As a block management agent, your role in the service charge audit process is essential. You’re not just a record-keeper, you’re the key liaison between leaseholders, landlords, and accountants.

When your preparation is clear and complete, the audit is faster, more accurate, and builds trust with everyone involved.

Feel free to use this step-by-step checklist to ensure your next service charge audit runs efficiently, with fewer headaches and more confidence.

  • Close off the accounting period

    Make sure the financial year is wrapped up cleanly:

    • All service charge income (including arrears) and expenditure must be posted to the correct accounting period.
    • Chase and record any late invoices, or create accruals where charges are expected but not yet invoiced.
    • Reconcile all relevant bank accounts, including reserve or sinking fund accounts.
    • Double-check for missing transactions, duplicated entries, or manual errors.

    Tip: Use a year-end checklist template to confirm each element is closed and reconciled.

    • Gather supporting documentation

    This is one of the most time-consuming parts of the audit – start early and be thorough:

    • Contracts for services (cleaning, maintenance, security, etc.)
    • All invoices and receipts, clearly dated and labelled
    • Proof of payment (e.g. bank statements, remittance advice)
    • Insurance policies and premium schedules
    • Payroll reports for on-site staff or caretakers
    • Utility bills and energy usage records
    • Any correspondence that supports unusual or one-off costs (e.g. quotes, landlord approvals, emergency works emails)

    Tip: Save everything digitally in a clearly structured folder by category.

    • Review budget vs actual spend

    Before handing the accounts over for audit:

    • Compare each budget line to the actual spend.
    • Flag any over or underspends, ideally with a short-written explanation.
    • Prepare backup for major differences (e.g. a £5k overspend on repairs should have a work order or contractor invoice attached).

    Tip: Be proactive – unexplained variances are one of the most common causes of audit delays.

    • Revisit the lease terms

    Check that all charges included are recoverable under the terms of each lease:

    • Are there caps on certain expenses (e.g. management fees)?
    • Are reserve fund contributions allowed under the lease?
    • Do different leaseholders pay different percentages?
    • Are there any exclusions or unusual clauses?

    Tip: Keep a lease summary sheet on file per block to speed up checks year after year.

    • Draft the statement of account

    Even if your accountant will prepare the final version, a well-structured draft saves time:

    • Include a clear income & expenditure statement
    • Show reserve fund activity (opening balance, additions, spend, closing balance)
    • Label each cost clearly and consistently with the budget headings
    • Where applicable, follow industry guidelines

    Tip: Make sure the format is user-friendly; your accountant and leaseholders both need to understand it.

    • Coordinate with your accountant

    The smoother your working relationship, the quicker the audit:

    • Book your audit slot early, especially between January and June when many firms are at capacity
    • Provide one zipped file or a clear digital folder with all records
    • Respond quickly to follow-up queries, don’t let one missing invoice stall the whole process

    Tip: If you use property management software, give the auditor access or provide clear reports to reduce back-and-forth.

    • Communicate with stakeholders

    Good communication builds confidence and reduces disputes:

    • Keep the landlord or freeholder updated on timelines and issues.
    • Once audited, prepare a short summary or cover letter to accompany the accounts when shared with leaseholders.
    • Be ready to field questions from residents – Ideally with a written breakdown of any variances or large costs.

    Tip: Transparency now avoids complaints later.

    • Plan ahead for the next audit

    Each audit is a chance to improve your processes:

    • Note down any delays or issues you faced (e.g. missing invoices, unclear coding, access to reserves).
    • Schedule internal reviews of service charge spend quarterly to stay ahead of errors.
    • Consider adopting cloud-based tools or accounting integrations to simplify record keeping, automate reconciliations, and support real-time reporting.

    Tip: The best audits start the day after the last one finishes.

    Final thoughts

    Efficient audit prep isn’t just about compliance – it’s about credibility. Block managing agents who prepare well and communicate clearly build stronger, more lasting relationships with landlords and leaseholders alike.

    At Williamson & Croft, we work closely with block managers to ensure service charge audits are handled promptly, accurately, and with minimal disruption.

    Our goal is to make the process seamless, so you can focus on what matters most: managing your buildings and your client relationships.

    Want to make next year’s audit your smoothest yet? Get in touch today.