The satisfaction of keeping detailed financial records probably isn’t the top reason most landlords invest in rental property. However, accurate bookkeeping affects your business’s tax deductions, protects you legally, and ensures sufficient cash flow.
Here are five tips for making your rental property bookkeeping as accurate and painless as possible:
1. Keep separate personal and business accounts. Maintaining multiple accounts may seem overly complicated, especially if your rental business is small. But in the long run, separate accounts will simplify your accounting. A separate business account lets you track income and expenses from your rental property without sifting through irrelevant personal transactions. Easy access to your business records will make tax season easier and help you spot ways to improve efficiency.
2. Find a system and stick with it. Do you prefer to create your own spreadsheets or use a software program that runs calculations and reports for you? Do you collect receipts in a physical folder or envelope or save digital copies on your computer? Your methods don’t matter if you can accurately track income and expenses, organize relevant receipts, and get a clear picture of your cash flow.
3. Don’t wait to log income and expenses. The longer you wait to record the details of a transaction, the higher the chance those details will be inaccurate. In a world of endless distractions, you may forget the details of financial dealings. For the most straightforward and precise bookkeeping, record every rent payment, hardware store receipt, contractor’s bill, etc., as soon as the transaction occurs.
4. Reconcile bank transactions regularly. Every payment you receive and invoice you pay will likely flow through your business account. Reconciling your business checkbook every month can ensure accurate records and timely payments. The more you stay on top of your business account balance, the easier it will be to catch and correct inconsistencies.
5. Consult a professional when needed. If bookkeeping isn’t your strong point, don’t force the issue. Hiring a quality accountant will reduce stress in managing your accounts and free up time for other tasks. In addition, an expert can help you budget and plan for your business’s future, identify tax deductions you might’ve missed, and suggest ways to increase business profits.
Keeping your financial records and accounts up to date involves time and work, but the effort will help you maximize your rental property investment.
About Rentals America
Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management, and we’re here to help landlords navigate the rental market.
