Do you want to make the most out of your property investment? If your answer is yes, then here is a guide to help you out. Getting a tenant, regular rentals and ensuring lower vacancies are only part of your responsibilities as the owner of a property.
Making sure that your accounting is in order is another responsibility you need to manage. You have to be in charge of your finances and make sure that you keep track of every financial transaction.
Not keeping an eye on expenses will result in business losses. Your business needs an efficient accounting system for you to succeed.
What Are the Benefits of an Efficient Residential Property Management Accounting System?
The right residential property management accounting system will make sure you have control over the following:
You make better purchase decisions when you control the amount that is being spent. Employees need to report what they have spent and any deviations from the budget needs to be detected. An official spending policy needs to be established, and employees need to follow it.
Streamlining the Spending Decision
Discussions on all purchases, no matter how big or small, are a colossal waste of time and money. Streamline the process by creating a list of vendors and products who have established a certain standard in terms of quality, economy and efficiency. Employees should be authorized to deal with such vendors to reduce the time spent on discussing small purchase decisions.
Method of Accounting
You may use the cash or accrual method of accounting depending on the size of your business.
The accrual method of accounting, records financial transactions when they accrue (are to be received). Income and expenditure which have accrued during the year are included. The actual income or expenditure may occur at a later date.
In the cash basis of accounting, expenses and incomes are recorded when they occur. If the transaction does not affect the cash position of the company, they are not recorded.
The cash basis of accounting helps you determine the actual cash position of the company. Decisions on expenses will be taken accordingly.
However, if something due in March is deposited in February, matching the actual month wise sales or purchases becomes difficult.
You should choose the method that works best for you.
Forecasting Future Data
It is important to forecast your future income and expenses using your current income and expenses. Looking at past trends, you can determine what the future figures might be. You will be able to set budgets for both purchases and sales, and detect deviations early on.
Account for Seasonal Fluctuations
If you are in the residential property management business, you will face seasonal fluctuations. While planning your projected income, this has to be taken into account. The lean months will exert pressure on your finances.
Wider Access to Data
With a proper residential property management accounting system which integrates all departments, it will be easier to monitor expenses as the data will be shared, and everyone will have access to accounting reports. The heads of different departments can then plan their expenses without disturbing the Accounts Department.
Transferring all paper documents to the digital format would save a lot of storage space along with faster receipts and payments with online banking.
Get Your Accounting Right for Greater Success
For success as a property owner, you need to ensure a regular income flow and a proper accounting system. Residential property management companies should take care of their accounting challenges. They should ensure that all the transactions related to the property are routed through trusted software.
There would be no duplication of efforts. You would have proper records of all transactions, keep spending under control and be able to create more accurate forecasts.
With the right residential property management accounting software, your business will grow to the next level.
OHI is a fifteen-year-old real estate services company working with 50+ commercial and residential real estate developers, funds and property management companies across USA. Our deep expertise in real estate accounting, financial analysis, lease administration and asset management has helped clients cut associated costs by 40-50%. We currently provide these services to a portfolio of 50000 units across clients.
We invite you to experience finance and accounting outsourcing through us.