Implement internal controls for property management to help reduce risks, detect fraud, and enable accountability — regardless of staff size.
Real estate property management companies are often lean by design, keeping overhead low while managing significant operational responsibilities. But when it comes to internal controls, limited staffing can create blind spots.
Without proper checks and balances, the risk of fraud, error, or mismanagement increases — even with a team you trust.
Common internal control challenges in property management
- Resident managers that manage new tenant setup, rent collection, deposits, and bank reconciliations
- Limited oversight of on-site petty cash, leasing incentives, or move-out charges
- One employee with full access to vendor selection, invoice receipt and approval, and payment posting and depositing
- Lack of documented approval for capital expenditures and vendor contracts
- Lack of a formal, disciplined financial close process, including lack of formal account reconciliations and journal entry posting controls
- Lack of appropriately restricted access to key information technology applications
Cost-effective, high-impact internal control practices
Segregate duties with technology
Use your property management software to automate approval workflows, restrict access rights by role, establish backup records, and generate audit trails.
Conduct owner or executive review of bank activity
Even if reconciliations are prepared internally, monthly bank statements and reconciliation reports should be reviewed by someone outside of the day-to-day operations.
Get dual authorization for payments
Require two levels of review for vendor payments and large reimbursements, even if one is a digital signoff.
Perform routine surprise checks
Periodic randomized reviews of journal entries, bank reconciliations, petty cash, tenant security deposits, or the status of vacant units can function as both deterrents and controls that give you insights into how employees handle operations when they aren’t aware that they are being observed.
Document policies and procedures
Clearly define and communicate financial roles, limits of authority, and required documentation for all key transactions.
Document financial close process
Document the key steps needed for an effective and complete financial close, which should include but not be limited to, review of variances from expectations, support for key journal entries posted.
Perform a periodic access review
Periodically reviewing employee access to key systems to provide reasonable assurance access is appropriately restricted and that roles assigned to employees are aligned with their job responsibilities. In lieu of this, consider a review of key changes made to system settings to determine they were appropriate.
How CLA can help
Whether you operate a handful of buildings or a regional portfolio, our approach balances control with practicality. We help real estate owners, operators, and property managers build internal control systems that are both practical and protective, even with minimal personnel. We offer:
- Tailored internal control assessments
- Workflow evaluations within your property management and accounting systems
- Recommendations for risk mitigation without overburdening your team
- Guidance on controls that scale with portfolio growth