Do you want to learn how to improve the speed, accuracy, and usefulness of your rental property accounting? Does keeping track of your books feel like an arduous and pointless task? There are measures you can put in place to make the whole process go quicker and work for rather than against you.
Combining some of today's best practices for rental accounting with robust technology can improve your ROI and the return on the time you spend working. You also get access to helpful analytics to help you grow further. Read about these methods in detail in this quick guide.
Separate Business Accounts and Online Portals
The first of our landlord tips is that separating your business account from your personal account greatly simplifies your accounting process. If you don't do this, you have to sift through all your transactions and separate personal and business expenses. This is a long process and carries a high risk of making mistakes.
Pairing a dedicated business account with an online portal takes the benefits to the next level. The information on your bank statements will correlate automatically with the records captured in the system. This makes reconciliation with bank statements a breeze.
Dedicated Rental Property Accounting Apps or Programs
Doing your rental property accounting manually on a spreadsheet or paper costs you way more time (and money) than you think. You can now use accounting software specially made for landlords. Even free web-based apps are available if your real estate empire is still budding.
Using one of these allows you to set rent collection and expense categories. When transactions occur, input the information into the app and let it generate the ledgers and reports for you.
However, for the software to work, you have to first set the categories up right at the start. You must also know how to review the reports it generates to ensure they're correct. Outsourcing your accounting to a property management firm gives you a similar benefit but less control over the accounting process.
Constant Tracking of Expenses and Documents
Accounting is supported by good documentation, especially the parts that involve deductions and taxes. Ultimately, you want to form a habit of capturing every document the moment you receive it.
This is easy with online payments but can be more difficult with paper documents. Scanning apps provide a simple solution. All you need to do is scan the document into a PDF format and save it in the cloud (e.g., Google Drive).
Some landlord accounting software allows you to match supporting documents with transactions. This can be a lifesaver if you have a big real estate investment and get rental income from many different sources.
Have an Accounting Expert on Hand
A separate bank account and instantly capturing your documents and spending make accounting easier and more accurate. Combining these habits with computerized systems streamlines reporting, analysis, and audits (if you get them).
With today's technology, almost anyone can DIY their rental property accounting to a high standard. However, it's always best to have an industry professional available.
PMI Fox Valley is your one-stop shop for a property manager, real estate accountants, and much more. We're dedicated to giving our clients the best service possible.
Learn more about how we can help your accounting today.
