Managing a rental business on your own means you need a diverse skillset.
Strong communication, tech-savvy instincts, and a solid understanding of maintenance are all general skills and knowledge you need to effectively run your business.
Bookkeeping is another vital skill. Knowing how to balance your books and organize your rental accounting will save you the money of hiring someone to do it for you.
One way to develop this skill set is to use property management software. Property management software for landlords include accounting features such as online rent collection, automatic bank reconciliation, and eFiling. You don’t need extensive experience in accountancy to use these features, but they will teach you the basics of managing rental finances on a digital platform.
Here are five essential bookkeeping tactics for landlords, and how you can implement them with property management software.
- Use Online Rent Collection
The most significant step you can take toward digital management is transitioning to online rent collection.
Although you or your tenants may be accustomed to cash or check payments, collecting rent online is safer, faster, and more convenient. With online rent collection, tenants can make payments from anywhere, and you’ll receive your funds sooner.
Online rent collection software also makes it much simpler to compile your finances. When it’s time to weigh expenses with revenue or file taxes, pre-prepared digital data is much more organized and accurate than hand-kept spreadsheets or paper files.
For these reasons, online rent collection is the most fundamental rental bookkeeping tactic to adopt.
- Automate Bank Reconciliation
If you use property management software or another rental accounting application, you’ve likely encountered automatic bank reconciliation.
When comparing your bank accounts to your financial records, you want to ensure the most precise information possible. Minor clerical errors can cost you time and cause frustration.
To avoid errors and streamline your bookkeeping, automate bank reconciliation through a software solution.
- Digitalize Payment Records
Payment records, receipts, and transfer verifications are all much more convenient when digitalized. No tenant wants to wait for you to find a lost file or track down a line in a long ledger when a digital option could be available instantly.
As previously mentioned, digital records prepare you to analyze trends in revenue, expenses, and overall efficiency.
Automatic payment records are also beneficial for your tenants. When a tenant submits a payment online, their receipt is automatically emailed directly to their inbox. A record of their payments, the dates those payments were made, and a ledger of their current balance are all a few clicks away on a tenant’s user account.
- Generate Profit/Loss Reports
Profit/loss (P/L) reports are helpful indicators of how your rental business is managing its expenses with the available income. You can use P/L reports to garner insight into how your business is doing financially and where you can improve.
Generate P/L reports, along with other financial statements, on your property management software platform or accounting application. Referencing these reports regularly is good practice and an effective bookkeeping tactic. When it’s time to make decisions about acquiring new units or lowering rent, you’ll already have all the data you need to make the most informed choice for your business.
- Prepare for Tax Season
A final bookkeeping tactic is to prepare for tax season with your digital accounting tools.
The last thing you want is to be scrambling to file just before the deadline.
Instead, use your digital accounting tool to prepare for tax season before it arrives. For instance, some software platforms offer 1099 eFiling and professional tax preparation for the IRS.
You can also initiate account book locking, which freezes your books right before you file. This practice prevents last-minute disasters like corrupted data or accidental changes.
Eliminate mistakes and hassles when filing by leveraging your software tools’ capacity for automation.
Automate Bookkeeping with Property Management Software
Rental accounting shouldn’t be a headache. When you use a digital accounting tool, you can limit the time and energy you spend balancing and maintaining your books. Features like online rent collection, automatic payment records, bank reconciliation, profit/loss reports, and tax preparation all make digital accounting on property management software a worthy investment.