As a property manager, you’ve got a lot on the go, especially when it comes to your money. Rent payments are coming in, payments to owners are going out. Then there are all of those repairs, maintenance work, and more that take up line after line in your increasingly busy books. Without an organized system, it’s easy to get overwhelmed, struggle to make or receive payments on time, or worse, lose tabs on your money altogether. But wherever you are in your property management business’ growth, here are a few accounting best practices you should always put into practice.
Maintain separate accounts
Keep money in separate accounts dedicated to specific purposes. This’ll make it easier to keep track of funds and label inflows and outflows from your bank accounts. Depending on what province you’re in, you’ll need to keep your tenants’ security deposits in a trust account. That said, it’s helpful to open more than just two bank accounts. In addition to the trust account for security deposits, you might want to consider separate bank accounts for receiving rent and making landlord payments and another for everyday operating expenses.
Create a chart of accounts
A chart of accounts is a list of accounting categories. The overarching categories are assets, liabilities, expenses, income, and equity which are then subdivided based on your needs, whether that’s by property or unit. Every time you make a transaction, it should be labelled with one of these categories. Your chart of accounts will make it easier to conduct financial reporting, figure out when to raise rents or fees, create forecasts, and more.
Pick and stick to an accounting method
There are two different accounting methods to choose from: accrual and cash. With the accrual accounting method transactions are recorded when money is due. This allows you to keep track of money that is owed to you and by you, match expenses paid to income earned and keep accurate financial records. With the cash accounting method, you make an entry when money changes hands. So you only record a rent payment when you receive that rent payment and you record an expense when you pay your suppliers. Unfortunately, this method doesn’t help you keep track of tenants that are late with rent or what bills you need to pay. Software, like Propra’s Service Accounting, makes it easy to keep track of your property’s finances for collecting rent, paying bills and getting your taxes in order. Whichever method you pick, just make sure you stick to it and stay consistent.
Keep track of your deductible expenses
You can deduct all sorts of expenses come tax time, including advertising, insurance, maintenance and administrative fees, and more. But to do this, you need to be able to account for everything. The quickest way to miss out on easy deductions is to not have an easily accessible record of everything you’ve spent money on and the documentation to prove it.
Use a centralized platform to manage your accounting
Your accounting is the central hub of all of your property management activities. So it’s useful to connect it to all of the other systems that impact your bottom line. If everything from maintenance requests to inspections records are tied into your accounting system, then you can have an easy flow through of information instead of increasing errors by having to manually enter data from one system to another. Having a centralized system also makes it easier to generate reports, create forecasts, and claim all the deductions you’re entitled to when filing taxes.
Propra’s platform provides a full accounting system including a starting chart of accounts, accounts payable and receivable, and automated maintenance request billing for integration records, and more. Contact us to learn more about Propra Service Accounting, designed to meet the expectations of accountants and the needs of property managers.
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