The Role of Accounting in the Rental Property BusinessAugust 10, 2020
Accurate accounting seems like one of the fundamental parts of the landlording business. However, many landlords don’t focus enough attention on their financial management, and the bookkeeping aspect is often overlooked. They don’t calculate monthly expenses, claim tax deductions, or keep track of rent transactions. As a result, financial stress and thousands of receipts in their drawer are guaranteed. But it can be easily improved by building the habit of keeping digital records and separate personal and business finances.
How do I keep my financial records?
When it comes to property management accounting, the first thing to conquer is automating invoices and receipts. A lot of online rental management services provide accounting features that help to better manage property-related finances. TenantCloud, for instance, automates accounting by creating invoices, receipts, and reminders for tenants. It helps you keep your bookkeeping records in one place and get easy access to the accounting dashboard to download data anytime.
While you can still use spreadsheets if you want, there are much more efficient alternatives. Accounting software systems that were created for small businesses allow you to record transactions and store financial data. If you’re already a TenantCloud user who is managing your accounting with QuickBooks Online, you can easily synchronize your TenantCloud profile with the existing QuickBooks account. The transactions are constantly synced and reflected instantly in your QuickBooks account.
Personal vs. Business Accounts
Along with maintaining positive cash flow, separating your business finances from personal bank accounts is essential for small DIY landlords. If you’re operating on a small scale, having the same account and credit card for both personal and business purposes seems reasonable. But at the end of the day, you might find yourself covering most business expenses from your personal account or vice versa. By doing so, you’re likely to face difficulties when claiming tax deductions for certain property-related expenses.
You can check out more accounting hacks for small landlords here.
Basic financial management tips
- Stick to the budget: Set up a business budget for the month ahead and follow it no matter what. For unexpected expenses, you should always have some extra amount of money in your emergency fund. This also refers to your personal finances.
- Start an emergency fund: If you haven’t created a savings account yet, start it right away. It’s usually suggested to have a liquid fund of up to six months of living expenses.
- Keep accounting records: Again, to always know where your money goes, keep every transaction recorded in the cloud so you can access your financial data and payment history anytime.
How do you manage your business accounting? Do you have any actionable tips that helped to better run your property management business?