Set-up accounts for Property management agency with owner passthrough revenue

Philip95

I am setting up accounts for my short-term-rental property management company and have searched long and hard for information on how to best run things, but I have not been able to find a complete answer. So, I am hoping someone in these forums can help.

Accommodation bookings come from OTA (eg: HomeAway, Airbnb), and direct bookings. All properties are managed via an agency agreement with the property owner (even for ones I own). This ensures the property owner revenue stays out of P&L, as per the agency model.

To do this, I am using an Asset cash account for Undeposited Funds and Liability payable accounts for temporarily holding gross revenue for each property (called Passthrough [prop_name]). The OTA commission, management fee and cleaning fee are paid out of the passthrough liability account, and at the end of each month, the balance is paid to the property owner.

A sample series of transactions for a property called "Russell St" for an OTA booking of say $1000 will look something like this (using manual entry transactions, no invoices):

Initial passthrough revenue: $1000
Less fees:
$200 Management fee (20%) paid to property mgt company
$100 Cleaning fees paid to property mgt company
$150 OTA commission (15%) paid by owner
= $550 remaining balance paid to owner

Transactions

• Add revenue of $1000: 

  • Deposit $1000 to Undeposited Funds (Asset cash account)  
  • Category of Passthrough Russell St (Liability payable account)

• Add Income of $200 for Management fee (20%):

  • Deposit $200 to Passthrough Russell St  
  • Category of Management fee (Income account)

• Add income of $100 for Cleaning charge: 

  • Deposit $100 to Passthrough Russell St 
  • Category of Cleaning services (Income account)

• Pay $150 of OTA commission (15%): 

  • Create a bill for $150 with expense category of Passthrough Russell St
  • Pay bill from Undeposited funds

• Pay remaining $550 revenue to property owner: 

  • Create a bill for $550 with expense category of Passthrough Russell St
  • Pay bill from Undeposited funds

This works, as my P&L only shows property mgt company income, and not the property owners revenue, and the payable liability account for each property balances to zero at the end of each month once the owner is paid. 

For direct bookings, things are managed differently. I create an invoice to track payment, so the first step above is done via an invoice, as per: 

• Raise invoice to Accommodation product (Sales account) for $1000:
  • Pay received funds into Undeposited funds

When I do this, I end up with amounts of $1000 in the Sales income account and the Accounts Receivables account, even though these aren't my Sales (they are passthrough revenue). I can't see any way to get this revenue into the Passthrough liability accounts (except to journal). 

I hope the above makes sense.  Now, to my questions:

a) Is this the correct and best way to manage passthrough (contra?) revenue as an agency?

b) For the invoiced (direct) bookings, I end up with the full booking revenue of $1000 in both the Accounts Receivables and Sales accounts, yet these amounts are not my Sales (my sales in the property management company should only be management commission and cleaning charges). I am journalling these amounts at the end of each month, to get a proper Sales balance, but it seems odd. Is there a better way?

c) I have considered setting up separate Wave businesses for each property, but if I do this, I won't have a holistic view of all rentals and how they are operating, plus it means I have to go to multiple different businesses to manage revenue. Is it ok to manage it all in one business, or am I forced to have separate businesses for each property or owner?

d) I end up with my management commission and cleaning services income still sitting in the Undeposited Funds account, so I journal this amount to Cash at Bank at month-end?  Again, it seems a bit odd that I have to journal things to make it work, so is there a better way?

Philip95

Can anyone provide some advice?

RoBeCo

Did you ever get any further with this? I'm in a similar situation and came to the same solution as you with using liability accounts for each property (in my case it's Films and TV shows)

Philip95

@RoBeCo, no, there was no response from the community, and my requests to Wave fell on deaf ears too.

A couple of simple changes to their Account payment rules to make the behaviour consistent across accounts (such as how it works in Xero), would resolve, but Wave knows best.

So, I just fix up the balances each month using journal transactions. Like quite a few solutions in Wave, it's clunky but it works.