Health Check: Markups
There are two methods to create vendor markups in AppFolio: the correct way and the “it’ll do” way. Both result in the property paying the accurate amount for an expense, but how it is presented and who receives it at the end of the process are significantly different.
Work Order Flow Process
AppFolio developed a process that allows a property expense to be marked up, which can only be done through the work order flow.
When a bill is created directly from a work order, depending on the database’s universal accounting settings, the markup bill to the manager will either be suppressed or itemized on the owner’s statement. The markup GL Code is not the same as the vendor’s invoice GL Code used in the work order bill.
Manual Entry Markup – Property
When a vendor’s invoice is processed through Smart Bill Entry or manually, and is allocated to a preexisting work order, the manager has the option to create a manual markup bill allocated to the same GL Code.
When a manual markup bill is created, this will appear as an itemized transaction on the owner’s statement and cannot be suppressed.
Manual Entry Markup – Corporate
AppFolio has the ability to pay vendors directly from the corporate/management operating account. The manager will invoice the property the higher amount then pay the vendor a reduced amount.
When the property is billed for the expense, the vendor’s original invoice cannot be included in the owner packet bill attachments. The amount represented on the vendor’s invoice and what the property paid are not the same.
Conditions & Disorders
The issue we have come across with the Work Order Markup Flow process is the use of a separate GL Code that AppFolio requires all databases to have in their Chart of Accounts. This GL Code is not the same as the vendor’s expense GL Code. Therefore, when a Year-End Statement with the owner’s IRS Form 1099 MISC is presented, the owner will see a separate line item for manager markups.
Depending on the agreement the manager has with their owner, this may cause confusion for the owner.
SFL K.I.S.S. Protocols
SFL uses the AppFolio Work Order Markup Flow process to ensure that all transactions are processed in accordance with the markup or discount agreed between the manager and owner. We go a step further by updating the markup bill to the manager by using the same GL Code used in the vendor’s bill. This ensures that when the owner is presented with their Year-End Statement, they have a full account of the amounts paid out for each expense incurred at the property.
This is specifically important for different services provided at the property. For example: HVA/C Repairs vs Plumbing Repairs, but the Markup amount includes both types of repairs. This does not provide the breakdown between the two different amounts of the services provided.
When the manager accounts for the income based on the specific property expense GL Code, the manager records the amount as income. This process is similar to recording any other management income paid by a property.
The work order markup/discount flow is particularly important when the manager has an agreement with the vendor to provide a discount. See our next blog, “Health Check: Discounts” coming soon.
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