Why do housing officers so often photocopy service charge invoices and even build their own spreadsheets? This is madness – it’s wasting their time and the company’s money, and they’re simply not experts at it. So why do they do it, and how can we change this?
There are four main reasons:
- They don’t trust the accounts system;
- They don’t have enough information in the accounts system;
- They will never get their hands on the invoices again (without a scanning system);
- They cannot easily access the accounts system.
What should the accounts system be doing for them? Service charge costs should be properly recorded in a useful and timely manner. In other words, each cost transaction should have the necessary information to evaluate it long after the invoice has been filed. It should have:
- A helpful description;
- The correct account code;
- The correct scheme analysis at the right level;
- The supplier code;
- Start and end date (if appropriate);
- Ideally, a link to the scanned invoice.
How can this be done? There needs to be a focus on improving the standard of the description entered against all transactions, but especially for service charge costs. The system should ideally be able to hold a description of a reasonable length. Additional fields for start and end dates can be particularly relevant as service charge costs are often periodic.
If all these elements can be achieved within the accounts system then viewing the invoice becomes less important. However users would benefit from the reassurance of being able to inspect the invoice itself.
Getting the coding right is a crucial part of the process. Some simple points to bear in mind are to have a dedicated range of accounts and the range of codes should be as short as possible while still being compatible with identifying the appropriate categories of expenditure. This implies that the service charge costs are budgeted at this level and the analysis is required in establishing whether it should be included or excluded from recharging.
A key requirement for RSLs is to be able to accurately account for costs relating to service charges. These are typically incurred at block or estate level. Using analysis coding based on the estate code, with a block suffix, costs can be coded to the correct level for subsequent re-charging. For example, if a particular scheme’s existing code is 1234, then use 1234A as the code for that scheme’s block A costs, 1234B for block B’s costs, and so on.
Train the coders
It is important to consider who actually does the coding. This is too often done by ‘the temp’ or someone without the appropriate knowledge. In order to address this, produce a coding booklet. Staff in the finance department should be assigned as ‘partner accountants’ to front-line departments and give the coders regular, face-to-face training. Other tools that can help with this are transaction entry presets and defaults. If available, business rules should be used to validate data and provide dependent coding.
Another way to improve coding is to use a purchase-to-pay ordering system. Such systems facilitate:
- Definition of the cost type to use when raising the order;
- Budget checking;
- Control over costs through commitments and accruals;
- Time saving by the raising of orders for all 12 months, which can then have invoices matched against them.
Coding integrity can be further tested by monitoring variances from budget. Service charge cost budgets should be entered at the appropriate level of detail. Systems such as Sun Accounts, with multiple budget ledgers, are particularly useful as these allow the operational budgets to be kept separate from the service charge budgets, which are typically held in greater detail, at scheme/estate/block level for the relatively narrow range of relevant costs.
Now that the data is in the accounts system with the right level of detail and correct format, how do end-users access this information? Where possible, avoid needing to distribute paper reports. Inquiry tools, which bring the information to users’ desktops, are preferable and don’t have to be expensive; for example, Advanced Inquiry and Q&A Executive are used by many RSLs to access Sun Accounts.
If you can improve the standard of service charge cost recording and reporting, you will remove the need for your housing officers to duplicate the accounts system. And that’s what the accounts system will have done for them.
Phillip Hunter and Philip Jude are both chartered accountants advising housing providers on their financial systems.