Client Accounting Goes Digital: A Guide for Estate Agents and Landlords

When Wendy Gallagher’s business partner retired in 2019 after 14 years at One Stop Properties in Glasgow, she inherited a problem familiar to thousands of letting agents across Britain. Managing client accounting for 400 properties meant shuttling money between five separate bank accounts, all by hand. “Depending on how many rental payments came in that day, processing could take anything between one and four hours,” she recalls.

Her experience illustrates why client accounting, the process of managing rent, deposits and other funds collected by agents on behalf of landlords, has become a flashpoint in the UK property sector. With around 25,000 estate agents and letting companies operating across the country as of 2024, the combination of tightening regulation and banks’ growing reluctance to serve the sector has forced a reckoning with manual processes that once seemed merely inefficient but now appear untenable.

The Banking Challenge

The catalyst for change arrived not through legislation but through the banking system itself. Since 2020, UK banks have been systematically closing pooled client accounts held by established letting agents and refusing to open new ones. Lloyds Bank recently informed one agent that pooled client accounts were “outside of our risk appetite”. Another agent who had banked with Lloyds for 20 years found himself forced to close his account, only to have Metro Bank open a new client account without difficulty.

A 2022 survey of 172 letting agents, representing 1.3% of the 12,670 agents providing lettings services nationally, found that 72% had experienced problems or were very concerned about issues with their banks. The mechanics of the crisis are particularly punishing: banks provide only two months’ notice of account closure, yet opening a replacement account typically takes between four weeks and three months. During this gap, agents cannot operate legally. The same survey found agents made an average of three separate applications before securing banking approval.

The problem stems from banks’ interpretation of Anti-Money Laundering regulations. Where letting agents see pooled accounts as an operational necessity, banks increasingly view them as compliance risks. Banks have been applying full Customer Due Diligence to every underlying party, not just the agent, leading to identity checks on every single landlord and tenant, operational overload, and account closures. Some banks have gone further, demanding that agents maintain individual accounts for each landlord, an approach that would require larger agencies to manage hundreds of separate accounts.

Without a client account, agents cannot obtain Client Money Protection insurance. Without CMP, they face fines of up to £30,000 and cannot trade legally. The cascading effect has pushed many agents toward digital platforms that bundle client accounting with compliant banking infrastructure.

Client Money Protection Requirements

The regulatory framework compounds these banking pressures. Since April 2019, all letting agents handling client money in England must join a government-approved Client Money Protection scheme. The standard CMP levy stands at £410 annually, though the final amount depends on total ‘other client funds’ held in client accounts, excluding deposits already protected by tenancy deposit protection schemes.

The requirements extend well beyond CMP. Agents must maintain Professional Indemnity insurance, implement robust internal complaints procedures, and in certain circumstances register with HMRC for money laundering supervision. The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 require letting agents who manage properties with monthly rental incomes of €10,000 or more to comply with anti-money laundering regulations and register with HMRC.

From 14 May 2025, all UK letting agents will be legally required to check tenants, landlords and other clients against the UK’s official sanctions list, reporting any matches or suspicions to the Office of Financial Sanctions Implementation. The penalties for non-compliance continue to escalate: in 2024, Home Office penalties for Right to Rent breaches increased over 400%, while non-compliant Energy Performance, Gas Safety and Electrical certificates now carry fines up to £5,000.

Manual client accounting systems struggle to track these evolving requirements effectively. Accountants reviewing client accounts routinely discover errors: mispostings, double charges, incorrect rent calculations due to wrong rental period dates, and uninvoiced emergency expenses. In one case documented by compliance reviewers, a letting agency accidentally paid custodial deposits totalling £78,000 into staff bank accounts over a two-year period.

Digital Client Accounting Solutions

Specialist platforms for automating client accounting have emerged to address this regulatory and operational pressure. PayProp, which launched in the UK in 2016 after founding in 2004, represents the most integrated approach. The platform operates as the only bank-integrated client account solution for letting agents, holding all processed funds directly in CMP-recognised NatWest client accounts with Financial Service Compensation Scheme protection. Since inception, PayProp has processed over £2.3 billion in payments.

The operational difference shows immediately. Griffin Residential, a London agency managing hundreds of properties, had been spending unnecessary hours chasing late payments through their old CRM system. After migrating to PayProp in May 2020, the agency cut their total arrears bill by £60,000 through automated payment reminders sent via email and text message. The platform’s rule-based automation allowed agents to collect and pay out rent in just a couple of clicks, regardless of portfolio size.

For Hunters, the fourth-largest estate agency brand in the UK with over 200 branches, Carrie Alliston (Director of Lettings) said the following:

“What PayProp offered us was all the time saving, the reporting, and everything that we needed,”

The ability to pay landlords twice daily became a unique selling proposition. Alliston notes that PayProp has allowed Hunters to take on substantially more business without employing additional staff.

The Glasgow-based One Stop Properties offers a smaller-scale example. After Wendy Gallagher’s business partner retired, she attended a talk by PayProp’s Chief Sales Officer at the 2019 Scottish Letting Day conference. “I thought ‘this is exactly what I need. This will give me complete control of my business’,” she says. The system automated invoice sending to tenants and landlord payments according to pre-set rules, reducing daily processing time from up to four hours to minutes. The platform also simplified her five-account structure into a single, integrated system.

Beyond PayProp, Reapit’s client accounting software offers another integrated approach. The platform allows agencies to import electronic bank statements and match receipts intuitively to appropriate tenancies. Users report the ability to pay multiple landlords simultaneously, coupled with direct bank statement uploads, has reduced manual processing time by approximately 20 hours monthly. The system includes BACS scheme integration for streamlined payments and provides the kind of automation that agencies need to scale without proportionally increasing back-office staff.

Cost Savings and Efficiency Gains

The financial case for digital client accounting extends beyond compliance. Time savings prove immediately measurable. Agencies using Reapit report daily accounting processes save 4-5 hours every day. For context, letting agents traditionally spend an average of 9.2 hours weekly solely on tenant maintenance requests, time that digital systems can substantially reduce.

Accuracy improvements eliminate the costly errors that plague manual systems. One accountant reviewing a letting agent’s books recalled spending multiple days untangling an “absolute paper trail” created by a self-employed bookkeeper who had managed to reconcile everything despite numerous missed and double posts. The time-consuming number-crunching required to track batched payments to contractors, letting agents and multi-property landlords made even routine transaction auditing laborious.

The growth implications appear substantial. PayProp reports that agencies using their platform grow their portfolios by 20% on average in their first year. This stems from freed capacity: when routine accounting no longer consumes hours daily, agencies can redirect resources toward client acquisition, property sourcing and relationship management.

Real-time visibility transforms operational decision-making. PayProp’s dashboard offers at-a-glance visibility of rental portfolio cash flow, revealing which tenants have paid and which have not. The system flags high-performing or underperforming properties and reveals month-on-month business growth, providing decision support that spreadsheets cannot match. One major franchise business using PayProp reduced rental payment administration by up to 70%.

Implementing Client Accounting Software

The transition from manual to digital client accounting requires careful navigation. Agencies must first determine whether they need comprehensive outsourcing or simply a ringfenced client money bank account. Any business can open a bank account and call it a ‘client account’ but that does not make it one in the eyes of the law. A formal request must be made to the bank for a designated client account with a clearly defined account name. Banks must provide written confirmation that funds cannot be moved from the designated client account to pay business or personal debts, known as a Set-Off Letter.

Integration with existing software demands attention. Banking platform providers offering client accounts as add-ons to existing lettings software may create work duplication if integration proves imperfect. Agencies should verify that proposed solutions are fully integrated and consider potential duplication across multiple software platforms.

Due diligence on providers should address several critical areas. Agencies need full visibility of client money at all times, verification that funds cannot be moved without authorisation, and carefully configured access permissions ensuring only authorised personnel can access client accounts or authorise payments. Audit trail capabilities should provide undeletable records of all actions, establishing clear accountability. Agencies must also confirm with their CMP provider that any outsourcing company meets the scheme’s compliance criteria.

For landlords managing their own properties, accessible software has proliferated. FreeAgent for Landlords provides auto-population of UK Property pages for Self Assessment returns with direct HMRC submission capability. QuickBooks offers property-specific features including income tracking across multiple properties and tenants, automated invoice reminders, and MTD-compliant VAT return submission.

Regulatory Changes Ahead

The government has begun addressing the structural issues underlying the banking crisis. In June 2023, HM Treasury launched a consultation to improve the UK’s AML regulations, prompted by the inconsistent treatment of pooled client accounts. UK Finance raised the issue that banks were frequently rejecting Simplified Due Diligence even when legally permitted.

Regulation 37 is being rewritten to clarify who the “customer” is in a pooled account, confirm that supervised businesses can apply Simplified Due Diligence when risk is low, define specific criteria under which SDD is appropriate, and provide banks with clear legal foundation to support these accounts.

Propertymark has called for more direct intervention. Following high-profile account closures, the organisation wrote to Chancellor Jeremy Hunt highlighting ongoing issues and pushing for government action. Propertymark has long called for regulation of property agents and for the UK Government to bring letting agents under the scope of Money Laundering Regulations, removing the monthly rent threshold, which would provide banks with the reassurance they need.

Until regulatory reform arrives, market forces continue pushing agents toward digital solutions. The property management software market globally is projected to grow from $22.05 billion in 2023 to $42.89 billion by 2030, with cloud-based solutions dominating this expansion through superior accessibility, scalability and real-time collaboration.

The Path Forward

The transformation of client accounting from manual ledgers to digital platforms reflects broader changes in professional services. What began as a banking crisis has accelerated adoption of technologies that fundamentally outperform traditional methods.

For the 64.5% of agents who cited finding new landlords as their biggest worry in PayProp’s 2024 Rental Confidence Index, the operational efficiency gained through digital client accounting creates competitive advantage. Agencies that can demonstrate faster landlord payments, real-time transparency and bulletproof compliance stand to capture market share as regulatory requirements continue multiplying.

The question for estate agents and landlords has shifted from whether to digitise to which solutions best fit their operational needs and growth ambitions. As banking access continues tightening and regulatory requirements expand, digital platforms have transitioned from competitive advantage to operational necessity. Those embracing this transformation position themselves not merely for compliance, but for sustainable growth in an increasingly sophisticated property management landscape.