Darren Bagnall from Manage Your Block discusses accounting practices for Residents’ Management Companies.
When taking on the role of Residents’ Management Company (RMC) Director or Officer, many tasks that land at your feet may feel somewhat overwhelming- and none more so than accounting and service charge calculations.
These tasks are often best left to professionals who have extensive training, up to date knowledge of the law and the time to dedicate to these vital tasks. However, hiring a professional accountant is not always possible. So, what do RMC Directors and Officers need to know if they’re filing their own accounts?
Choosing Your ‘Accountant’ Wisely
Quite often, RMC Directors are automatically handed the task of accounting, but some thought should go into who among the Officers may be best suited to this detailed, time-consuming task.
The ideal candidate will be meticulous, organised and thorough- with enough spare time to dedicate to the role.
Splitting the tasks among your team should also be considered. Often, a Director may be best placed to keep track of transactions and file receipts etc, while an Officer may be better placed to complete the annual statutory accounts.
Either way, the accounting function shouldn’t be given to any one member of the team without due thought and consideration to their skillset and availability- especially as Directors may find themselves signing off on (and accepting responsibility for) incorrect accounts if the wrong decision is made.
What accounts need to be submitted?
As with all companies, an annual tax return is required by Companies House (guidance for which can be found here) and, often, this can be done online.
Alongside this, RMCs will need to complete an annual statement of account for service charges too. Best practice for service charge accounting is set out in guidance issued by the Institute of Chartered Accountants in England and Wales (ICAEW) and ARMA- all of which can be found online and downloaded for free.
ARMA states that “Approval of the service charge account is not for the shareholders or members of an RMC to do. The lease may require the statement to be certified or audited professionally but it should be issued to all leaseholders — not just shareholders or members.”
What can RMCs and their residents do to support the accounting function?
Residents can make the lives of their Directors and Officers easier by ensuring that all payments are made promptly and with the references requested by the team attached.
RMCs can make things simpler by preparing their accounts on a very regular basis- even as often as weekly. This avoids the once-yearly scramble to dot the Is and cross the Ts before deadlines loom.
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