Property management bookkeeping should maintain precise records of business transactions. Accurate rental property accounting makes creating business reports less complicated.
A business report collects company data so it's accessible and easier to understand. What we're trying to say is that you need good bookkeeping skills to manage your Denver, Colorado, rental property.
But what does it take to become a good bookkeeper? Below are some useful tips to help improve your financial record-keeping.
Keep Business and Personal Accounts Separate
Car payments and investment property maintenance costs sharing an account may seem harmless. The issue is this can make it hard to keep up with both expenses.
Your investment property requires separate checking and savings accounts. You should also have debit and credit cards dedicated to your rental property.
Dividing personal and business accounts makes it easier to track your money. Keeping company finances separate also limits personal liability if something goes wrong.
Create Accounts for Separate Properties
Creating separate accounts for each property location can make investment property bookkeeping easier. Location A and B sharing the same account may make tracking expenses more stressful.
Separate accounts will make profit/loss statements and filing taxes more streamlined. Giving each property a dedicated account helps find locations that aren't making money.
Track Your Expenses
Once you've set up your separate accounts, start tracking your expenses. Expense tracking tells you what you've spent money on and where your income comes from.
This information helps with budgeting and organizing for the tax season. The most vital thing is to find a reliable tracking method. You can make expense worksheets or use rental property accounting software.
Consider Going Digital
If you ask another property owner, they would likely tell you to go digital. Digital bookkeeping makes it easier to keep digital records organized. It saves space and reduces clutter. "Going digital" includes:
- Scanning receipts and invoices
- Accounting software to merge financial analysis, bookkeeping, and file storage
Business owners with teams should consider cloud-based software. Cloud-based software makes it easier to share information with team members.
Have an Emergency Budget
You may wonder how an emergency budget helps with bookkeeping. An emergency budget helps offset future emergency expenses and prevents funding derailments.
Putting money aside makes it easier to track expenses, and the extra funds help take care of issues fast. For example, you'll never know when appliances need upgrades or replacing.
You might have a pipe burst and need emergency plumbing. Making emergency budgets may be difficult when starting.
Predicting future expenses gets better once you get better at keeping financial records.
Why Rental Property Accounting Matters
Rental property accounting matters because it helps better manage business finances. One piece of helpful advice is to separate business and personal accounts. You should further divide accounts for different locations.
Other bookkeeping tips include tracking expenses, going digital, and setting aside emergency funds. But have you considered outsourcing your investment accounting?
PMI Foothills offers accounting assistance, rent collection, maintenance services, and marketing aid to real estate investors throughout Denver, Colorado. Contact us to improve your bookkeeping efficiency.
