Bookkeeping for Property Management: 8 Best Practices

Software options typically streamline categorizing expenses, generating financial statements, and preparing for tax season. If you prefer, you can download a free rental income and expense worksheet to manage your finances in Excel format, which offers flexible customization to fit your needs. Our property management and real estate company in Detroit has been working with PMBookkeepers going on 2 years. The fact many of the employees are former workers of the property management software company we use as our platform has been the difference maker.

#2: Establish a Chart of Accounts

• REA helps our property managers improve operational efficiencies while increasing their profit margins.
• In property management account, this will usually consist of outstanding rent balances.
• By implementing these ten practices, property managers can overcome common challenges, ensure regulatory compliance, and optimize financial performance.
• Accurate financial statements allow property managers to assess the financial health of their investments, plan for future expenses, and ensure they are making the most of available tax deductions.
• Non-compliance with these regulations can result in fines, audits, and reputational damage.
• Reliable property management accounting software automates these tasks, reducing overhead and freeing up time and resources for business growth.

Any property management accounting software you choose should have automated accounts payable. Buildium, for example, includes calculators that show you what you owe your owners, your vendors, and yourself. A chart of accounts categorizes all your financial transactions—which can be created  automatically in an effective property management software. Instead of worrying about integrating your accounting software with your spreadsheets and your property management software, find a software that does it all in one place—and securely. Accrual accounting is a method where revenues and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid. This typically gives you a more accurate picture of a property’s financial health by matching income and expenses to the period in which they occur, rather than when the cash transactions happen.

#10: Look for Tax Deductions

Professional accountants and bookkeepers are here to save you from unnecessary costs. When you thoroughly know your business expenses, you can also control your budget through cost-cutting and reducing unnecessary operational costs. As a result, this practice may help improve your profitability and allow you to create a Cash Flow Management for Small Businesses realistic budget for your company.

• Cash accounting focuses on immediate recognition, whereas accrual deals with anticipated revenue and expenses.
• Regularly review and analyze your financial statements to gain insights into your property management business’s performance.
• They will take your business to the next level through their unmatched expertise in trust account reconciliations, full-service trust accounting, and consulting services.
• Many landlords find it helpful to separate personal and rental accounts, simplifying the tracking of deposits, rent payments, and business expenses.

Generally Accepted Accounting Principles (GAAP)

From there, our team meticulously handles all your day-to-day accounting needs. We record and categorize every transaction, from rent payments and security deposits to maintenance expenses and owner distributions. We ensure accuracy and completeness, providing you with a clear and reliable financial picture.

Understanding Capital Gains Tax

These processes help property managers allocate resources effectively, anticipate future financial needs, and make informed decisions to optimize operations. Understanding key accounting terms is the first step to mastering property management accounting. Software like DoorLoop not only simplifies your accounting processes but also provides valuable insights into your property management bookkeeping properties’ financial health. Schedule a free demo today to see how it can transform your property management operations. Tracking security deposits separately from rental income will prevent errors and ensure deposits are properly accounted for when tenants move out. Treat them as liabilities (money owed back to tenants) rather than income, since this money is owed back to tenants at the end of the lease term.

Does the software integrate with other tools like tenant screening or maintenance requests?

It takes more work to maintain, but it’s better for organizing lots of different transactions and ledgers. If you’re interested, we’ve got a What is bookkeeping simple guide to double-entry accounting to help you get started. However, it lacks some of the time-saving property management features that other software on this list have, such as maintenance requests and tenant communication.

Reconciling accounts is a time-consuming process that requires attention to detail. However, it’s essential for ensuring the accuracy of financial statements. Property managers can use accounting software that automates the reconciliation process and reduces the risk of errors.