You're not alone if you have yet to hire an accountant for your small business. Unfortunately, only 30% of American small business owners use an accountant to help with their finances.
However, if you own one or more rental properties, you need to stay on top of the finances if you want it to be profitable. But is it worth hiring a full service property management company if you only have one property? Wouldn't you be able to save money if you did it yourself?
You'll be happy to hear that this is entirely possible. So, keep reading to learn three tips for effective rental property accounting.
1. Keep Your Finances Separate
The number one rule, whether you own one or several rental properties, is to keep your finances separate. You want to avoid combining your rental income with your personal finances, or it will become a logistical nightmare later.
Open a bank account dedicated to your rental properties and use this account for rental property transactions like repairs or supplies. By keeping your finances separate, you can have a dedicated place to record all transactions, payments, and earnings. In addition, having these separate finances means you're not sorting through your finances and wasting time when tax season comes.
2. Track Everything - Always
Now that you're keeping your rental property finances separate from your personal finances, you must always track everything. You can use one of two bookkeeping methods: accrual accounting or cash system.
An accrual accounting system records income and expenditures for your rental properties, and the cash system requires you to record all transactions completed in cash (receiving and spending). You'll want to track every cent that comes in from rent collection and every cent you spend on business expenses.
3. Use the Right Software
Now that you know what you need to record regarding your rental property finances, you must ensure that you're using the software. Using rental property accounting software can help minimize potential errors, which means you have more accurate accounting.
Finding the right software is essential, so you want to ensure the rental property software you choose has the following features:
- Online Rental Payments
- Tenant Screening
- Online Lease Agreements
- Accounting Capabilities
- Reporting Capabilities
The right software can make all the difference to the amount of time you spend on tasks related to your rental properties, like collecting rent, accounting, etc.
Get On Top of Your Rental Property Accounting Today
If you're going to handle your rental property accounting yourself, then knowing these three tips and tricks can help you manage them accurately. In addition, if you've already merged your personal and rental property accounts, it's still worth spending time separating them for the future. Finally, if you're not yet using rental property software, it's worth looking into for all the time it can save you.
However, if you're particularly busy, contact us today about our Hawaii property management services. Furthermore, we offer also offer free rental analysis.