Commission and letting fees on their own accounts
How the Real estate pack lets an agency invoice sales commission and letting fees on lines that each name their own revenue account in the ledger.
By Achekam · · 4 min read · For Real estate businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
Look at many agencies' income statements and you will find a single line for income. Sales commission, letting fees, administration charges and the odd valuation fee are all poured into it. The total is right, but the question every principal eventually asks cannot be answered from it: is the rentals desk paying its way, or is the sales side carrying it?
The answer has to be built in at the point of invoicing. If every line on every invoice says which revenue account it belongs to, the income statement separates itself. That is how the Real estate pack in Achekam's Industry CRM handles commission and letting fees.
What switching the pack on adds
The Real estate pack is built for an estate agency's sales and lettings. Switching it on adds the industry's revenue accounts to the business's chart of accounts and its starter items to the catalogue. If an account code the pack needs is already used in your chart for another type of account, the activation is refused and the conflicting account is named, so you can sort out the clash rather than end up with two meanings for one code.
After activation, open your chart of accounts and read the revenue accounts the pack added. Decide which kinds of income you want to see apart, typically sales commission and letting fees at the least. Accounts can be added, renamed or switched off. If your agency also wants, say, valuation fees on a line of their own, agree with your accountant how that account will be used before the first invoice goes out.
Starter items you price yourself
No starter catalogue item in any industry pack carries a price. The Real estate pack's starter items arrive without amounts, and you set them.
That is deliberate. Commission is negotiated per mandate, letting fees differ between agencies and between once-off placements and managed lets, and any price printed in a starter list would be wrong for most readers. Before the first invoice, go through each starter item and decide what it should cost your customers, with your mandates and fee schedule open beside you.
Each invoice line names its account
With the pack on, an invoice line names the revenue account and the product it sells. Revenue is posted per account, with any cost of sales in the same journal.
A worked example in words. In one month an agency registers two sales and places a tenant in a flat. The two commission invoices carry lines that point to your commission income account. The letting invoice carries a line that points to your letting fees account. When each invoice is issued, the ledger receives debtors, output VAT and revenue split exactly as the lines said. Nobody posts a reclassification journal at month end, because nothing was misclassified in the first place.
When each invoice is raised
The two kinds of income arrive at different points in a listing's life, and the pack's stages make the timing visible. A listing moves from Appraisal to Mandate signed, On the market, Under offer, With the conveyancer and Registered or let, or is Withdrawn.
Sales commission is usually invoiced when the sale reaches registration, because that is when it is paid. Until then, an invoice can sit as a draft: drafts can be changed or deleted, and only issuing one takes the next number and posts it to the ledger.
Letting fees often follow an agreed quotation. In the Industry CRM a customer accepts a quotation on a link by typing their name and ticking a box, and the acceptance drafts the invoice in receivables. The link token is stored only as a hash, the customer's IP address and browser are kept, and a sent quote is frozen: it changes only through a revision. Issuing the invoice straight away needs an administrator's recorded authority, so by default someone looks at the draft before it posts.
That default suits an agency. A landlord who accepts your letting quote has agreed the fee, but the tenant may not have moved in yet. Leaving the invoice as a draft until the let is final keeps your debtors honest. When commission and fees count as revenue in the financial statements is a question for your accountant; ACCA's article Revenue revisited explains the IFRS 15 five-step model for recognising revenue from contracts with customers.
Reading commission income month by month
Once the lines carry the right accounts, the reporting needs no extra work. Management accounts show an income statement for a chosen period beside the period before, added up from your own journals, and can be exported as PDF or CSV. Choose a single month and you see commission income and letting fees side by side, with last month next to them.
One detail to know: the year-to-date preset starts on 1 January, not on your own financial year start. If your agency's year runs from March, choose the period by hand when you want a true year to date.
Questions worth asking of the report every month:
- How much commission registered this month, and how does it compare with last month?
- Are letting fees steady, or do they follow the sales cycle?
- Are any fees landing on the wrong line, which points to a catalogue item set up wrongly?
The same approach, invoice lines that carry their own revenue accounts, is used across other industry packs; order forms that post subscription revenue shows it for a software business.
Setting it up once
Before switching the pack on, check your chart of accounts for codes that might clash. After switching it on, price the starter items, confirm the revenue accounts you want, and issue the next commission invoice through the pack. The month after, your income statement will show you which side of the agency is earning. For the listing stages that drive the timing, see following a listing from appraisal to registration.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
