Property Management Accounts And Property Management Bookkeeping
Being a landlord and managing property is one of the most stressful things in the world, especially when things go wrong. All it takes is one small mistake and it feels like the world is coming to an end. Accounting for property management doesn’t need to be so stressful. With some knowledge of basic property management and the right property management accountants on your side, you can get back to doing what you love and taking care of tenants and properties.
What Is Property Management Accounting?
Accounting for property management is also called landlord accounting. The process recognizes revenue generated by rents and expenses spent on things such as landscaping, maintenance, and other expenditures related to property management.
How to Create a Property Management Bookkeeping System
Creating a basic property management system isn’t too difficult. Creating a more professional option is. Here are the steps to accounting for property management, according to your needs and requirements;
- Determine Your Tipping Point
There are a few different ways to handle property management, depending on what kind of property you manage. At the very least, you need to have a financial statement spreadsheet for the property. You should continue to update the statement as you do your taxes. Check the statement each month to ensure that the payment goes through, and keep physical receipts throughout the year. You might want to only use an income statement on small properties. Preparing a full balance sheet and maintaining it would be more trouble than it’s worth for one or two small units, like condos or apartments.
For a more professional approach to property accounting, you should use accounting software to keep track of monthly bank reconciliations and continue to update the rent roll. Input rental payments for properties as they come in and use bank reconciliation to prevent losing money.
There are no hard and fast rules on when you should go from one situation to the other and take a more professional approach and use double-entry bookkeeping. That’s why you need to determine your own tipping point – the point where you want a more advanced property management bookkeeping situation. If you only have a few transactions per year, you can get by with single-entry. If you start processing multiple invoices per month, you need consider accounting software or hiring property management accountants.
These accountants can provide the services you need to stay on top of things. A lot of work goes into professional property management. If you don’t feel comfortable handling it by yourself, or just don’t have the time, don’t hesitate to hire help.
- Purchase Accounting Software
It shouldn’t be too difficult to find accounting software for your system. You won’t need accounting software designed for landlords. Check out some software reviews and choose the one that feels right to you.
Accounting for property management goes best when handled like accounting with any other business. You should find everything you need with standard accounting software.
- Set Up the Properties
The properties should all have several things set up for them;
If you maintain commercial properties with several units, then list it as a separate LLC to reduce personal liability.
- Software Account
You should be able to create separate accounts for each business on the software program. Give each business/property a separate account for easier management.
- Bank Account and/or Credit Card
The simplest way to monitor expenses for an account is to assign each property a separate bank account or credit card. Go through the statements at the end of the month and add the journal entries to your property management bookkeeping software for accurate tracking.
- GL and Chart of Accounts
Put together a General Ledger and chart accounts for the individual rental properties. Making this effort at the start means it’s easier to process new transactions throughout the month. Put in the effort now to save time later.
- Rent Roll
Put together a spreadsheet with each unit assigned a row on the sheet. Add the rental payments to the sheet when they come in each month to create a rent roll.
- Do The Monthly Accounting Cycle
The monthly accounting cycle is split into the following steps;
- Receive Rents
Most accounting software programs let you integrate your bank account directly. Connecting your account like this makes it easier to produce automatic invoices with Automated Clearing House (ACH) payments. If you find you can’t do this with your accounting software, then arrange a meeting with the treasury management representative for your bank. With their help, you should be able to et up ACH pulls for tenants. Another option is to require tenants to create automatic payments or an ACH push themselves. Either way, the point is to automate the rental payment process so that neither your nor your tenants have to worry about making payments.
- Process Invoices
Landlords can expect to get invoices for landscaping, maintenance, utilities, and other things. You’ll be able to pay most of these invoices automatically through electronic money transfers. If you have to make manual payments, then record them in your accounting software and have it print checks for you.
- Bank Reconciliation
Bank reconciliation is traditionally done to ensure that the amount of the balance sheet is the same as the bank balance. This is still the main goal, but how you handle the process changes a little. Enter the transaction information from the bank statement into your software, unless the transaction is related to a check you’ve entered already. When finished, compare the book balance on the software account to the balance on the bank statement. If the numbers don’t match, you’ll need to go through the statement and general ledger again to see where you went wrong.
- Print Financials
You can print the financials for your property accounting every month, quarter, or year. It makes sense to process these financials monthly on big properties to ensure you aren’t losing money. So long as the general ledger is put together properly and you correctly enter all transactions, you’ll only have to print the financial statements as they won’t need any adjustments or corrections.
This is the accounting cycle recommended for the professional approach. Print the financial information annually to better handle taxes and stay on top of your bank balance throughout the year to prevent losing money.
You may want to consider using accounting for property management websites to set up payments and manage credit cards.
Property Management Accountants Services
While most people can handle basic property management, it takes a degree of professional expertise to properly handle property accounting. You need the helping hand of property accountants. Find property accountants with the experience and training to support and advise you, manage your property, and offer further guidance in the property sector.
We offer bookkeeping services, management reporting, advice, VAT returns, preparing accounts and statements, property tax advice, and more. Any landlords, letting or management agent, or service charge accounting service could benefit from the services of registered property management accountants.