Property Accounts Payable: The Overlooked Specialists in Retailers' Estates-Accounts Overlap

In this episode of That Retail Property Guy, we shine a light on one of the most overlooked yet essential functions in any retail property operation: Property Accounts Payable.

While estates teams focus on leases and landlord relationships, it’s often Property AP that carries out the financial obligations those leases require. But this isn’t standard Accounts Payable. These are high-value, legally binding payments, often made without formal invoices or purchase orders - and the margin for error is huge.

We explore what happens when landlords or managing agents change mid-lease, when new payment instructions arrive without clarity, or when teams rely on automation without specialist oversight. In those moments, confusion can reign - and unless someone reads the lease, mistakes can quickly become expensive. Here we cover the who, what, when and why to pay, in detail. 

The episode delves into the risk of treating Property AP like standard GNFR accounts, the compliance traps hiding in poor handovers, and the dangers of under-resourcing a team responsible for millions in payments. We also consider the importance of strong collaboration between Estates and AP - because when those teams work in silos, money gets lost.

Ultimately, this is a call to recognise Property AP as more than admin. It's a legal, operational, and strategic function. And if your business isn’t reading the lease—or backing the people who do—you’re leaving profit on the table.

00:00 Introduction to Property Accounts Payable

00:26 The Unique Nature of Property AP

01:12 Challenges in Property AP

01:38 Distinctions Between Property AP and Regular AP

02:51 The Importance of Proper Training and Resources

04:32 The 'Who to Pay' Challenge

07:27 Verification and Due Diligence

14:08 Payment Methods and Issues

17:24 Final Thoughts on Property Accounts Payable

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Go to ThatRetailPropertyGuy for more on Gary Marshall, SmarterEstates and the TRPG podcast. You can also check out the TRPG Blog for reading versions of key episodes. 

For our niche 'Accounts Recoverable in Retail Property' business services, visit SmarterEstates

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Transcript

0:00

Welcome to that Retail Property guy with your host, Gary Marshall we hope you'll be entertained, enlightened, and may be a little inspired. In this episode, let's delve a little deeper into that special area, the overlap between estate management, which looks after the landlords and the leases. And property accounts payable, which looks after the payments for those lease obligations. In some businesses, this is handled by the same person and sometimes juggling other responsibilities too. In larger businesses, the responsibilities might be separated, which causes its own points to be recognized. I. Property AP is a specialized function. It doesn't exist in a vacuum. It fulfills the payments which are obligations under the lease contracts. These property costs are often a massive proportion of any retailer's costs. It needs to sell a lot of widgets to cover one pound in occupancy costs, so every pound knot wasted goes straight to the bottom line as profit. Property AP is different in so many ways from regular business ap, which might be called GFR or GNFR, and which cover the items that the business buys and sells. Property costs are so different, often governed by different rules and legal structures that regular AP guys might be unaware of, like bailiffs. But oddly, when you consider the risks property, AP is often reduced to a skeleton service or even outsourced to a remote team who know little about UK property. That team might handle millions of pounds in payments, may be triggered by semi-automated processes where everything can flow smoothly until something changes. And then in the absence of a specialist supervisor. Sometimes confusion and chaos can quickly set in. There are some obvious distinctions right from the outset. Most business procurement deals stipulate that the supplier must quote a preauthorized purchase number like a PO on their invoice. No purchase order, no pay. It simply gets rejected. The purchase order is often associated to a specific project or cost area, and may be limited in terms of scope or expiry, but it can be the key by which A-G-N-F-R team matches invoices to expected spend. Not so easy for property accounts payable by comparison to GNFR with its purchase order numbers. Property leases form a binding contract often with the liability to pay the lease charges on time, whether formally demanded or not. This means a landlord or managing agent doesn't even have to provide an invoice, let alone quote, a purchase order number to expect the tenant to process a rent payment. And this fact surprises a lot of non-property whiz, especially the auditors, putting it simply. The lease is the contract which says, pay me. Of course, if the landlord has opted to tax for VAT purposes, he must provide a VAT receipt after payment. It's all part of a very complex web. For the moment, let's recognize that property accounts payable is a specialized function. They might be a subset of A-G-N-F-R AP department, but they require special training, understanding and skills. It's a complex area and woe be tied. The business who under resources it. Yet so many do. The losses or missteps can add up to millions of pounds and impact the bottom line. The diligent asset manager or estates manager should ensure that whoever handles their property accounts payable function is well-trained and recognized and embraced as the other half of the estates team, not a disconnected or disinterested back office function. Who can't see that there's a lease behind the invoice? I am a strong believer that personal interaction is critical to nurture that dream team, to build the bonds and relationships, to create the knowledge base and the mutual understanding. Step it up. Don't dumb it down. We recognize that property accounts payable teams make payments, but their functions extend to so much further. And if they're not doing this, then who is? They need to manage supplier relationships. Deal with queries about arrears and balances. Recover your credits. Process changes of detail, like suppliers, bank accounts, provide cashflow forecasts, assist with completion statements, handle service, charge adjustments, verify insurance demands, organize business rates, payments, and so much more than might be expected of a standard AP team. And they do all of this on one of the biggest spend areas in the retailer's business. Usually the second, only after its people costs. Like I said, woe be tied. The business who under resources it. So have you ever come across the who to pay challenge? I. It's a peculiar aspect of property. AP kind of a result of the fact that the landlord or their agent doesn't have to go through a procurement process. They don't sign up to your business's terms and conditions. In fact, they don't really see themselves as suppliers at all. They believe they have the dominant role in the relationship. You are subject to their terms, not the other way around. Many landlords and their agents are helpful business partners, but it's not unusual for a landlord to sign up a tenant in a new lease and expect that that's all that's required in order to get paid. These landlords might be big businesses who wouldn't dream of just writing checks to their own suppliers without first running background checks and then setting them up in a secure payment system to minimize risk of fraud and so on. So why would they think that their tenants would be any less diligent? Tenants often have internal protocols across their whole business, not just in property to verify new payee details and create separated duties between who can authorize a payment and who can process it. And the start of a lease isn't the only occurrence of this setup challenge. It's not unusual for a landlord's interest in a shop or a retail park to change hands midway through the term of a tenant's lease. It's just the usual churn of business for landlords. Investment funds come and go. Their objectives change, so the old landlord sells to the new landlord, who then issues new instructions to the tenant about who to pay sometimes how to pay and even when to pay. Often, this is accompanied by a bunch of other expectations that may or may not be included in the tenants lease based obligations. And remember our mantra, RTFL. It's time to read that lease again. And whether it's a result of a change in landlord or just the periodic renewal of a management contract, it's also not unusual for a landlord to appoint a new managing agent. Again, this could trigger new instructions about who to pay, how to pay, and when to pay. A previously agreed concessions and side letters and customer rearrangements might be overlooked or thrown out the window, so the tenant needs to be on the front foot to enforce these. In my experience, this who to pay challenge is often a bit of a challenge. The landlord or their agent might think it's okay to share their new bank details on the afternoon before rent day. And still expect payments on time. They might think their invoice is the only invoice to be processed that day and believe that the tenant is compliant and will prioritize it with a quick bank transfer, no questions asked. There are numerous questions to be asked, and if there is a separation of duties, that means an accounts colleague can't make a payment of large amounts to a previously unknown payee without other colleagues first vetting that payee against fraud, money laundering, modern slavery, and so on. So let's consider who in your team handles which part of a change, what tests are applied? Who signs off? What is your due diligence against fraud scam, incorrect data leading to a mis payment. Perhaps money gone forever. For example, if you are recognized and longstanding landlord or their lawyer advises you of a sale of their interest, where does that communication go? I've seen examples of landlords sending formal notifications to the subject premises as demised in the lease, so to a trading branch rather than to the registered office that's mentioned in the lease and checkable at company's house. Why would they do that? Is it just poor research, lack of training, or maybe even intentionally sneaky, and if so, what are they trying to conceal? Are they aware of the many reasons that that notification might just be deemed undelivered? Not the least of which is the poor store manager who has no authority or obligation to check and understand correspondence like this. It might take an obvious decision to treat it like junk straight in the bin, but let's assume that the notification does reach the right building, and then which desk does it land on, or which mailbox does it land in? Estates accounts, possibly even. It lands first with legal or admin or the company secretary. And admittedly, all of these could be the same person, so who gets it first? Who checks that incoming paperwork? Who connects the dots, looks for the fraud, validates the authenticity. I. And applies the ultimate test of trust. Back to that Venn diagram overlap idea. In my experience, estates teams sometimes shy away from this obligation, seeing it as an admin function, not a deal, but holding a mirror to that accounts teams might not have the market knowledge or experience to apply those tests. In an ideal situation, shared knowledge, shared expertise, shared responsibility equals mutual outcome. So, as I said, who checks what? Well, what exactly are we checking? What are we expecting? We're all fully aware of the potential for scams in our personal lives. Those unsolicited telephone calls or emails allegedly from your bank, urging you to transfer funds or share a confidential detail. You'd hang up, maybe you'd mutter something under your breath. You ignore the email while simultaneously marveling at how genuine it looks. So why be any less vigilant in business? Nobody wants to be that person who authorized a substantial payment to a new supplier, only to find it was a scammer and they can't recover it. So back to that communication from your recognized and longstanding landlord. They've advised you of the sale of their interest. How does that communication come in? Email PDF attachment on an email, hard copy, snail mail, and what essential information should it contain? Opposite would be very useful if the letter told you what date the landlord had sold it on and who they had sold it to, by which I mean the exact actual legal entity name as registered at company's house, not a soundalike or an umbrella company. The legal transfer date is essential for any apportionments of charges, but also for recognition of the end of legal competency in any other instructions. When the formal landlord steps away, their existing instructions to any managing agent immediately fall away too. They don't control that lease anymore. They have no clout. Their asset managers hold no sway. They are to paraphrase, Monty Python, an ex landlord. But that leaves you hanging in Bair. You only have half the story, so you'd hope that you also receive a letter of introduction and instruction from the newbie landlord, and maybe this is a company you already know and have frequent dealings with, or maybe not. And maybe that newbie landlord advises you that they've appointed a managing agent. I. So maybe you have a third communication from the agent with their bank details, contact details, their tenant reference for you, which they'd like you to quote in all the remittances and which mailbox to send that remittance advice to, and possibly a summary alleged, a balance handed over by the outgoing landlord. And a question, please, can you settle your account within seven days? But you thought you were all paid up to date, right? So who do you pay and how do you change that payee, middle lease? Who owns that responsibility? It would be great to see estates and accounts work hand in hand to verify the documents, manage the systems, balance the books for a fresh start with your new landlord. The tests are simple. First to consider the incoming documents would probably be an experienced colleague in a state. Someone who's familiar with the usual players in the property industry follows the latest developments or changes in the market. Is aware of the typical relationships between pension funds and their tax vehicles. First test has got to be. Does all the information match? Does the incoming landlord's name match exactly to whoever the outgoing landlord said they sold it to? I've seen numerous examples where they don't match, which immediately triggers doubt. If they don't match, then what's the connection? Is there an intermediary party? Has it changed hands again, or is there a money laundering scheme at play? Do both parties agree the same date of transfer? If there's a substantial gap between the date the outgoing landlord says they sold it, and the date the incoming landlord says they acquired it again, this should raise doubt. Is it just a a slip up? Did another party own it in the interim period? And who's entitled to the rent for those missing days? Could you keep it? Put it in a piggy bank and fund the office party. Then following our Venn diagram, the accounts team should pick up the battle for the second stage immediately suspend any payments, charges, items in process, but not yet released, asking a question, should these still go to the old landlord or to the new landlord? Don't release them till you're sure. You may never get back Any mis paid funds. And separate question. Do all the information and the details and the letters and the documents look strong enough to pass a basic test? There's a bunch of things to mention here that many even competent and experienced landlords and agents neglect to include in their data packs. For example, they might provide their sort code and an account number. But not give the account name. This is not their business name. It's the name of the bank account as it appears on their bank statement. This might typically fail the confirmation of payee, protocol, or cop, which requires three points of verification to establish if a bank account is correct. You've probably come across this in your private banking transactions. If it doesn't match, you get a message asking, are you sure? And if you aren't sure, you stop and check. So we've looked at who to pay. Another worthwhile check is how to pay. Now you'll be familiar with the different platforms that banks use to make payments. Often these are chaps or banks. Chaps is faster than backs, but costs more per transaction. So many big organizations save thousands of pounds each year by preferring the snail paste backs, but backs isn't suitable for everyone, including landlords whose bank accounts are not in the uk, and also some that are. I came across one very frustrated new landlord who invoiced directly, not via an agent, but never seemed to receive his rent on time unless he chased and got an emergency same day transaction. His patience was stretched thin. My client's accounts team then did the basic check and yes, you guessed it. His bank account was set up to receive only chaps, but the client's, regular outgoing payments were processed by backs, so they were being automatically rejected back into their bank account and nobody noticed. But the emergency, same day payments were processed as chaps, so they landed okay. The solution was simple to amend the landlord's supplier details in the payment system, so all their regular transactions went out as chaps. It cost a bit more, but everybody lived happily ever after. I. The moral to this story is that you don't want a time critical payment to bounce back over a minor processing issue. It's always wise to check the destination. Account aligns with your preferred method of payment. The next big challenge we might call, why to pay or maybe, trust me, I'm a stranger. The question is who is giving the instruction and more to the point. Do you think they have the authority to give it? Some landlords provide instructions on the letterhead of a parent or umbrella company acting as Tittel head of a grand organization like Puppet Masters to the various subsidiary entities. But without demonstrating any evidential link between them and the entity, which was stated as the new owner by the outgoing landlord. Therefore, this shows no evidence of competency by the signatory to act on behalf of the new landlord entity. Maybe they think the tenant already knows the deepest ins and outs of their corporate structure, maybe has access to their table of delegated powers for their signatories. Most likely they just assume that tenants don't pay attention to minor detail. But we do, don't we? And we're still not at the end of the process. We mustn't forget that property accounts payable should always double check any balances being transferred from the outgoing landlord or supplier. To the incoming landlord or supply. To do this, they mostly need to obtain ledgers, showing the balances, and then reconcile those ledgers. Experience shows it's not unusual for credit balances to be mysteriously left, unaccounted for, and therefore not handed over. And it can sometimes take an age for the new supplier to reassure themselves of a competent handover before releasing anything that showed as a credit they took on. And all through that interval, the tenant remains at risk. My recommendation is to obtain these handover ledgers and complete the reconciliation in a rapid turnaround. The more time passes, the more difficult it becomes to get the errors explained, corrected, and where relevant refunded. Phew. Okay, so here we are. A simple task of recognizing that property accounts is different from standard accounts and about how to pay and who to pay and why to accept instructions. It all turns into a complex minefield of risk management, compliance, corporate governance, as well as estates and accounts management. The then overlap between those two teams must be very strong here. It's where the money is. Some deal makers in retail property might suggest that their accounts team are merely beam counters, but those beans are incredibly valuable. The personalities and skill sets of a good accounts payable team are often different from the deal makers in estates, but they're just as essential. Consider the size and range of your property portfolio. Consider the enormity of your property budget. Imagine the churn of that budget as it's chunked down into quarterly or monthly transactions across multiple payment types or GL codes. Imagine checking and controlling for accuracy for no gaps or duplications in the periods being invoiced to ensure to not pay even one single day, twice. And then to forecast all of this so the business can plan its activity, its cashflow. Well look after the pennies and look after the pounds as well. So how well do you think your teams in estate and accounts payable are looking after the pennies and the. I've posed this question to numerous retailers, either to the estates team or the accounts team, and be met with a reassuring nod or sometimes a protective shields up that everything is humming nicely. I suppose it's an obvious human nature response, especially when those managers are deeply embedded in that end-to-end process. But in the same way, I've also been invited to scratch the surface revealing millions, yes, millions of pounds that should be profit in the retailer's pocket, but sadly it's hidden in the landlords or their agents coffers or ring-fenced in long, forgotten provisions. Follow the money. You'd be amazed at the margin of possibility. And it could be your property accounts payable team looking for you. Like we said, it doesn't function in a vacuum. They need a competent point of contact within estates and lots of conversations to build the underlying knowledge. Property accounts payable is definitely not a function to overlook under resource, or simply ignore. Thank you for listening to that Retail Property guy. For more information, visit that retail property guy.com.