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Power Teams: Managing the Money

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RISMEDIA, June 30, 2008-Assuming your team is even moderately successful, a lot of money is flowing through your office. You have to make sure that money is handled with extreme care and that everyone in the office is well aware of the cash flow. Any misappropriation of funds or confusion among team members about how the money is handled could potentially undermine the team and perhaps even lead to legal problems.

In Chapter 8 of RISMedia’s recently released book, “Power Teams: The Complete Guide to Building and Managing a Winning Real Estate Agent Team,” by RISMedia President and CEO John Featherston and top producing Broker Ralph R. Roberts, we provide you with strategies and tips for managing your team’s money, choosing a qualified accountant, building a system of checks and balances, and making sure your team stays on track with weekly, quarterly and annual financial statements. Following is an excerpt from Chapter 8:

Setting Up Your Internal Accounting System

Although your accountant can handle the quarterly and annual accounting tasks for you, you need an internal (back-end) accounting system to handle daily and weekly transactions. Consult your accountant when setting up an internal system. Your accountant should be able to recommend a software package and provide additional guidance to expedite the transfer of data between your system and your accountant’s.

In the following sections, we lay out the goals for your accounting system and then suggest a way to structure it for maximum efficiency and to prevent mistakes and minimize opportunities for employees to exploit the system.

Identifying what you want your system to accomplish

Prior to setting up your internal accounting system, you should have a clear idea of what your system needs to accomplish on a daily basis. However you choose to structure your system, it should be able to do the following:

• Pay invoices and commissions promptly.
• Provide adequate security measures.
• Maintain an adequate account balance.
• Provide reporting and tracking features. The types of data you want the system to be able to track and report on include the following:

- The source of business of a particular transaction
- The date a contract was written
- The date a contract was settled
- The volume of the transaction
- The agent involved who represented your team in the transaction

• Format data in a way that is compatible with your accountant’s system.
• Enable you to sleep at night without worrying (about your books’ security and accuracy, anyway!).

Putting three roles in place

Never set up an accounting system in which one person is solely responsible for managing the money. This makes the system highly vulnerable to errors and fraud. You should have at least two people involved, preferably three:

• Check writer: This person is in charge of paying the bills, writing commission checks, and entering transactions into whatever accounting software you use.
• Account manager: The account manager is in charge of cross-checking all checks against the account registry and cross-checking commission checks against the case sheets-sheets used to record the commission splits payable to agents when they sell a property or the property goes under agreement or contract.
• Financial officer: The financial officer (typically the owner and team leader) spends a few minutes every week reviewing commission reports and the account registry to make sure nothing looks out of place.

Implementing a good tracking system for cash flow

A major concern with all business and even personal accounting is cash flow. In order to survive for any length of time, you must have at least as much cash flowing in as flowing out. Preferably, you want much more flowing in. Once you have a system for tracking all revenue and expenses, the system pretty much runs itself.

Establishing policies for receipts and reimbursements

In most real estate offices, salespeople and other staff members may need to purchase equipment and supplies and cover other expenses out of pocket that really should be paid by the business. To handle these situations, your internal accounting system should have a policy in place for receipts and reimbursements. (Of course, you’ll want to include this policy in your employee handbook, as we explain in Chapter 5.)

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