Bookkeeping Tips for New Landlords
Managing expenses, receipts, payables, payments, and tax reports is a slightly, unappreciated and neglected task for all small business owners.
Getting organized about how you manage your books has many benefits. For property management startups, good bookkeeping is a good habit underpinning a viable, sustainable company.
Property managers may learn the hard way that keeping good books and documentation accessible anytime, anywhere is important. In fact, good records are legally required for many corporations and llc’s. When we get sloppy, the IRS just seems to get signals.
Any business owner can manage their own bookkeeping professionally, using today’s modern accounting solutions.
Modern software can do more, do it well, to save a good deal of time and stress.
Difference Between Bookkeeping and Accounting
Bookkeeping typically describes the administrative aspect of processing rental property transaction data according to the company’s fundamental accounting rules. It involves the important task of recording events into the appropriate ledgers to attribute costs and revenue accurately.
Accountants on the other hand use the information entered by the bookkeeper to generate financial reports. Using ManageCasa, bookkeeping is made simpler and reports are more accurate and insightful.
Your bookkeeper’s actions create a literal view of where your business stands financially at the moment. This allows you to view your cash at hand, cash flow, liabilities, receivables, payables and other items critical to your business as well as knowing where your money is going.
Accounting takes that basic data to build more comprehensive and informative reports and financial statements. They help managers allocate budgets and spend wisely, and foresee negative financial events.
Tax Filing Requires Accuracy and Completeness
Bookkeeping involves making deductions for income tax filing. The IRS has stringent rules for record keeping and deductions claimed. Having the company’s books in order is invaluable should you ever be audited by the IRS.
Bookkeeping well done means accountants and management can get access to any transactions made, for whatever reason. They’ll have confidence the information is complete and accurate. Unfortunately, your software doesn’t make all the inputs and decisions on its own.
Bookkeeping might be referred to as the art of not making mistakes!
Ensuring Errors Aren’t Made
Business transactions are often recorded by hand in a journal or a spreadsheet. This manual process via a person, borne out of paper receipts, raised the chance something could be missed, or an error made in where it was recorded. Human fatigue and inexperience are two big contributors to bookkeeping errors.
Many entries are done manually, some scanned and some are imported digitally. There’s always room for data entry errors of different kinds. It’s up to the bookkeeper or property management staff to spot errors and ensure expense and transaction items are attributed correctly (and via account reconciliation).
What do Bookkeepers Do?
In general, bookkeepers manage the chart of accounts and general accounting ledgers, record journal entries (transactions), as well as create financial statements. They make calculations and input information.
- understand local and federal tax codes
- record financial transactions
- post debits and credits
- find errors via reconciliation of accounts
- prepare financial statements (balance sheets, income statements, cash flow statements)
- processing payroll and owner contributions
- accept, process and file paper receipts, deposit slips, and checks (ensuring none are misplaced)
Step by Step Process to Setup Accounts
Here’s a step-by-step process to ensure your bookkeeping system is successful:
- separate your business and personal expenses
- set up an account for each business entity (landlord client)
- set up a separate bank account for each owner client
- choose the correct bookkeeping method (single or double entry)
- choose cash or accrual accounting system
- set up a chart of accounts
- categorize your transactions correctly
- acquire a dedicated property management accounting software solution
- setup financial reports and statements
- setup separate escrow accounts for security deposits, so the funds are accessible when residents move out
Additional Tips for Bookkeeping Like a Pro
- reconcile accounts regularly (monthly)
- reconcile bank accounts frequently
- deposit cash payments in bank (don’t spend that cash right away)
- manage your tax payable throughout the year (set aside 20%)
- automate routine transactions (via software)
- put aside funds in a separate bank account for emergencies
- ensure all relevant data from source documents is recorded (via accounting software)
- print and send invoices (digital or paper versions)
- stay cash flow positive (monitor your cash flow statement)
- ensure you’re claiming all your tax deductions
Property Accounting Software to the Rescue
If you adopt property management accounting software, it can help make bookkeeping simpler with fewer errors.
Regular, routine transactions can be input then automatically attributed to the right accounts with the software’s guidance which helps reduce errors and rework. Reconciliation of accounts is automated too which saves a lot of time.
The software helps to automate many accounting processes, (repeat transactions), saves time and reduces the stress of tedious data entry on a transaction basis. DIY landlords will enjoy the assistance and be more confident they’ve set up bookkeeping properly and their financial statements are correct.
One of the handy and helpful features of ManageCasa is the bank reconciliation feature which helps automate your bank account reconciliation. It will report the difference between your ManageCasa Accounting Balance and your Bank Statement Balance. You can find missing entries and then add them until you achieve balance, which is much better than hunting for paper receipts.
Keep Accurate Books and Enjoy Peace of Mind
All in all, your property accounting software helps you keep accurate books which helps keep your owner clients confident of your management capabilities.
Good bookkeeping and accounting practices help to build a solid brand reputation, which in turn helps you attract and sign new owners.
Take good care of your clients with the bookkeeping and accounting power of ManageCasa.
Learn more about ManageCasa’s dedicated accounting system for landlords and property managers. Enjoy the fact you won’t need off the shelf accounting solutions such as Quickbooks, Netsuite, Sage, Xero, Freshbooks, or other small business accounting software packages.
You only need ManageCasa.
Read more on the ManageCasa blog: Property Management Software | Real Estate Accounting Software | Real Estate Management | Pain-Free Accounting | Automat Rent Collection | Rent Payment Software for Landlords | Income Statements | Property Management Documents | Learn Accounting | Profit and Loss Reports for Property Managers | Profit Margin | Costly Mistakes Landlords Make | Property Management Software Features