What follows are a few tips to help you with your property management bookkeeping, so you can avoid issues and take advantage of what is available.
Be Meticulous with Financial Records
The better you maintain your records, the easier it will be to track what you are doing and provide solid protection in case you are audited. In addition, you'll be able to see trends and answer common questions about your property investment. This means that you may be able to spot potential issues in the early stages and make plans to counter its effects. In addition, keeping good financial records helps with the following;
- Maintenance Issues
- Market Performance
- Local Market Competitiveness
The more documents you can keep for every transaction, the better off you will be. This is where going digital can really help if you have the proper backups in place.
Create Trust Accounts
You want the funds allocated to running your business being used in the proper way. So, you'll need to start by creating trust accounts to help you organize and ensure that your money is being spent the right way. Unfortunately, the misuse of trust accounts is the #1 reason why property management companies get audited, so you will need to be careful.
Create one account for security deposits and one account for collecting rent and paying bills for each client. It may not be required, but it will help you maintain separate records that will protect you during the auditing process.
Separate Personal & Company Funds
The right property management accounting keeps your personal funds and those running the company separate. You may be tempted to funnel one into the other, but bringing the funds together is illegal and will get you into trouble. You'll need to check with local, state, and federal laws, but here are some areas you should know.
- Deposit Funds for the Proper Account
- Withdraw Commissions and Fees from Proper Account
- Set Time Limits on When Funds Can Be Withdrawn
- Do not Mix Personal Funds with Funds from Your Business
By following these simple rules, you can avoid getting into trouble and keeping your funds separated in the proper manner.
Effective property management bookkeeping means that you can build upon your success while minimizing mistakes. In essence, you can avoid basic issues that often plague property managers by simply keeping separate accounts and meticulous records that insure your protection in case you are audited.
Plus, if you employ the right property management accounting practices, you can spot potential issues along with good opportunities to make your business even more money. It does take a little time, but following the right practices brings rewards that you may not see today but will enjoy tomorrow.