29 July 2025

Strata End of Year Financial Reviews - Pt. 1

Part 1 of our 2 part guide to reviewing year end strata financials

This is part one of a two-part guide prepared in response to a common question we receive from strata managers: What should I be checking when reviewing a property's financials at year end?  The process can be broken into two clear phases. First, confirming the accuracy of the financial data, and second, analysing the results to identify trends, explain variances, and prepare for the year ahead. Both steps are important in ensuring reliable reporting and confident decision-making.

Getting the Basics Right When Reviewing Strata Financials

Before any analysis or forecasting can be done, the financial data for a strata company must first be confirmed as accurate. Without this foundation, any insights drawn from the reports risk being misleading. Phase one of reviewing financials is about verifying that the underlying data matches reality and is free from errors or omissions. This article outlines the key checks strata managers should be making as part of that process.

Start with the Balance Sheet

A reliable balance sheet should be fully reconcilable to supporting documents or reports.

  1. Bank Reconciliation
    The bank account balance shown in the software should match the actual bank statement. Minor differences may occur due to unpresented cheques or end-of-day transactions, but anything longstanding or unexplained should be investigated. If the bank statement is several months out of sync with the reported balance, there may be issues in the processing of transactions.

  2. Accounts Receivable
    Arrears need to reconcile to a list of debtors, typically lot owners or external parties. Confirm that all balances are current and valid. A common issue is income being duplicated—such as when a status certificate fee is both invoiced (creating a debtor) and again recorded as income upon receipt. This creates an overstatement of both income and receivables.

  3. Accounts Payable
    Similar checks apply here. You should be able to produce a list of all outstanding creditors and confirm it agrees with the reported liability. There may be bonds or accruals that are tracked manually or outside your software, but there must still be clear documentation supporting every item.

  4. Owner Funds (Equity)
    The opening balance of owner funds should tie back exactly to the prior year’s audited financials or AGM-adopted reports. This is often overlooked but is a simple check that helps confirm continuity across reporting periods.

Reviewing Income and Expenses for Consistency

Once the balance sheet is verified, review the income and expenditure items for consistency and correctness.

  1. Coding Errors
    Look for transactions that are inconsistent with others of the same type. For example, if gardening invoices have mostly been coded to “Gardening” but one has gone to “General Repairs,” that should be corrected. Internal consistency across accounts is important for accurate reporting.

  2. Wrong Account Types
    Watch for items that should not appear on the income and expenditure report. A common example is insurance paid in instalments under a finance agreement. Ideally, this should be shown on the balance sheet, with only the interest portion appearing as an expense. The full instalments can distort expenditure if not handled correctly.

  3. Timing Differences
    Recurring expenses should reflect a 12-month period. If you have 13 monthly gardening invoices or two insurance premiums due to timing quirks, consider using prepayments or accruals. This aligns the expenditure with the correct reporting year and avoids overstating or understating annual costs.

  4. Reimbursements
    If a lot owner repays the strata company (e.g. for an insurance excess), this should ideally be handled through the balance sheet. But if your internal process records it through income and expenditure, then the reimbursement should be coded to the same account as the original expense, allowing it to net off correctly. This prevents overstating your expenses for the year.

Final Balance Sheet Checks

Before concluding the review:

  • Ensure every balance sheet line item has a supporting report, statement or reconciliation

  • Confirm owner funds match the prior year’s final accounts

  • Eliminate any unexplained or aged unreconciled balances

Once these steps are completed, the financials can be relied upon for analysis, budgeting, or presentation to owners.


Quick Takes

  • Confirm bank, receivables and payables all reconcile to support

  • Review for duplicated income or old unreconciled balances

  • Apply accruals or prepayments to align expenses to the correct year

  • Ensure consistency in coding similar transactions