3 Best Practices for CAM Reconciliation

ARTICLE | March 05, 2024

For real estate owners, Common Area Maintenance (CAM) reconciliation is critical for financial transparency, accountability, and optimal resource allocation. CAM reconciliation is also a notoriously tedious and error-prone process—but these three best practices can help.

Best practice #1: Carefully review your lease agreements

CAM expenses are for parking areas, janitorial services, sidewalks, and other areas that benefit all tenants or residents of a property. The terms of each occupant’s share of these expenses are defined in the lease agreement—so reviewing your lease agreement is a key first step in your year-end reconciliation.

All leases are not alike, and it is a mistake to overlook the small print. In addition to outlining specific terms for the CAM expenses, some (but not all) leases provide a reconciliation deadline, which is typically 30 to 90 days after Dec. 31. If you miss the deadline, you may need to absorb any unallocated expenses.

Best practice #2: Automate expense management

Maintaining accurate and detailed records of all relevant expenses is paramount for effective CAM reconciliation. Best-in-class software solutions like Sage Intacct can help owners capture all CAM-related costs, including not only direct maintenance and repair expenses but also indirect costs associated with property management and shared services.

Automating expense management with specialized software can streamline reconciliations, reducing the amount of time team members have to spend on it, and reducing the likelihood of errors. The latest cloud-based software can also give you assurance that all relevant information from different locations is organized, accessible, and up-to-date.

Best practice #3: Budget for CAM expenses

If you haven’t already, be sure to include CAM expenses as part of your regular budgeting and forecasting processes. CAM expenses can vary from year to year based on property needs and market conditions, and without a well-developed budget, owners risk being caught off-guard by unexpected spikes in expenses.

Budgeting for CAM also empowers real estate owners to assess the financial implications of leasing agreements and make strategic decisions that align with their overall goals.

Get expert assistance

Insero & Co. has extensive experience helping businesses navigate the complexities of CAM reconciliation. Contact us to talk about how our Outsourced Accounting Services Group can help.