There are many reasons condo boards decide to keep their accounting in-house. But is this really the best choice for your condo corporation? Here we look at outsourced versus in-house accounting to help you make the right choice for your board.

Top 3 Considerations

1.Team experience

Having a director or team member who is an actual accountant, bookkeeper or financial manager can work well. However, the main issues here are:

• Do they have enough time to ensure proper oversight of accounting and
• Whether they’re experienced in the specific financial management and oversight required for a condo corporation including reserve fund management and planning, condo budgeting, cost proportions, and effective investment strategies, on top of managing day-to-day activities such as payroll, bookkeeping, and reconciling accounts.

2.Risk of fraud

There are many openings for fraud and theft when you lack third party oversight, including:

• Taking kickbacks from vendors
• Shell companies for auto-payments/unauthorized money transfers
• Forgery
• Ghost payroll accounts
• “Borrowing” from petty cash
• Not depositing common element cash payments

3. Controls and systems

If you have an existing system that has efficient controls in place, managing accounting in-house can save money and be very reliable. However, if you’ve lacked a formal system and controls to track how money flows in and out of the corporation, then calling in a professional accounting service to implement systems can help manage your finances more responsibly and efficiently.

Outsourced vs. In-house Accounting: Pros & Cons

To help you decide which solution is best for your condo board, consider the following pros and cons of each:

Outsourced accounting

Pros:

• Cost savings can be realized by reducing overhead, salaries, benefits, and other expenses
• You’ll have access to specific accounting expertise in condo corporation financial management
• You’ll have comprehensive reporting to make informed decisions
• Board members can focus on core condo corporation functions
• Outsourcing can provide access to advanced accounting technology to streamline processes
• You’ll see improved controls to ensure you follow regulatory requirements
• Common elements will be tracked and liens for unpaid amounts will be registered in a timely manner
• Introducing improved accounting systems and controls will reduce the risk of fraud

Cons:

• You have less control when relying on an accounting company
• Poor communication can make matters worse instead of better
• Sharing financial information can increase the risk of data breaches and unauthorized access to accounts and sensitive information
• You could find it more expensive than cost effective if pricing is not transparent
• Dependency on a vendor can slow down internal approvals and reporting

In-house accounting

Pros:

• You have more control and oversight with your processes
• You can reduce possible delays through seamless communication in some cases
• You can reduce the risk of breaches and unauthorized access if your system is secure
• Hiring an accountant or bookkeeper in-house allows you to include them in business operations
• Having someone on the team provides quick resolution to issues

Cons

• Paying an in-house accountant or bookkeeper full time contributes to overhead costs, salaries, benefits, ongoing training, hiring, etc.
• If relying on board members, they likely lack the expertise and time to manage finances effectively
• Board members will lack time to focus on other critical tasks to oversee the community’s needs
• Errors are more likely with inexperienced in-house accounting
• A lack of access to proper accounting systems, processes and technology reduces efficiency and increases risks of fraud
• Employee turnover incurs additional costs including ads, interviews, onboarding, and training new staff

If you’re still uncertain, there is a third option that combines the best of both worlds: Using a property management company’s financial services.  At CPO Management Inc, a Toronto property management company specializing in condo management services, we can help manage your accounting and improve operational efficiencies while finding cost saving opportunities. For more information about how we can assist with your property management, or for any other questions reach out to us today.