Property management accounting in Mexico

What does property management accounting cover?

It covers every amount that passes through somebody else's hands on the way to or from your house, and the proof attached to each one. Three figures have to be derivable at any moment: what came in, what went out and against which document, and what is owed back to you.

The first thing worth separating is whose money is being counted. A manager has its own books — its fees, its payroll, its own taxes — and those are an ordinary business's accounts, answerable to the business. The money collected for your house is a different set of figures with a different owner, and the whole discipline exists to keep the second from being read through the first. What a property manager does day by day is the work; this is the record the work leaves behind.

The fee itself sits on the boundary and is the easiest line to misread. It is the manager's own income and your expense at the same moment, which is why how a management fee is calculated belongs in the deductions block of a statement like any other cost, named and documented, rather than quietly netted off the top before you see the gross.

Everything else in this guide follows from one property of that list. Each of the three figures is either derived from lines that can be checked one by one, or it is asserted. There is no third condition, and the difference does not show on the page unless you go looking for it.

What is trust accounting, and where does the idea come from?

Trust accounting is the practice of holding other people's money in an account that is not yours and keeping records that show, at any moment, how much of it belongs to whom. In the United States it comes from state real estate licensing law: California's Department of Real Estate defines trust funds as money or other things of value received by a broker or salesperson on behalf of a principal or any other person, held for the benefit of others in the performance of any acts for which a real estate license is required.

The rule has a clock on it. Under the Business and Professions Code the funds must go to the owner of the funds, to a neutral escrow depository, or into a trust account not later than three business days following receipt, and the account itself is held in the name of the broker as trustee for the designated beneficiary or principal of a transaction. The money is in a bank under the manager's name and is not the manager's money, and the account exists to make that sentence true rather than merely stated.

Then come the records, and they are two, not one. There is a journal of all trust funds received and paid out, and a separate record for each beneficiary; where the funds come from rental properties managed by the broker, the department provides a Separate Record for Each Property Managed to be used in place of the record for each beneficiary — which is the same idea as a statement per house, arrived at from the regulator's side.

What makes the system verifiable, though, is the last step. Two reconciliations must be made at the end of each month — the bank account record against the bank statement, and the bank account record against the separate property or beneficiary records — because the accuracy of the records is verified by reconciling them at least once a month. A single record kept carefully proves nothing about itself. Two records kept from different sides, compared, prove a great deal.

Notice where the obligation is anchored: in the acts for which a state licence is required. That is the detail that decides the next section, and it is also why the idea is worth reading even by an owner it does not cover.

Does Mexico have an equivalent, and what does it have instead?

No, and a near-synonym would be the most useful-sounding falsehood on this page. The duty described above is a condition of a licence issued by a US state and reaches the acts that licence covers, so there is no Mexican article to send you to that says the same thing in Spanish — what Mexican law regulates is not where the money sits but what every operation has to produce.

The instrument is the fiscal voucher, and the obligation runs both ways. The Código Fiscal de la Federación requires the voucher to be issued as a digital document through the tax authority's own site, and in the same article it requires that whoever enjoys the temporary use of a property, receives services or has contributions withheld must request the corresponding voucher. A missing document is therefore not only the issuer's omission: the law puts the other party under a duty to ask for it.

Each voucher is then built to be identified from outside. It has to carry the folio number and the digital seal of the tax authority as well as the taxpayer registry key, the name and the postal code of the person in whose favour it is issued. A document with a folio and a named addressee is a very different object from a line in a report: it exists in a register that neither of the two parties keeps.

One requirement is specific to houses, and it is the one an owner should know by heart. A voucher issued for rental income, or for granting the temporary use of real property, must contain the property tax account number of the building concerned. That field is what ties an amount to one house rather than to a month, a portfolio or a manager.

Tax then arrives before the money does, which is the part that most surprises an owner reading a first statement. Where the rent is paid by a company, the Ley del Impuesto sobre la Renta obliges it to withhold 10% of the payment as a provisional payment, with no deduction whatsoever, and to provide a voucher stating the amount withheld, and under the value added tax law whoever withholds substitutes the person granting the temporary use of the property in the obligation to pay and remit the tax. The money that reaches you has already been reduced by an operation that produced its own paper.

So the two systems protect the same owner from opposite ends. One keeps the money in a separate place and reconciles the records that describe it; the other lets the money move and makes every movement leave a document addressed to a named person. The practical consequence is worth stating plainly: in Mexico your evidence is not the manager's account, it is a set of vouchers issued in your own name, which you can hold whether or not anyone helps you.

What does a monthly statement have to show to be checkable?

Three blocks and the arithmetic that joins them: what came in, what was taken out, and the net that follows from the first two. Checkable means the total is derived from the lines rather than printed beside them, and that every line names a document which exists outside the page it is printed on.

The income block is the easy half. Each amount should correspond to a voucher, and a rental voucher carries the property tax account number of the house, so a line can be tied to your address and not merely to a period. A statement that reports a single figure for the month is not wrong, but it is unreadable in the only sense that matters: you cannot take one number out of it and go looking for the paper behind that number.

The deductions block is where a statement is won or lost, because an expense line is worth exactly what the document behind it is worth, and the document says whose expense it was. Each line should name a voucher, and the voucher should name you — the tax code requires the name, registry key and postal code of the person it is issued to, which makes the addressee a field rather than an assumption. The four checks that follow from this are set out one by one on the page for monthly owner statements, and none of them goes through an administrator.

There is a third block an American statement often has no equivalent of, and leaving it out changes the arithmetic rather than the presentation. Where the payer is a company, 10% is withheld before the payment is made, with no deduction whatsoever, and that withholding has a document of its own. What arrives in the account is therefore not the gross less the costs; it is the gross, less the costs, less something already paid to the authority on your behalf. A statement whose net cannot be reached by that subtraction is describing a different arrangement from the one that actually took place.

The arithmetic itself is the last requirement, and it is a structural one. If the totals are typed independently of the lines, they can drift from them and nothing on the page will say so; if they are computed from the lines, the two cannot disagree. This is the reason to be suspicious of a round number at the foot of a column of unround ones.

What can an owner reconcile without asking anyone?

Three things, and none of them needs the administrator's cooperation: that the lines add up to the total, that each document named actually exists, and that it was issued to you. Reconciliation is the process of comparing two or more sets of records to determine whether their balances agree, and it works the same way where nobody is obliged to perform it.

That definition is the useful import from the American system, and it imports cleanly because it describes a method and not a duty. A reconciliation needs a second record kept by a different hand, and an owner of a Mexican house has three of those already: the vouchers registered under their own tax registry key, the property tax account of the building, and their own bank.

None of these is an audit, and none of them requires an accountant. They are the checks a distant owner can run from a desk in another country, which is the only place most of these checks will ever be run from — and the reason the obligations attached to a let house in Mexico are worth reading once in full rather than inferred from a report each month.

What does a spreadsheet miss that a statement should not?

A spreadsheet holds what somebody typed; a statement has to hold what somebody else can contradict. The distinction is not one of format, and the American tax authority draws it in its own guidance: transactions generate supporting documents, and those documents contain the information you need to record in your books.

Books and supporting documents are two objects, in other words, and a template is the first of them. Good records, the same guidance says, are what let you keep track of deductible expenses and support items reported on your tax returns — support being the operative word, since a figure supports nothing on its own.

This is why the search that brings most owners here is half right. A rental property spreadsheet template, a property management report template, a property management monthly report template, a rental property record keeping template in Excel: free property management templates are plentiful, they are generally competent, and not one of them is the problem. The problem is what the columns are asked to do.

Judge a template by its outward-pointing columns. A folio, a voucher date, a property tax account number, the name the document was issued to: each of those is useless inside the sheet and decisive outside it, because each one is an instruction for finding the paper. Columns that only describe — category, note, a colour for the ones that looked odd — make the file pleasant to read and prove nothing.

A statement is held to a higher standard for exactly one reason: it is written by the person who also handled the money. That is the situation trust accounting was invented for in one country and the situation the fiscal voucher was built for in another, and an owner reading a monthly report is entitled to whichever protection the law where the house stands actually provides. Here it is the document, it is issued in your name, and it does not need anybody's permission to be looked at.