Bookkeeping is a vital part of every business, and property management is no different. And for the most part, it’s fairly straightforward. As long as you properly handle your accounts, double-check your work, and pay attention to what you’re doing, you really shouldn’t have any problems.
However, if you think your bookkeeping can be improved or that you need to brush up on the basics, there are definitely some good practices you can make a conscious effort to adopt. To that end, here are a few simple tips you can follow to make the accounting process go as smoothly as possible.
Get acquainted with the laws
Property management accounting has pretty much the same rules and regulations as any other sort of accounting. Since you’re going to be allocating a lot of funds on a regular basis, you’ll need to make sure that you stay up to date on the state requirements for the proper documents and records that need to be submitted when managing these funds.
In particular, make sure that you know the policies that your state has in place when it comes to disbursements, the end-of-month-close, and the end of fiscal year close. In the beginning, the sheer number of documents that need to be submitted may seem a bit daunting, but you’ll get used to it pretty soon and after that, it’ll be just standard procedure.
Monthly reconciliations are crucial
Keeping all of your accounts balanced is crucial if you want to get through an audit as quickly and painlessly as possible. However, aside from covering your bases in time for audit season, there are some other obvious benefits to reconciling all of your accounts on time.
Regularly reconciling your accounts allows you to ensure that you didn’t make any mistakes, like accidentally entering the wrong amount or misspelling certain names. In particular, watch out for common and easy to overlook trust accounting mistakes, since even a small issue could potentially lead to big problems in the future.
Don’t delay on the rent collection
There are going to be tenants that are always punctual with their payments without you even having to ask. But on the flip side, there are going to be tenants that will constantly need to be reminded, and trying to get rent payment from them will be so annoying that you’ll want to pull your hair out after every conversation.
However, since the majority of the finances that you manage come from those rent payments, you won’t be able to properly calculate the funds that you have on the books until all of the rent amounts and late payments have been collected.
Make sure to stay persistent and even be a tad more assertive when it comes to sending out rent payment reminders. Otherwise, you might not be able to get through to certain types of tenants.
Learn how to manage your own funds more efficiently
The funds that your company has at its disposal will always be heavily reliant on the number of properties that you’re managing and the rent amounts that you receive from the tenants that are leasing these properties.
As we mentioned in the previous section, rent payments aren’t set for a certain day of the month — they are often going to be spaced out on different dates. This means that there are likely going to be weeks of the month with no funds coming in at all.
While this sort of financial situation does sound troublesome to manage, it’s still doable. All you need to do is plan your expenses ahead of time. While most repair costs aren’t easy to predict, there are going to be certain recurrent maintenance fees that can be predicted and dealt with.
For example, clogged toilets or broken garbage disposals are pretty common occurrences, so setting a certain amount of funds aside in order to deal with such issues is easy to do.
Be aware of your spending limit
Continuing on from our previous point, there are going to be times when you simply won’t be able to keep up with the required payments, regardless of how well you manage your finances. Simply put, having more money going out than you have coming in isn’t something that can be fixed by simply becoming more frugal in your spending.
However, what you can do is take stock of your financial situation every month. Calculate the rates that you’re charging, the property management amounts that you’re spending, and the losses that you’re sustaining — and adapt your fees accordingly.
A company that doesn’t pay their employees properly or can’t keep up with the various unit maintenance costs isn’t going to last very long. So make sure that the property management fees that you’re charging are enough to cover all of the necessary expenses and keep the company afloat at the same time.
- Make sure that you know all of the necessary accounting laws and regulations and that you follow them to the smallest letter.
- Don’t skip your monthly reconciliations or problems will appear later on, which you’ll have a hard time identifying, let alone solving.
- Keep your rent payments as current as possible and keep reminding your tenants to try and make their payments on the agreed-upon date.
- Learn how to make the most of the funds that you have at your disposal, even if you’ve had a slow month when it comes to rent collection.
- Adjust the fees that you’re charging to at the very least be able to cover the costs of properly managing all of the properties that you’re in charge of.