Every Day I Write the Books

There are a lot of things to keep straight when you're managing your own co-op or condo, but chief among them is balancing the books and paying the bills on time. Collecting and depositing maintenance, writing checks and getting them signed, updating who's owed what and when, and reconciling accounts. Those necessary, yet time-consuming, tasks have to be done every month. And they have to be done correctly. One of the biggest challenges for a self-managed building is finding the right person - and the right method - to keep the financials under control.

One of the biggest advantages of hiring a management firm is having the back office staff keep the books running smoothly and the accounts in order. But in those buildings that can't afford a manager, are too small to warrant one, or have made the decision to go it alone, there are plenty of options out there to help handle bookkeeping. Low-priced, straightforward computer software that is designed specifically for the non-professional has made bookkeeping a much more manageable and efficient task. For those who want to outsource, there are service firms in New York City that specialize in co-op bookkeeping.

"Self-managing isn't for everyone," warns Lois Reisman, a CPA who handles the books at a self-managed cooperative on East 97th Street. "You could really create a big problem in your building if you don't know what you're doing." Where it does work, she says, is in buildings that have active boards that clearly delineate responsibility for who oversees what part of a building's operations. Organization and communication is the key to making sure everything is done correctly. Managing the books on a volunteer basis, she says, takes "a tremendous, tremendous amount of time."

While some buildings are lucky enough to have accountants and financial professionals on the board who can apply their expertise to in-house bookkeeping, software like Intuit's Quicken and QuickBooks can go a long way towards assisting in the work. The original Quicken program is designed primarily for individual finances: managing checking and credit card accounts, paying bills, tracking investments, and tax planning.

But there's a separate version that is much more relevant to small-business bookkeeping and accounting: Quicken Premier Home & Business. The program's accounts receivables and payables function is particularly useful, allowing the co-op to track maintenance payments from shareholders and bills that are owed to contractors, vendors, energy providers, and others. The program can also generate a variety of business reports, including cash flow and account balance sheets. Quicken Premier Home & Business retails for about $79.95 and is only available on Windows computers, while the original Quicken costs about $60 and runs on both Windows and Macintosh computers.

Intuit's QuickBooks and MYOB are the next step up from Quicken. These programs are specifically designed for small business accounting, and while some functions (inventory, purchase orders) are unlikely to be utilized by a co-op or condo, the programs make it easy to generate property budgets and track payments due. Basic versions of both of these programs retail for about $200. Programs like Microsoft Excel can also be employed as an electronic ledger, but expert knowledge of the software is required to set it up before it functions as bookkeeping software. All this accounting software is user-friendly and comes with plenty of documentation and set-up instructions. In addition, there are dozens of books available that can help in operating these programs, although there are no specific guidelines for building bookkeeping.

There are other programs that can be used, but they are not designed specifically for bookkeeping. The vice president of a six-unit co-op near the South Street Seaport keeps her co-op's books using Microsoft Word, the popular word processing program. Since her building doesn't have a tremendous amount of expenses, her process is fairly simple. A few times a month, she meets with the treasurer and presents all the bills that need to be paid. The treasurer writes the checks, and then the vice president mails them out and keeps a running log in Word of all the bills that have been paid, as well as any other expense the co-op has had. At the end of the year, she passes on all the bank checks and financial records to an accountant who prepares the co-op's financial statements.

Her building only has one checking account to manage and no reserve fund. With most of the building's expenses under contract (elevator upkeep, exterminator visits, boiler check-up, sprinkler inspection) and no mortgage payments, she says the process itself isn't terribly time-consuming. But her fellow board members' lackadaisical attitude toward managing the co-op's affairs bothers her.

"Sometimes it's very time-consuming, and that's my chief complaint. I'm not paid, my maintenance isn't cut down, and people aren't appreciative," she says. "They somehow think the building can be run by itself." While things get done in the building efficiently, she says there isn't much forward-planning going on. "Nobody's really looking to see if we can save money here and there with our boiler contract or our heating system. There's no forethought."

Keeping the books at Tova Gardens, a 20-unit Park Slope co-op, is a much more involved process. While it helps that Dayna Corlito, board treasurer, works as a CPA, she says that her business skills don't figure prominently in her co-op's bookkeeping and bill-paying. "This is all basic stuff, to be honest. In terms of paying things on time and keeping track, anyone who knows how to do a computer can do it," she says. "It's more a matter of being organized."

Every two weeks she prepares the building's bills and gets the two signatures required for every check from any two board members, typically the president and former president. She marks off on the bills that they've been paid, the amount, the check number, and the date, and places everything in a separate filing cabinet. Another shareholder is responsible for making deposits; and that person then provides Corlito with an itemized list of deposits made each month.

Corlito's software of choice is Microsoft Excel, a popular spreadsheet program. She says she uses Excel because she works on it every day at work, but she recommends Quicken or QuickBooks for non-Excel experts. She keeps track of actual expenses and deposits in one spreadsheet, with each check number, check amount, vendor name, and type of expense listed. That allows her to create summaries, totaling cash inflows and outflows by vendor and vendor type. This summary is then used to create a budget for the rest of the year that can be updated as any new items arise.

Corlito reports to the rest of the board every month, discussing recent expenses and updates on the cash balances of the building's operating account and reserve fund. Any upcoming expenses are discussed, and the board decides whether to pay out of the reserve fund or not. The board communicates via e-mail as well.

Some boards simply can't find the right person in-house to handle the books. Sandra Abramson had served as board president, bookkeeper, and manager throughout her tenure at an eight-unit Park Slope co-op. When she and most of her neighbors sold their units, she agreed to keep doing the books before turning them over to the new treasurer for the sake of consistency. But after the new board had problems keeping everything straight, she was asked back to her old post.

Abramson pays all the co-op's bills online with Citibank, which she says is very convenient, but won't work on any account where more than one signature is required. She keeps her records in QuickBooks, entering all income and expenses per month, with a list of vendors and payees. The software provides good reporting functions. "I can pull just about every report that I need: balance sheets, income expense, income expense against budget," she says. "It's really quite a useful software package. It's simple."

However, Abramson's arrangement with the co-op is not a good model and opens the board up to potential problems. All the building's bills come straight to her and she can pay them online, where there's only one signature required for all checks. She admits she operates with little oversight from the board, and strongly suggests that this not a good practice. The board trusts her simply because she was a long-term resident. "I happen to be very honest so they're lucky," she says. She doesn't do the work for free, either, but is paid a monthly fee. "It's really not a hard thing to do, what I'm doing. They really have not had anyone who's had a burning desire to do it. They'd rather have me do it."

Boards that are looking to contract out their bookkeeping to an individual like Abramson must institute tighter internal controls. She recommends making one person from the board responsible for oversight. That person should first collect all the bills, note how much is due and when, and send them on to the bookkeeper with instructions to pay, or at the very least get a copy of the bill from the utility or vendor. The board should require monthly reports, with the bookkeeper getting paid after receipt and approval of the reports. Two signatures should be required on checks above a previously agreed-upon amount. The concept, called segregation of duties, is intended to prevent any transactions from being handled entirely by one person. Her board is currently not doing any of these things.

For a board that wants something more professional than just a bookkeeper-for-hire, there are service firms such as The Back Office. The 11-year old company specializes solely in managing the books for co-ops and condos: collecting and depositing maintenance, producing checks for paying vendors, and generating financial reports for the buildings.

"This is the kind of work that either the co-op or condo finds tedious to do, they don't have the competence to do it, or they just don't want to do it," says Harold Wolf, president of The Back Office. "We're experts at this." The firm charges its clients a monthly fee based on the number of units. Wolf stresses that his firm is not a management company and not an accounting firm; its sole focus is handling the books for co-ops and condos.

Wolf says his company can provide more specific and faster service than a management firm, and is more accurate and less problematic than relying on a board member to keep the books. "It could be a disaster," he says. "They won't do the work, they'll do it improperly. Even if they do it with their own computer, the likelihood of accuracy and correctness is, frankly, remote."

There's certainly not one specific way, program, or method that should be followed when keeping a co-op or condo's books straight. However a self-managed board chooses to handle it, the key is communication, and making sure that there's no possibility of fraud on behalf of the bookkeeper, be it a board member, a bookkeeper-for-hire, or a service firm. Make sure everyone is clear about the process used. Examine who is getting paid and how much they should be getting paid, how the records are kept, and who oversees them. Remember: sometimes the jobs nobody wants to do are the most important of all.