A good rental property bookkeeping tool will enable you to accurately record all your business expenses, provide valuable insights into the performance of your portfolio, and save you both time and money.
Monitoring your cash flow can help determine if your business has enough cash to cover your current and upcoming expenses. It can also help with planning your budget, by helping to predict future income and informing decisions about future spending and investments.
Keeping on top of these tasks also helps your accountant or bookkeeper. They can give you better, more tailored advice with more information about your business.
Bookkeeping software is also commonly known as accounting software and is designed to help you optimize your accounting processes allowing you to accurately keep track of all your rental property businesses’ income and expenses while minimizing the effort required to do so.
You can think of landlord bookkeeping software (such and Landlord Studio) as a kind of electronic ledger. Many solutions will also have tools for improving your tax filings, taking payments, invoicing, and receipts.
Additionally, solutions specifically designed for landlords also often have property management-specific features such as rent reminder emails, tenant screening, and have features tailored specifically to tackle unique problems for landlords.
Bookkeeping software comes in two forms. The first is the more traditional bookkeeping solution. This is the type you would install on a single device – spreadsheets also fall into this category. Your data is stored on a local drive and is accessible and editable from that device only.
The second form is online bookkeeping software. This stores your data on cloud servers allowing you to access and edit your data at any time from any device anywhere in the world.
As with most software services, online software comes with built-in advantages:
When looking for a rental property accounting solution you need to make sure that the solution you choose has all the functionality you need to not only save time and money but also will scale with you as your portfolio grows.
The first thing to look at is the pricing. Is it affordable for you and does the pricing offer flexibility to allow you to easily scale your portfolio up or down?
Secondly, you don’t want to have to change in 10 years’ time. Will the solution grow with you? You might not have the most complex demands right now – you might just need basic accounting tools – however, in 10 years you might need additional features such as maintenance management and payment management. Having a solution that either offers this as an add-on, or you believe will scale their functionality as you grow is important.
Thirdly, how easy is it to use? Learning any new software comes with a challenging learning curve. Having a solution though that not only makes your bookkeeping easier in the long run but also isn’t too hard to get to grips with will prevent you from making potentially costly bookkeeping errors in the short term.
Finally, you need to look for a solution that is secure and that you can trust. This is especially important for any software, however, especially important when that software is handling your financial data. Additionally, you should be able to get fast and quality customer support.
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Not sure what to look for when searching for the perfect rental property bookkeeping software? Here are a few things to keep in mind.
Your business transactions will stream straight into your accounts.
Get a visual summary of things like money due to come in, bills due to go out, and more.
By tying your rent collection into your bookkeeping platform you can automate both the rent collection and the income tracking.
Reports are an integral part of understanding cash flow and a vital tool if you are going to improve your rental property business’s profitability.
Customizable reporting features can speed up tax prep and filing.
Manage on the go and get alerts for things like overdue invoices or payments received.
We mentioned above that a key feature to look out for in a rental property bookkeeping tool is the ability to connect your business bank accounts. This allows you to reconcile transitions directly from your feeds, minimizing manual data entry which saves time and reduces errors.
All of your related bank accounts should be added as a bank account so that all of your business’s transactions are in Landlord Studio.
It’s recommended that each of your properties has a separate bank account to make it easier to manage your income and expenses across your portfolio.
With up-to-date transaction information in your software, you will want to make sure to regularly log in and reconcile expenses to ensure you don’t miss recording any money in or money out. This is essential if you want accurate books and want to file an accurate tax return.
We recommend that you do this frequently. You can see when items need reconciling from your dashboard. The Landlord Studio app makes it easy to quickly reconcile your accounts on your phone whenever you have a spare moment.
Make sure to accurately track all your business expenses by digitizing receipts in real-time with our smart scan receipt feature. This allows you to use the camera on your phone to snap a picture of your receipt. The system then automatically reads the expense details and enters them for you. Simply select the expense category and hit save.
Alternatively, you can reconcile your expense from the connected bank feed on your mobile device and attach the receipt then and there or at a later date.
Managing expenses helps you to maintain an accurate representation of your business outgoings.
However, doing this in real-time means you will never forget deductible expenses. Plus, it not only makes the entire process more accurate thus potentially saving you thousands of dollars at tax time, but it also prevents you from having to complete the traditional vast admin task at the end of the month where you have to pick through all your receipts and manually enter all the details.
All income and expenses should be accurately dated. This helps better inform your portfolio cash flow graph on your Landlord Studio dashboard. Which in turn allows you to spot potential discrepancies and in your finances.
Additionally, it can help you plan your expenditures ongoing with expected income vs expected outgoings extrapolated from your current cash flow data.
Once you’ve got your books set up you need to be able to quickly and easily generate professional reports that draw out the key figures you need and give you fast access to an overview of your financials.
Landlord Studio has a selection of reports that you can instantly generate and are customizable by filters including property, expense category, income category, and date range. They can be generated whenever you need them and either downloaded onto your device or shared straight from the app with your accountant. Additionally, you can give your accountant full access to your reports which they can run themselves to get all the information they need to help with your financial and tax planning.
A key report, and the most commonly generated one on our system if the P&L (profit and loss) report. Your profits and loss report should include operating earnings or the profit made before income and tax. Operating earnings are not to be confused with net income, which is the sum income after taxes and expenses.
From these reports, you can also learn invaluable things, like if you’re over-spending and if so on what which can help keep your properties in the green. Some profits and losses reports include sales volume as well, or the number of total units (in this case, real estate) sold during a particular time period.
As tedious as it may be to constantly be updating your accounting it must be done consistently. This though is why we created the Landlord Studio software.
Our software allows you to quickly and easily stay on top of your accounts, generate professional reports instantly, reconcile with your bank, and more.
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Ben is an author and real estate enthusiast. His interest in all things entrepreneurial has led him to work with real estate professionals all over the world, distilling their knowledge into articles and Ebooks.
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