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Collecting Today's Income Needs More than Lockbox

Collecting Today’s Income Needs More than Lockbox

Management companies need new financial tools to efficiently collect management fees, assessments, rents and other income in today’s market. Lockbox is still an important part of the process but now there is so much more.

Management companies have historically been cutting edge in many areas including: Board Meetings; Owner service; Maintenance schedules; Personnel management; and Coordination of repairs and improvements. Many managers dedicate both financial and other resources to maintain their certifications and designations through continuing education and other professional development. And yet, when it comes to the financial aspects of the day-to-day receivable collections, payables, reconciliations and other basic bookkeeping, many companies are still living in the dark ages of Treasury Management.

And it’s not their fault.

While banks have had many sophisticated financial tools for years, they have traditionally been offered to the Fortune 1000 companies. Those managers who use the big banks also know that the credit or loan side of the relationship tends to drive the relationship rather than the deposit and cash management side. So, what has changed?

Technology is the Great Equalizer

A lot has changed in the last 10 years since most started with a lockbox service. Lockbox still offers many benefits and remains an important part of the Treasury Management Team, however the world of Electronic Banking has expanded ten fold. It now offers services that meet strict compliance and security standards as well as significantly improving the efficiencies of on-site management offices and accounting departments. First, lockbox itself has evolved. Imaging of statements, coupons and remittance items is now available and saves enormous time when researching a deposit. Electronic files to import paid accounts receivable transactions directly to the accounting software save hours (in some cases days) of manual data entry.

Some of the new Collections Services include repetitive ACH debits; Remote Deposit Capture and Electronic Lockbox for both credit card payments and on-line bank transfers (also with an accounts receivable import file). Unit Owners have many options available to make payments and yet management companies have very few ways to accept these payments.

And So Much More

Improved efficiencies with collections are just the beginning. The world of payables has also advanced beyond mailing a check. ACH credits with Electronic Data Interchange (EDI); Tax payments; On-Line Bill Pay; Corporate Credit Cards; and Wire Transfers are now not only available but also the preferred payment method among the rest of Corporate America. These tools provide payments at costs significantly below the traditional check and efficiencies that have allowed accounting departments to reallocate staff.

Communication is Still King

One of the most important parts of Management’s Job is Good Communication. This should include the financial status of the account. Historically, managers and accounting staff would call the bank to check on the balance or to get updates on certain transactions. However many times, the people who need the information are not authorized on the accounts and therefore the information cannot be shared. On-Line balance reporting, On-Line transaction reporting, and Managed User Account Set Up (view only, transaction level, approval level, etc.) allow the right access for the right people in a controlled environment. These services facilitate the right communication in a timely manner.

Fraud Prevention

The majority of organizations suffered at least one incident of payments fraud in 2004 and the median dollar amount of the fraud was ,600 (1). These criminals used to target the mega customers (those with revenues exceeding billion). However, as these organizations have now employed many new financial tools to detect and prevent fraud including Positive Pay and Account Reconciliation, the criminals are moving on to the next level of companies. In addition, "Numerous coverage elements are impacted during a deposit, particularly when a Management company does so on behalf of their Association. The definition of an Insured and potentially inadequate sub limits for Depositors Forgery all become very important as the number of people involved grows and as the size of deposits increase. Reducing manual transactions and taking advantage of technology are vital in improving exposures to Association funds" recommends Mark I. McLallen, President of Condominium Insurance Specialists of America. Management companies absolutely should employ various measures to protect their accounts.

Succeeding in Today’s Market

We all know that succeeding in today’s market requires an increasingly more sophisticated and educated manager. Take advantage of the new financial services available to your clients, your managers, your accountants and your owners. It will not only save time and money, but also provide you with increased opportunities and a significant competitive advantage. _______________________________________________________________________

Notes: (1) Association for Financial Professionals - Payments Fraud and Control Survey – March 2005 (2) Certified Treasury Professional as certified by the Association for Financial Professionals (3) Certified Manager of Community Associations as certified by the National Board of Certification for Community Association Managers. (2) Writer gratefully acknowledges the contributions of Mark McLallen of Condominium Insurance Specialists of America.

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