An agency typically operates with two ledgers:
- the client ledger
- the office ledger
The client ledger relates to the client account(s), funds which do not actually belong to the agency but are held in trust by the agency on behalf of its clients - primarily landlords and tenants.
Rent is typically due to and collected into the client ledger, since this money is paid from the tenant to the landlord via the dedicated client account.
Elevate allows agents to track all financial activity within the client ledger and fully reconcile this activity at any time.
The office ledger relates to the agency's main office or business bank accounts. This money is actually the agency's own money which is used to pay normal business overheads and operating expenses such as utilities, wages, VAT, etc.
To properly manage the office ledger the agency should use a separate accounting package since Elevate is primarily concerned with the client ledger.
When rent is applied on a tenancy, this sum is now due from the tenant to the client ledger.
When rent income is collected from a tenant this is typically paid into the client account where it becomes part of the client ledger since it now belongs to the property or landlord.
When rent is collected from a tenant the property is usually charged a management fee, typically 10% of the rent collected. This charge generates revenue for the agency and is due to the office ledger, along with any VAT element if appropriate.
In the example screenshot below, the tenant has paid £2000 of rental income to the agency, and this income is held in the client bank account and reflected in the client ledger.
The property has been charged a 10% management fee of £200 (consider the agency is not VAT-registered). This fee is due to the agency since it represents sales revenue for the business, and is reflected in the office ledger.
Overall, the property has £2000 of rental income awaiting payout, and £200 of charges to be paid to the agency, so the net balance is £1800 due to the property.