Accounting involved in Property Management is just like typical business accounting. There have to be different accounts for both properties and tenants. They also need to keep and manage administrative tasks like utilities and payroll separate from the company’s main account in which major cash dealings are done.
This blog is more like a guide in which we have discussed property management accounting in easy-to-understand, simple-to-implement ways. Also, we will discuss the significance of implementing accounting project management software. Let’s get started!
Important Accounting Terms
Several accounting terms are there that you should know for your property management accounting. These include:
- Accounts payable
- Accounts receivable
- Balance sheet
- Journal entry
- Net profit and loss
Many other accounting terms could be foreign to you, and learning and understanding them can be difficult and time-consuming.
Setting Up Your Property Management Accounting
After getting familiar with the essential property accounting terms, it’s time to put them into practice by setting up your business accounting.
Setting up a separate business account is essential, as you can’t do property and other business transactions from a personal account. Moreover, keeping personal and business accounts separate is necessary to track all business transactions accurately; otherwise, it would become impossible and wreak havoc on your accounting.
Choosing an accounting method is also essential. Typically, there are two types, accrual, and cash. In the former, transactions are recorded whenever they occur. In the latter, the transaction is recorded as soon as money is sent or received, whether for the service, the property sale, or payment to the contractor.
The next step involves setting up the foundation, i.e., charts of an account which is the backbone of any accounting system. It is a list of all financial accounts you use for your business. This includes:
Lastly, generate accounting reports through the system you set up. You can use these reports to obtain funds, identify accounting errors, uncover areas of improvement and pay your taxes.
If you're a property manager looking to enhance the transparency and credibility of your accounting practices, seeking the advice of a voluntary audit advisor can be a wise choice, as they can help you identify potential areas of improvement and ensure that your financial statements accurately reflect the financial health of your properties.
Some Best Accounting Practices
After the basics, it’s time to learn some best practices, which are important to know while setting up your property management accounting system. Some such practices include:
- Having separate accounts for administrative and property management operations
- Including gaps in your accounts numbering system. Lack of enough space between each category could end up confusing and inconvenient.
- You may need to add more than one account with time, but ensure you add them when necessary. Adding unnecessary accounts may end up with a huge amount of bloat.
- Let the professionals handle your annual taxes, especially when it is about property accounting, as a single mistake can cause a painful audit.
Use Accounting Software To Save Time, Money & Effort
Use project management software for marketing and accounting to manage your accounting tasks, as they are the most efficient way to manage your accounting compared to spreadsheets. With property management software, you can automate all your business processes and streamline workflows that would take hours to complete if performed using spreadsheets or manually.
With enterprise accounting software, you can create a diverse range of reports within a few seconds. Also, you can access features that you can never get in typical accounting software.