Best Property Management Accounting Practices to Maintain Success
Here are some tips to help you with your property management bookkeeping, so you can avoid problems and take advantage of what’s available.
Be meticulous with financial records
The better you keep your records, the easier it is to track what you are doing and provide strong protection in the event you are audited. Plus, you’ll be able to see trends and answer common questions about your real estate investment. This means that you may be able to detect potential problems in the early stages and make plans to counteract their effects. Also, keeping good financial records helps with the following;
– Maintenance problems
– Market performance
– Competitiveness of the local market
The more documents you can keep for each transaction, the better off. This is where scanning can really help if you have the proper backups.
Create trust accounts
You want the funds allocated to run your business to be used appropriately. So you’ll need to start by creating trust accounts to help you get organized and make sure your money is being spent the right way. Unfortunately, misuse of trust accounts is the number one reason property management companies get audited, so you will need to be careful.
Create an account for security deposits and an account to collect rent and pay bills for each customer. It may not be necessary, but it will help you keep separate records to protect you during the auditing process.
Separate personal and company funds
Proper property management accounting keeps your personal and business funds separate. You may be tempted to funnel into each other, but pooling the funds is illegal and will get you in trouble. You will need to check local, state, and federal laws, but here are some areas to know about.
– Deposit funds to the appropriate account
– Withdraw commissions and fees from the appropriate account
– Set time limits on when funds can be withdrawn
– Do not mix personal funds with your company funds
By following these simple rules, you can avoid getting into trouble and keep your funds separate properly.
Effective property management bookkeeping means you can leverage your success while minimizing mistakes. In essence, you can avoid basic problems that often plague property managers simply by keeping separate accounts and meticulous records to ensure your protection in the event you are audited.
Plus, if you employ proper property management accounting practices, you can spot potential problems along with good opportunities to make your business even more money. It takes a little time, but following the correct practices brings rewards that you may not see today but that you will enjoy tomorrow.