Bookkeeping for Property Management: 8 Best Practices

So, make sure to be proactive about setting up a system for managing it. If you’ve never done this kind of cash flow statement before, it might be worth hiring a professional to perform it for you to make sure it’s done right. Notice how we have 100 account numbers blocked out for each property type. Depending on how many properties you manage, this could be much larger and have further subaccounts that organize your individual property accounts by state or city.

1. Too many people accessing the file will only cause mistakes and chaos—and by too many, we mean more than one.
2. Trust accounts are a valuable way to help you keep your owners’ assets organized, stay compliant, and reconcile accounts through more accurate reports.
3. This involves setting up systems for tenants to pay rent, tracking payments, and addressing any issues related to late payments or non-payment.
4. They should be familiar with the unique challenges of property management accounting.
5. Any property manager or landlord who manages real estate rentals from 1-20,000 units can use it.

Payroll for Property Management

Hemlane’s sophisticated accounting features are designed to ease the complex tasks of property management. Whether you are handling security deposits, managing payables, or ensuring compliance with tax obligations, Hemlane’s software streamlines every aspect of property management accounting. It is a crucial aspect of property management that helps you keep track of your finances, make informed decisions, and ensure compliance with tax laws and regulations.

Property management accounting basics: The definitive guide

One of the most critical parts of that is tracking your deductible expenses, which can significantly reduce your tax bill at the end of the year. You could still manage your accounting with something as simple as an Excel spreadsheet. One mistake can cause a painful audit that could have been easily avoided by paying a small fee to a local accountant who will review and sign off on your books. It’s impossible to know just how many accounts you’ll need over the next decade (and beyond) for your chart of accounts.

#1: Designate One Person to Update the Property Management Chart of Accounts

Managing a property management business of any size is difficult, and accounting is just the beginning. Propertyware is a good system with a robust set of features and other unique paid add-ons for the property management industry. The basic Rentec Pro plan costs $55 per month, covering 10 units. The QuickBooks Small Business version’s most basic plan, Simple Start, is $30 per month.

Separate Business Accounts

For instance, if you paint a room that you typically rent out, you can deduct the expense—even if it’s an improvement that might increase the value of your home overall. When it comes time to file your taxes, there are three different ways to do it, each depending on the specifics of how you rent out your property. If you wanted to go into more detail, though, your chart of accounts could be longer. For instance, instead of “Utilities,” you may have separate accounts for heat, water, and electricity. Categorizing your expenses by type can help you identify areas where you are spending too much money.

How Revenue Recognition Works: A 5-Step Guide

However, accounting for your properties doesn’t have to be an earthquake-level trauma. If you want to get a loan on the property or sell it, the first thing you will be asked for is a rent roll. Having one accurate and up to date will go a long way toward making interacting with third parties easier — not to mention helping you identify delinquent tenants faster. When you run your annual financials, work on preparing a cash flow statement. The cash flow statement and appraisal will let you grade each property on those four key metrics each year. Fortunately, most accounting software can set reminders and multiple accounts, which mostly automates this process.

With accounting software, preferably dedicated property management software, you can automate many processes that would take hours to do each month manually. The cash accounting method records transactions when they’re either paid or payment is received (depending on whether you’re paying a bill or receiving a payment from a tenant). QuickBooks is a widely used accounting software that offers a range of features, including invoicing, financial reporting, and payroll management. This might involve implementing new processes for tracking expenses, improving rent payment collection, or using accounting software to automate certain tasks. Property management accounting aims to show how much profit a property is making.

It allows you to make better decisions about how you’re running your business and how you’re managing your clients’ properties. Getting property management accounting right saves you time throughout the year. It also prepares you for tax season and major financial events like quarterly meetings with owners or your HOA. Setting up your bank accounts in your accounting software will allow you to reconcile your accounts and ensure that your financial records match your bank statements.

Property Management Accounting is a system of accounting that helps landlords keep track of their rental properties’ finances. It involves recognizing revenue for all rents received and expenses for maintenance, landscaping, and other cash outflows. Keep an up-to-date rent roll that includes tenant information, lease terms, and payment history. This helps you track rental income, identify delinquencies, and provide accurate information when applying for loans or selling properties.

These reports provide an overview of income, expenses, cash flow, accounts receivable/payable, and other key metrics for each property and the overall portfolio. Monthly reports help identify issues early, while quarterly reports spot longer-term trends. Net Operating Income (NOI) for a rental property can be calculated by subtracting operating expenses from gross operating income. By implementing these best practices, you can significantly improve the efficiency and accuracy of your property management accounting processes.

Condo Control offers both a Core and Premium plan with a variety of features. However, the cost isn’t very transparent; you’re required to contact Condo Control directly for a quote. AppFolio is a strong overall option, with great features for both residential and commercial property management. To do that, assign each property a number in the 1s place of your accounts.