Wouldn’t it be a lot convenient to have a system that simplifies all your transactions? Imagine a rental property accounting system that helps you keep track of all your transactions all throughout the financial year.
The system we will consider here works wonders for small landlords. It will allow you to scale your business without the inclination of hiring a bookkeeper. So let’s dive in and understand how exactly small landlords can create a competent rental accounting system.
One Bank Account per Rental Property
What might sound like a tedious practice has been implemented by small landlords a common practice, working wonders for them. The goal of setting up different bank accounts per property is to make sure all income and expenses related to one property flow through one bank account. Creating an immaculate path for you to keep tabs on your cash inflow and outflow. You will easily be able to create a profit and loss sheet for a single property, maintain receipts of your transaction while avoiding chaos.
Keep an Eye on Your Accounts
Once you have set up the bank accounts, the next step is to be observant. Monitor all your expenses incurred from each bank account. You will have to be meticulous while keeping tabs, making sure you don’t miss recording a single transaction charged from your card. You can snap photos of your receipts as soon as they are generated, use sticky notes to remind you of your purchase, or place some sign on your debit cards, each card representing the property it represents.
Our purpose of keeping tabs on our transactions is to create a profit and loss statement which is accurate. To make sure we have a precise profit and loss statement, all our bank statements need to be accounted for. Most banks allow their customers to download their bank statements as an excel sheet, which you should be doing if your bank allows you that luxury.
Keeping Substantial Records
Keeping records of all your transactions is of fundamental importance for you to run a well-oiled accounting system. You can keep snapshots of your bank statements, receipts, and invoices saved up on your cloud for a rainy day. It will help you in not only maintaining your finances in an organized manner but also help you find them in a second when needed. Always keep receipts that convey your mundane transactions like meal and travel. If the amount statements seem overwhelmingly confusing to you, then there are many apps that aid you in record keeping of your important financial documents.
The rental property accounting system mentioned above is so easy, even a non – CPA can do it. You just have first set-up separate bank accounts for each property you plan to lease, monitor and maintain records for all the transactions incurred on the properties. This way you will easily be able to consolidate and reconcile all your transactions at year-end.