Property Management Accounting Basics and Tips

Introduction

Being a property manager there are various roles and responsibilities that you have to perform. This also includes property management accounting.?

Unlike standard accounting practices, property management requires a more complex approach. You do not just have to manage the assets, income, and expenses of the property but also prepare separate tenants' ledgers.?

It can get tiring to manage one property at a time; but as a property manager, you might have to look after various properties. That is when hiring property management accounting services becomes a necessity.?

If you don’t believe us, see how critical property management can get.

What is Property Management Accounting?

Property management majorly includes tracking the cash inflow and outflow, reconciling bank accounts, and maintaining tenants’ ledgers. Each of these tasks needs to be done separately for different properties one manages.

Other than these, the manager also has to take care of the assets and liabilities to accurately maintain the financial records. It doesn’t matter whether one likes accounting or not, this is a crucial activity that needs to be performed nonetheless.

Basics for Property Management Accounting Set-up Process

It’s not just about understanding the term but also following the correct set-up process that helps in effective property management accounting. Having accounting experts in property management can allow you to successfully practice the below-mentioned.

• Start with a separate bank account

The first and foremost step is having a business bank account through which you will carry out the transactions. Most government agencies, such as IRS in the US, prohibits the use of personal bank account for professional usage.?

There are various transactions to be traced in property management accounting. These include security deposits, rental payments, late fee charges, and so on. All these transactions and other expenses must be handled via a professional bank account.

• Choose the accounting method

As you might already know, there are two accounting methods: Cash and Accrual. Cash basis of accounting records the cash flow as and when it happens. On the other hand, the accrual basis records the transaction at the time it occurs, whether or not the payment has been made.?

• Select a bookkeeping method

One also has to select the bookkeeping method as in single-entry or double-entry bookkeeping. It is suggested to maintain the double-entry system to make the reconciliation easier.

• Prepare a chart of accounts

The Chart of Accounts includes all the assets, liabilities, expenses, liabilities, and even equity in the list. This assists the accountants to easily organize and label the financial statements. To maintain the chart of accounts, one can either use Excel or automate the process by using some accounting software QuickBooks, Xero, Zoho, and so on.

• Manage financial reports and records

Last but not least, one also has to ensure that all the receipts and invoices are duly considered and recorded. However, one has to prepare distinguished reports for separate properties to avoid any confusion or double calculation in the future.

Tips for Better Results

• Stay prepared for unexpected expenses

Uncertainties are a part of every business, and property management is no different. That is why, one must always stay a step ahead and prepare for any unexpected expenses that can occur in the future. Remember, it is important that the cash flow stays positive for any business to flourish.

• Make it a thing to regularly update books

Regular updates allow you to stick to the numbers and eliminate the chances of omissions. You can also have a tab on your reconciliations and see if there are any typos or errors in the entries. This could be hard to identify after a month or year during the year end closing of accounts.

• Look for tax deductions

Many expenses come under the tax deduction category. Marking the expenses as such side by side saves time and effort at last. It also provides you a better understanding of the direction in which your financial statement are leading. You can save your business from big liabilities and make better decisions for future.

Conclusion

There are various intricacies in the process of property management accounting which you can miss. It is only the experts who regularly go through the books and have a deeper understanding of the categorization who can assist you with the same. At Mercurius, our team of accountants and bookkeepers ensure that your finances remain positive as much as possible. With accurate bookkeeping and timely reports by us, you can use your saved time by ideating about future expansions.

If the thought of year-end closures bring stress to you, here’s how to keep the burnout at bay .