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Understanding financials

This article looks at:

  1. Creating bank accounts
  2. Where can transactions be added
  3. How do transactions get created and where do transactions reside
  4. What are the transaction types
  5. How to distinguish between self-managed and managed portfolios
  6. How does the hierarchy affect what transactions are visible
  7. How does hierarchy affect what you see on an owner statement
  8. What are remittances
  9. A summary of the journey taken by a transaction
  10. What is the payment screen
  11. How payments get reconcilled
  12. What is a cashbook
  13. What is the income screen
  14. How do Xero and Quickbooks fit in

 

1. Creating bank accounts

Bank accounts must be created on Arthur in order to receive money into or pay money out of:

These include:

  • Rent account
  • Deposit accounts
  • Other business accounts for income transfer

This is linked to creating bank accounts

2. Where can transactions be added

Any transactions will be added to:

  • Property
  • Unit
  • Tenancy
  • Workorder

Paid to or by:

  • Contractor
  • Owner
  • Tenant

3. How do transactions get created and where do they go

This is related to adding a tenancy and  how to add transactions retrospectively

  1. Manually (one-off transactions) 
  2. Automatically (recurring charges) 
  3. Via the contractor app to the work order

Once created they will go onto the recipient’s statement:

  • Tenant statement
  • Owner Statement
  • Contractor statement

 

4. What types of transactions are there

The transaction will fall under two main categories:

  • Charges
  • Receipts

Charges

  • Debit the statement (charge to be paid by/to tenancy, owner or contractor)
  • Credit the statement (credit to be paid to tenancy or owner- negative charge)

Receipts

  • Credit the statement (receive money from the tenant)
  • Debit the statement (pay money out to the tenant, owner, and contractor of the statement)

5. How Arthur distinguishes between self-managed portfolios and 3rd party management

Identifying your management type in Arthur’s ‘Financials’ is a fundamental step to ensure that your set up reflects your business.  This is especially important if you intend to integrate with cloud accounting software later on.

Two types are available;

  • Direct rent – used by those that self manages i.e collecting the rent for themselves. Direct rent assumes the receipt of rent remains as income on the tenant statement and outgoings are costs to contractors. Together these will show on an income and expenditure report.

 

  • Rent charge – used by those who manage on behalf of 3rd Parties e.g agencies who deduct fees from the rent before passing it on. Rent charge assumes the receipt of rents will go across to a property owner statement to be paid out.

Some Arthur clients are a mixture of both so we suggest setting your default position to the most common management type. To set you default position on rent type 

 

 

6. How does the hierarchy affect what transactions are visible

Depending on the level you view the statement will determine what transactions you see. This is linked to understanding hierarchy

  • The property level shows =  property-related transactions + unit/s related transactions + tenancy/s related transactions  
  • The unit-level shows  = unit related transactions + tenancy related transactions  
  • The tenancy level shows  = tenancy related transactions

 

7. How does hierarchy affect what is seen on an owner statement

  • Viewed at owner level – This will include all transactions across all properties/units/tenancies in the portfolio on one statement
  • Viewed at property level – This will include all transactions related to that property/unit/tenancy = tenancy related transactions  + unit related transactions + property related transactions
  • Viewed at the unit level – This will include all transactions related to that unit/tenancy = tenancy related transactions  + unit related transactions

This is linked to the article how to set up you remittance preference

 

 

8. What is a remittance

Remittances are a collection of charges and receipts that result in a single payment (transaction) being made. Remittances are made to:

  • Tenants, on a closing statement
  • Property owners, when they are due funds. This is linked to how to apply management fees
  • Contractor, to pay their bills

Remittances payable to owner, tenant, and contractor are the net figure paid to them. The remittance will generally be a collection of transactions.

​You must never void a remittance as it voids all the linked transactions within. To remove or add further transaction to the remittance must first be unallocated and then adjusted

 

9. A summary of the journey taken by a transaction

The created transaction journey is summarised below

 

10. What is the payment screen

This screen display all payments to be made to:

  • Owner
  • Contractor
  • Tenant Deposits

 

11. How payments get reconciled

  1. Outside of Arthur within Xero or Quickbooks
  2. Inside Arthur using a Live bank feed or uploaded bank ststements

 

12. What is the cashbook

This shows all incomings and outgoings from bank accounts.

This is linked to understanding cashbook

13. What is the income screen

Shows all income revenue that includes:

  • Direct rent
  • The mark-up on contractor jobs
  • Agency fees

This is linked to understanding the income screen

 

14. Where does Xero or QuickBooks fit in?

There are many advantages to using the two systems. One of the most important is the avoidance of having to manually record the same data across multiple software/spreadsheets. Another advantage is that it complies with new regulations for Making Tax Digital. One of the best features is the bank feed and reconciliation process. In short, Arthur is responsible for tenant, owner and contractor statements and Xero or QuickBooks is responsible for your business. This gives users the best of two worlds.

 

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