The key to effective accounting is to keep a track of the money earned and spent in business. It is essential for every business, and real estate is not an exception. Besides helping you stay organized, it also measures your profitability and aids in complying with legalities. You need to take key business decisions from time to time, and proper accounting helps you take the right ones.
If you have a new business and feel overwhelmed managing all the financial details, the following suggestions can help.
Keep track of receipts
You should organize and store all kinds of payment receipts above $75 to ensure proper tax calculation at the end of the financial year. There is no need to keep all the receipts and invoices in paper form, as you can always take pictures and store them in a folder on your system. But the best way to store receipts is to upload them on the cloud. The hard copies may get misplaced, but on the cloud, you can store these receipts forever.
The receipts can also help you track all the money that is going out of your business and vice-versa. Hence, they can help you make business decisions that involve financial details.
Categorize the finances
It is the next step to proper bookkeeping in the real estate business. You can categorize the income and expenditure in different sections on an excel sheet for your convenience. A few examples of these categories are rent payments, advertising costs, maintenance fees, mortgage, insurance, supplies, legal fees, property management costs, and more. They will give you a clear idea about the financial flow of your business.
Hire reliable property managers
A landlord has many responsibilities that prevent him from giving much time to the finances. You can delegate all the responsibilities, like tenant finding, screening, management, and query resolution to an experienced property management company to get more time for bookkeeping. You may learn more from the expert property managers of a leading agency to understand which responsibilities you can delegate. Some of them also have experience in the financial sector, thus offering some help in accounting.
Create flawless profit-loss reports
You need to itemize revenue and losses by referring to your business bank statements. It can help you create profit and loss reports. These reports are necessary to track overall business progress and make business decisions in the future. You are free to decide how often you want these reports – monthly, quarterly, or annually – depending on the size of your business. By itemizing profit and loss, you can also get an idea about the areas that require more expenses than others.
For regular bookkeeping, you may need various documents and financial statements that can be provided by your bank. Also, keep a close watch on the transaction details. While running a business, a lot of money gets in and out of the bank frequently. If you do not keep track of them, you may face trouble creating the financial and taxing reports at the year-end. Hence, you should be in touch with your bank officials and ask them for help whenever necessary.