Heads up! This is something to watch out for in property-based accounting softwares, such as AppFolio. If you ever run a property negative, it will actually draw the entire owner negative. In trust accounting, this is considered an illegal commingling of funds.

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The problem

If you are using a software that pays each owner based on property funds, such as AppFolio, the system would want to distribute the full amount for all positive properties, regardless if any of the others were negative.

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To correct the negative balance and cover your unpaid bills, you’d immediately need to turn around and ask the owner to return funds you had just paid out to cover those expenses.

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‍Running your properties negative, and commingling funds can result in fines, non-compliance, and lawsuits. Imagine if some of those properties that were negative had even more unpaid bills, which may have missed their due dates because there were not available funds to cover it, even though the owner previously had enough funds (just on another property).

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The solution

The following tips will ensure that your property-based accounting software doesn’t cause you to make avoidable mistakes.

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• Regularly check your properties for negative balances using the Trust Account Balance report
• Use the Transfer Owner Funds feature to move available funds between an owner's properties
• Establish Property Reserves to prevent properties them from going into the negative
• Pay all bills and management fees prior to sending monthly owner distributions

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Questions?

APM Help is happy to review your property balances with you! Click here for a free consultation, or reach us at (281) 949-8755 and info@APMHelp.com.