Managing a rental property can be tricky, and tracking your income and expenditures may prove difficult, especially if you do not have an accounting background. Always consult with an accounting professional who can provide expert advice and help you with all matters concerning your rental property, including tax returns and SMSF.
Every landlord and property manager should have some accounting tricks up their sleeve to successfully put all their financial affairs in check without much stress.
Some helpful tips to ensure that you can stay organized and put all your accounting affairs in check are described below.
1) Know the different types of transactions that come from your property
A rental property will come with different income and expenses that can easily overwhelm you and make you lose track of money. The first thing you should do is get familiar with what brings money and what takes money. Some transactions you might often see are:
When you know what each payment is for, you will be a step ahead in managing your funds.
2) Have unique accounts for business and personal dealings
This is the first rule of any business. It would be best if you did not mix business finances with your income. This is so that you do not spend your business funds on personal expenses and vice versa. Try to get different bank accounts for your property, even if you have only one.
Some landlords go as far as having different accounts for different properties. With this, it is easier to handle income and expenses from separate properties.
3) Have a clearly defined system in place
You should have a system to follow in recording transactions that are connected to your properties. You can create a system that you understand that states clearly where funds are coming from and where they are going. Also, try to be consistent in recording these transactions. If possible, have a particular day set aside for it as you take time to make sure all income and expenses are recorded.
4) Set aside time to establish a solid reconciliation plan
The same way you set aside time for recording is the same way you should set aside time for reconciliation. This is simply matching what you have on your records with what you have on your bank statements.
This helps you check that every payment is accounted for. You will see if there has been any case of underpayment or overpayment or if you have skipped any payment. Reconciliation makes sure there is no place for irregularities. Some landlords do this monthly, but doing it every week can reduce the workload and make it easier.
5) Take advantage of modern accounting applications
With the right software, all your accounting worries can be sorted in a matter of minutes. Sometimes this software may cost a little, but you will gain a lot in efficiency and save time. Good software will help you record, reconcile, and review your transactions.
6) When in doubt, seek assistance from an industry specialist
It is okay not to know everything about bookkeeping and small business accounting; it is advised that you have someone who is a professional accountant who you can always refer to for guidance.
It is sometimes necessary to hire an accountant to help you, even if it is just temporary. A second opinion is occasionally required.
Anybody can have good bookkeeping skills, whether they are accountants or not. All you have to do is take time to study the processes, be consistent in recording transactions, and take advantage of using available tools to make your job easier.
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