Poor cash flow and late rent are two leading stressors for landlords. If you've managed rental properties for any length of time, you can probably relate.
The good news is that effective rental property accounting strategies can help you overcome some of the common stressors. Managing properties is one aspect of your business, but managing your money is another.
Learning how to properly handle the accounting can be a stress reliever. Continue reading to learn the importance of developing good habits and strategies for your Asheville, NC, rental properties.
Understanding Rental Property Accounting
First, you must understand the basic principles of rental property accounting. Rental property accounting is a process that helps you track your income and expenses.
Your rent money is your income, and your expenses offset the income, helping you pay lower taxes. Therefore, you must set up a system for rental income tracking and property expense management.
Accounting also consists of budgeting and forecasting to help you have a positive cash flow. In addition, your accounting helps you prepare financial statements and reports and handle landlord tax planning.
Set Up a Separate Bank Account
If you haven't already, you must set up a separate bank account for your business. You'll use this for all your income and expenses, which is essential for keeping this information separate from your personal finances.
Track Income and Expenses
Next, choose the right accounting tools for landlords. The primary thing you need is accounting software.
This software helps you track all your rental income and expenses. You can record the expenses in different categories to help you budget. You can also record and track late rent, late fees, and long-term expenses.
Accounting software is also helpful for other purposes. For example, you can track lease expirations to help you improve your lease renewal process.
Create Financial Reports
Your software also produces financial reports to summarize your finances for a period.
For example, you can create an income statement at each month's end. This statement shows how much income you collected and all the expenses for the month.
When you subtract the two amounts, you'll see your net income or net loss. You can also create income statements every quarter and year.
You can also create other financial statements, including balance sheets and cash flow statements, to see other aspects of your business's finances.
Your financial statements can help you determine whether you're making enough money. You can also see a breakdown of where your income came from, such as rent or pet deposits.
Seek Help With Your Rental Property Accounting
Tracking your rental property accounting is essential for your business. When you handle this properly, you'll reduce your stress level. It also helps you plan for your financial future.
You can use accounting software to simplify it. You can also hire a property management company in Asheville, NC, for help.
PMI Mountain and Main offers full-service property management services. We focus on excellence and accountability, helping property owners maximize their profits.
Ready to get some help? Reach out to learn how we can help.
