Top Three Tips for Retail Tenants of All Shapes and Sizes

Top Tips for Estate Management and Accounts Payable in Retail

Gary Marshall, the host of 'That Retail Property Guy,' shares his insights on the intersection of estate management and accounts payable from a retailer's perspective. He offers his top three tips: RTFL ('Read the Lease'), review all accounts processes, and follow the money. Each tip is elaborated with practical advice and real-world examples. Gary emphasises the importance of understanding lease specifics, fostering collaboration between estates and accounts teams, and diligently tracking payments to avoid costly mistakes. The episode concludes with a reminder to explore more content for detailed guidance.

00:00 Introduction to That Retail Property Guy

00:38 Top Tip #1: Read the Lease (RTFL)

04:16 Top Tip #2: Review All Accounts Processes

09:59 Top Tip #3: Follow the Money

13:04 Conclusion and Final Thoughts

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Transcript

0:00

Welcome to That Retail Property Guy with your host Gary Marshall. In each podcast episode, we delve into topics relating to the particular overlap between estate management and accounts payable from the perspective of a retailer as tenant. Sharing stories and insights through Gary's unique lens, we hope you'll be entertained, enlightened, and maybe a little inspired. I'm often asked for my top three tips for estates or accounts leaders, and it's a little difficult to summarize all of this experience and pearls of wisdom into three simple bullet points, but let's have a go. My first top tip would be RTFL, read the lease, ensure that all estates professionals always read their leases. Top tip number two would be review all accounts processes. Ensure both estates and accounts teams recognize how transactions are coded, processed and controlled, and that they can talk to each other about it. Top tip number three would be follow the money. Never assume that your payments land as expected. Always consider that the landlords, their agents, and even your accounts team might mess up. Regularly follow the money. Check you get the right receipt for your payment. Now, of course, these top tips. Are very much bullet points. Let's try to break them down into a little bit more detail. Top tip number one, RTFL, read the lease. This is the basic fundamental estate management concept, which is to read the lease, the actual lease, not a summary or an executive report. Don't guess or assume the extent and limitations of every demise. Okay. It's pretty easy to be. Maybe complacent, or maybe under pressure of workload, so it doesn't feel like there's a right time to read all those boring documents, especially on leased locations that don't seem to be particularly active at this time. I mean, if someone asks a specific question, you've always got time to look up the specific answer, to read that specific lease clause at that specific moment? You don't need to know it all, you just need to know how to find it, right? Except when something unexpected bites you by surprise. Or you miss a trick, an opportunity slips by, a door closes, a potential gain is lost, or a liability gets extended. So without doubt, every property professional who holds responsibility for estate management should know exactly what's in each of their lease packages. That's lease, side letter, deeds of variation, everything. Okay, we have databases and summary documents, but if an estate manager or an asset manager relies wholly on these generalized, homogenized, unified, edited, non comprehensive resumes, they risk overlooking something obvious that wouldn't fit into a standard template. So read the lease. Reassure yourself that you know exactly if that summary is accurate, or perhaps that there is an unusual exceptional clause that might just need particular attention before it's too late. For example, is any clause in the lease personal only to the initial named tenant? So not transferable if the lease is transferred. Are there conditional clauses or time of the essence provisions? Exactly what is the permitted user clause? Who is the legal landlord? Even if communication comes from an associated entity like an investment manager, what's their relationship? And who is the legal tenant? Especially if this could be part of your group and you tend to share occupation, whether formally or informally. Don't assume, never take it for granted, always know exactly what you're dealing with. And read the side letters, the deeds of variation, the concessions. Know how these might impact the actual lease terms. Know if these are assignable or personal. Know if any could fall away with no right to reinstatement if, for example, rent is late more than once. Now, of course, this handy tip is still just brushing the surface. There's a load more to consider and reflect on. In other episodes, we delve into this in greater detail. So follow the links in the notes to episodes like RTFL. Top tip number two, review all accounts processes. By this I mean, ensure both estates and accounts teams recognise how property transactions work, how they are coded, how they are processed, how they are controlled, what they mean. For example, it's essential that property accounts teams recognise how different their role is and From that of a standard GNFR team, that they recognize the existence of the leases which drive these liabilities for the transactions that they handle, and that they understand the nature of those transactions. Which GL code is assigned to which type of charge? Which cost center is assigned to which lease? How rent differs from service charge? They must recognize the purpose of payment frequency, whether that's traditional English quarter days or modern monthly payments. So for example they can identify any gaps or overlaps or duplications. If the accounts team validate incoming invoices, they must recognize the need to check all the key points. In this role are accounts of the front line, they're the gatekeepers of conformity, or of changes and variances which might indicate a change in the controlling interests such as a new landlord or a different managing agent. They must share this information with the estate management team without delay, otherwise a change could slip past unnoticed, payments could go out to the wrong party, maybe never be recovered, and of course ongoing negotiations might be compromised. A business can't risk that the accounts function is dumbed down, reduced to a remote back office activity, where the colleagues don't sense a connection to estates, don't recognize their purpose, to act as partner in fulfilling the business's leasehold obligations. And by reciprocation, the estates team must understand what they are asking of the accounts team. They must share the goal of ensuring that the right transactions are processed in the right way, in the right timescale. An estates colleague should never just drop a bundle of paperwork on the desk of an accounts colleague and instruct them to do the necessary. We understand that different teams have subject specific tasks and specialties, but an estates colleague who can't explain the necessary in better detail could be a risk and a liability to the overall business. Those payment objectives, charges, values, date ranges, are an intrinsic part of the estate's function. No deal should be concluded if the financials don't stack up. And build a bridge. Ensure that both estates and accounts share the common ground and liaise with each other. This might sound absurdly obvious, but my experience teaches me it often doesn't apply. The accounts team might be in a different building or a different country. They might consider themselves detached from the professional activities of the estates team. They might view themselves as a lowly back office function who daren't challenge the property wizards. They might action every instruction verbatim. Simply because an asset manager so commanded it. Even if their own experience tells them something is wrong. Or, conversely, they might be sick and tired of trying to raise these technical accounting issues that nobody in Estates seems to understand or see the relevance of. The Estates teams might view their roles as professionals. And to some degree this is true. They deal with complex quasi legal and technical stuff. But they should still have time and respect for the accounts team that provide the service to pay the landlords, to manage the service charges, to provide the completion funds to the lawyers. This activity doesn't occur in a vacuum. It's part of the same overall task. Property. The two teams should function as a ying to the yang, two halves of the same overall function, sharing a common goal, working together to ensure accurate and on time transactions. Not a penny or a cent late, mispaid, misallocated, unidentified, duplicated, or lost forever. So, sharing common ground, it sounds like an easy ask, but there are often issues with lost in translation, even in the same language. Critical technical terms can be complex, whether these come from a landlord and tenant perspective or from a cashier and accountant perspective. The intention of any series of transactions might in itself be complicated. It needs clarity. It needs de complicating. Legal deadlines and financial periods might need aligning. So if sharing common ground and a common technical language seems a bit of a stretch, Consider the cost of failure. Property occupation costs are often the second largest in a business after people costs. You don't need much of a margin of error to misplace, mispay or misallocate large sums, possibly more than the cost of the people in resourcing the right solution. But expertise in this common area can be a challenge. It's rare to find someone in a business who can act as an ambassador or partner between the two halves, but there is a strong motivation to train someone up. Or hire someone in to facilitate that. So tip number two is review all the payment processes to better understand and then document them all. So expectations are clear for both halves of the function, the right vocabulary, the right expectation, the key steps, the expected outcome, and then train both halves. There's no point in having well documented process notes if they only live in a shared drive that nobody ever visits. And of course, this handy tip is just brushing the surface. There's a load more to consider and reflect on. Follow the link to episodes about the property AP team and the Venn overlap between these teams. Tip number three is follow the money. This is really my toppest top tip. You can train your people, you can establish processes, but you can never guarantee that an outgoing payment gets correctly allocated by the recipient, or that an internal transaction gets properly coded. In general, the law of averages suggests that somebody somewhere will mess up eventually, and for transactions of large value, such as property liabilities, it doesn't take much for that to have significance. So regularly follow the money. This can range from your accounts team checking that they get the right receipt for your payment. It's not unusual for a landlord's agent to misallocate your payment and send a receipt which looks like a thank you but which actually indicates an error, showing that maybe rent was applied to clear old service charge arrears which of themselves might not actually be arrears. If your monitors are doing their job diligently, they should spot these and immediately raise a query. Oi, I paid you a quarter's rent, not a service charge balancing. Reallocate it immediately, and then let's talk about those alleged arrears, which I can also prove we paid. It might include demanding a full copy of a landlord's ledger, and then checking a history of all the items billed and receipted, in case the landlord has a history of misbilling and misallocating. As time passes, it's not difficult for considerable sums to be misplaced or left in suspense accounts anywhere except where it should be. Landlords and their agents, or at least their cashiers, are easily able to mismanage your payments. Your task is to make sure they don't. Never assume. And it might include double checking your own internal processes. Again, it's not unusual for sums to be reserved perpetually in provisions that no longer require them, especially if a project manager moved on and nobody closed up the CAPEX. It's not unusual for mysterious variances to appear when internal entries are miscoded, maybe using the wrong date range or the wrong GL code. And it's not unusual for sums which are due in to remain unpaid. And I'm not just talking about rental income from subtenants. I'm thinking of agreed but uncollected contributions from landlords, or expected but unreceived refunds from managing agents, or promised but unpaid refunds of business rates or service charge. It's always worthwhile to not assume that all processes hum along efficiently like a well oiled machine. There's always the possibility of human error when you consider the extent of your property budget, it's surely worthwhile shining a light into the darkest corners and putting a few sample activities under the microscope. Whatever you find would be pure profit. No additional sales required. Once again, this handy tip is still just brushing the surface. There's a load more to consider and reflect on. In other episodes, we delve into this topic in greater detail. Episodes such as Follow the Money and Statements of Accounts. Thank you for listening to That Retail Property Guy. I hope you enjoyed today's discussion. Don't forget to explore more episodes and if you have ideas for future topics, feel free to share them below. If you enjoyed the show, please consider leaving a review. Your feedback is greatly appreciated. For more information, visit ThatRetailPropertyGuy. com. Thanks again for tuning in!