The Letting Partnership, a Propertymark Industry Supplier that specialises in client accounting for letting agents, outlines why agents should undergo annual inspections of their client accounts and the options available.
Audit reports
Most letting agents in the UK undergo annual inspections of client money accounts to verify that all client monies held have been accounted for and the accounts are intact.
What is client money?
Client money is what a letting agent receives from a landlord or tenant and includes rent, tenant deposits, holding deposits, landlord floats and non-resident landlord tax. It does not include the agent’s fees and commissions, or the deposits once they are protected in a deposit protection scheme.
Client money is definitely not income and should never be treated or shown as such in the business accounts. An agent’s income is derived from the management fees and other fees charged by the company for services provided.
Why should client money accounts be audited?
For landlords, good client money management (protecting, handling, and getting their rent paid on time) is as important as finding them the ‘right’ tenant for their property.
This should be reason enough to make sure accounts are in order, however, the majority of letting agents also need to undergo an annual audit of their client money account(s) to obtain and retain membership in their CMP scheme and/or redress scheme.
What options are available?
Traditionally letting agents have entrusted their annual audits to chartered or certified accountants who are members of one of the Financial Reporting Council's Recognised Supervisory Bodies.
Unfortunately, accountants may not fully understand the lettings business and what is required to comply with the numerous industry regulations.
Accountants generally need to attend an agent’s office to complete an audit report and it can take a full day. Relevant information and documentation must be on hand and time must be set aside to answer queries. Most agents struggle with this and do not have time for these lengthy onsite visits.
In most cases, accountants are costly in terms of money and time. An audit from an accountant can easily cost £3000-£4000 which can be prohibitive for smaller businesses.
Alternative options
The Letting Partnership offers a simple low-cost solution – the Client Money HealthCheck. Unlike other products that tether agents to specific software providers, this tool replaces the annual audit required by industry bodies like Propertymark and can be used by anyone.
Introduced in 2013, the HealthCheck is a well-established and trusted tool that is used by agents across the UK, with the report accepted by Propertymark, Money Shield, Client Money Protect and the TDS as part of their membership requirements – replacing the accountant reports.
Time-saving solution
The online HealthCheck questionnaire takes most agents less than an hour to complete, with the report received within ten days. Compliance and good practice are taken into account, and any breaches are highlighted in the report, together with recommendations and practical advice on how to rectify them.
Any queries can be resolved quickly by talking to the HealthCheck team at The Letting Partnership.
Propertymark members save money
A discounted rate is available to Propertymark member agents who can get their HealthCheck for under £400 including VAT.
The HealthChecks are carried out by The Letting Partnership who are specialists in outsourced client accounting and award-winning professional services providers, as well as trusted Propertymark industry suppliers.
Having an audit can seem a scary process, but I am happy to say The Letting Partnership make the process very simple, straightforward & also cost-effective. I would recommend their services to any letting agent that is audited each year by Propertymark. The team are very helpful and responsive.
The Letting Partnership: Client accounting
The Letting Partnership was created with the express purpose of supporting and promoting professionalism within the property industry specifically in the areas of client accounting and Client Money Protection.
