The local boat marina probably knows how to tie up and watch your boat, but that does not mean they know how to fix it. Accounting is a specialist service that is generally performed poorly by those for whom it is not their “core” business. In Prague it is common practice for property management firms to “in-source” accounting services in order to provide “high-quality, industry-focused accounting at an exceptionally low price.” This formula rarely works to the advantage of the property owner, and this is why.
- “Specially-discounted” accounting services
If you want to pay wholesale rates, expect wholesale quality. Your accounting has been repackaged as a fraction of the annual contract. Anything above the minimum is a productivity drain on the cracker-jack box “accountant” who got the business. - “Above-standard” service
Property management firms make huge profits off of their clients by charging a small fixed fee for the entry of a small, “standard” number and types of documents. But they charge exorbitant fees for “non-standard” services like: real estate/income tax returns, appraisals, drafting contracts, powers of attorney, etc. - Tax-compliance, not tax optimization
If your property management firm is outsourcing your accounting to another firm, they are not going to be helping you make tax-efficient decisions. At best, it is about tax compliance, since they do not want you getting upset because a tax return was filed late. What is worse, since they rarely manage the “in-sourced” accountant, and s/he is beholden to them anyway, your property manager is almost guaranteed to fail in providing the necessary documentation in the proper form or timeframe and the accountant may not care enough to critically evaluate the completeness of your documentation.
The fact is, if you want to succeed in your investment, you need to be personally involved, at least enough to critically manage the work of your service-providers. Even a two-hour commitment per month to review and follow up on information far exceeds what many “investors” put into it. If you are not doing this, your investment is at risk!
If you are an American tax payer, we can ALL BUT GUARANTEE that unless your accountants are aware of US reporting rules, you are reporting bad information to the IRS.
Your local property manager almost definitely does not understand the relevance of short-term to long-term rentals, VAT, or the accrual basis, all of which are relevant to local reporting. If you do not either, you need an accountant.
We have found that when clients engage our firm, they are often doing so specifically to keep an eye on the property management firm. We have saved clients working with all of the major Prague property management firms (name any one of them) thousands of crowns in tax penalties, receivable losses and cost savings. How do we do this? We see the same information come across our desk as the property management accountant. But when we see five invoices a month overdue, or a very high cash balance, or an undocumented outgoing wire transfer … we find out what it is and let you know.
We also keep clients independently informed about issues that relate to their investment in the economic, accounting, tax and property sectors on a constant basis. We will respond to your needs or alert you of issues – immediately.
