is very important in mixed-use or large residential blocks, where service charges are usually complex.

Conclusion

Legacy service charge management systems are outdated and inefficient. Adopting AI and the digital tools it brings with it is the way to go. These technological advancements have made service charge accounting smarter, faster and more transparent.

So, what are you waiting for? Embrace the change today, partner with the right experts and take your service charge accounting to the next level. Technology can do the heavy lifting, but expert oversight can ensure it is done within the right parameters.