Introduction
The property management company faced challenges in two critical areas: delays in filing periodic replacement reserve claims from lenders for property improvements and failure to account for Use Tax correctly, leading to non-compliance risks and potential financial penalties.
Background
As per their agreements with lenders, the company was obligated to file periodic replacement reserve claims for property improvements. However, due to lack of staffing and clearly defined processes, there were significant delays in filings, and some claims were rejected, resulting in additional costs for the company. Additionally, the company struggled to account for Use Tax accurately, which is levied on products and services used in a jurisdiction where sales tax is in effect but purchased from a jurisdiction where tax was not paid.
Approach
Xshore implemented a two-pronged solution to address these challenges. First, they developed a clear Standard Operating Procedure (SOP) and built a dedicated team to prepare the filings and a detailed tracker to ensure compliance and eliminate rejections for replacement reserve claims. Second, they implemented an automated solution to account for Use Tax by grossing up relevant invoices in the accounts payable process and preparing returns and filings for every relevant state.
Results
The Xshore solution delivered the following benefits:
– Backlog of replacement reserve claims was cleared within 60 days, and ongoing delays were eliminated
– Use Tax compliance risks were eliminated, and financial penalties were avoided
– 60% direct cost savings
– 100% compliance with regulations and agreements
Key Takeaways
By outsourcing critical finance and accounting processes to Xshore, the property management company was able to streamline its operations, ensure compliance with regulations and agreements, and achieve significant cost savings.
