Accounting sometimes falls outside a landlord’s skillset.
Successful property managers are not always accountants either, and that’s okay. You don’t need a degree or extensive professional experience to learn the basics of rental bookkeeping.
Instead, you’ll need organizational skills, an understanding of a few metrics or KPIs (Key Performance Indicators), and an eye for interpreting data in aggregate. If you can quickly scan a spreadsheet and observe general trends, you can assess and track your business’s growth over time.
When it comes to tax preparation and bank reconciliation, there’s no need to do these tasks manually. There are many software applications and tools available for landlords and property managers. By utilizing these resources, you can master bookkeeping with minimal time and effort invested.
Below are several bookkeeping basics and recommendations.
Digital Rental Accounting
If you manage your rental business manually, you literally have your hands full.
Landlords and property managers alike have realized the power and potential of digital rental management.
Accounting is included in digital property management models. For instance, you may use or have heard of various property management software platforms. These platforms typically include rental accounting as a free or paid feature.
Why should you switch to digital rental accounting? It’s obvious. From increased convenience to instantaneous records and reporting, bookkeeping on the cloud gives you the freedom to pursue your other ambitious goals.
Property Management Software or QuickBooks?
QuickBooks is a popular rental accounting software application. You might have heard of QuickBooks or even use it in your own business. If so, maybe you’re wondering: how is property management software any better than what I use now?
Whether you use manual accounting, QuickBooks, or another application, property management software can still benefit you. You don’t have to give up the tools you currently use to switch over to new software.
Many property management software companies offer integration with QuickBooks. Link your accounts, transfer data, and keep your rental accounting the way you’re used to it.
Online Rent Collection
Online rent collection is a primary feature of property management software, QuickBooks, and other digital management applications. You’re probably familiar with online payment portals in your everyday life—online shopping, PayPal, bills, and more.
For digital accounting to succeed, you also need to integrate online payments. While cash and check payments are long-held traditions in real estate, they are vulnerable to damage, misplacement, theft, or disorganization.
Instead, collect rent online. Tenants make accounts on your property management software platform and pay each month via debit, credit, or ACH (Automated Clearing House) Transfer.
Online rent collection features also come with the added convenience of automatically generated payment records. Say goodbye to hand-typed rent receipts or manual recording in a spreadsheet. Your software automatically creates a ledger for each tenant’s account and tracks when payments are submitted, processed, and received.
Remember your KPIs? Here’s where they come into play. Your KPIs are essential in providing insights that help you make decisions about your business.
Should you increase the rent? Are you attracting as many applicants as your competitors? How’s your lead-to-lease conversion rate? KPIs can answer all these questions.
One such metric is found in Profit/Loss (P/L) Reports. These reports outline how your business manages expenses given available revenue. These numbers are important for knowing how much expendable income is necessary and where you might improve efficiency.
Knowing how to navigate P/L reports is a bookkeeping basic. Remember, your property management software can generate these automatically, so you never lose track of your progress.
It’s tax season. Instead of dreading the stress and confusion, get a head start on your filing with some help from software.
With a digital accounting tool, there’s no reason to scramble to file before the deadline. Many property management software platforms offer 1099 eFiling and other professional tax preparation tools to help you understand and consolidate various IRS forms.
Account book locking is another indispensable feature. This feature lets you lock your books right before you file to avoid accidental changes or corrupted data.
If you’re the person responsible for bookkeeping and taxes in your rental business, accounting software is your new best friend.
Master Bookkeeping with Digital Rental Accounting
There’s no faster way to master bookkeeping than with a digital accounting tool. Whether you use an accounting application, property management software, or a combination of both, digital accounting is the best solution for rental bookkeeping.