Property management bookkeeping involves keeping track of financial transactions related to your properties. Whether you manage personal or commercial property, bookkeeping is a crucial part of property management as it allows you to calculate your profits and evaluate your financial performance.
Property management itself is a hassle and accounting can be another headache. However, if done correctly, property management bookkeeping can lead to higher savings and profitability, which in turn leads to higher return on investment.
Maintenance costs, vendor invoices and other financial transactions need to be recorded as a lot of money is moving. In order to secure your properties, bookkeeping is absolutely essential for every property owner.
Property Management Bookkeeping Basics
Below, we will walk you through 7 of the most important property management bookkeeping practices so that you can ensure that you are maximizing your profitability.
1. Separate Bank Accounts
To prevent your funds from being commingled, it is important that you keep your personal account separate from your business account. Sure, it sounds easier to maintain one account as it is more convenient, but running a business means you can face losses too. Having a separate business account will also boost your credibility in the market that will positively affect your business image.
2. Recording All Transactions
You need to have a clear record for every financial transaction that is taking place in your business. These transactions can include maintenance payments, taxes, insurance and mortgage payments. Legally, you are bound to record all of these payments otherwise you can face legal penalties and repercussions. It also makes your evaluations more accurate.
3. Financial Accountability
It is a very common occurrence when you don’t understand where your money went. Similarly, on a larger scale, it becomes difficult to figure out where your money was spent. Especially when these transactions are larger, it can only lead to disputes that will be difficult to resolve without any financial records. Having bookkeeping records can allow you to resolve such issues as they provide evidence of the money trail.
4. Financial Planning and Budgeting
4. Financial Planning and BudgetingImagine you run into some unforeseen event like an unexpected repair. Financial bookkeeping can prepare you for situations like these so that you are not financially strained and your business can remain secure and profitable.
5. Tax-Reporting
As a business owner, you need to file for tax returns every year. You need to report your income and deduct eligible expenses in order to meet your country’s tax obligations. If you bookkeep these records, filing for tax returns will be more simplified and hassle-free, plus it will be more accurate than having to do it all at once before the end of the fiscal year. Some of the expenses that you can deduct include legal fees, cleaning supplies, insurance and marketing.
6. Accurate Fee Collection for HOAs
If you manage a property in an HOAs, collecting the fee on-time will allow you to meet your financial obligations so that you don’t run into any financial setbacks. It will ensure a reliable stream of income for you. Your obligations may include taxes, maintenance payments and much more. You will also develop good relations with your clients.
7. ROI Analysis
A good business owner knows that ROI analysis is imperative to analyzing profits. Think of ROI analysis like a roadmap that guides your financial decisions and helps you evaluate your performance. Simply put, you want to know as a business owner whether you are making enough money or not. Plus, if you want to set financial goals and grow your business, ROI is the metric you rely on. Whether a certain investment pays off in the long run, like renovations, ROI can help you assess if the hassle and expense is worth the cost.
Property Management Bookkeeping Software
A variety of tools are available online that provide cost-effective solutions for property management bookkeeping. Some of these include Appfolio, DoorLoop, ONR and Inuit.
Property management accounting fundamentals can be difficult for many property owners, which is one of the reasons it can be so troublesome. It is, nonetheless, an essential component of every organization. To reduce risks and increase profits, you must keep track of where your money is going. These 7 bookkeeping best practices for property management enable you to assess your financial situation and protect you from significant financial disasters. Visit our website to discover more about property management bookkeeping, and get in touch with us to find out how we can simplify this process using our all-in-one property management software.