While most people are not overly fond of bookkeeping, it is an important part of life. When you run a business, accounting becomes even more vital. Although keeping a box receipts and handing it over to your accountant at the end of the year might sound appealing, it can also be dangerous. Proper rental property accounting can help you to ensure you know where you stand with your business at all times. At the very least, you should maintain a basic record of your rental property income and expenses. Keep in mind that most of your rental property expenses are tax deductible, which is one more reason why it is important to keep up with your records.
Most of the income that your business receives will be in the form of rent. With that said, you may also have other income that you need to make certain that you document. For instance, if you ever need to file an insurance claim, you may receive money from the claim. Any time that you receive a check for your business, including rent paid by check, it is a good idea to make a copy of the check prior to depositing it. If rent is paid by cash, you should issue a receipt and make sure that you keep a copy of the receipt for your own records. Of course, the easiest way to make sure that rent collection is documented is by using online rent collection.
You also need to ensure that you properly document expenses. Throughout the course of the year, there will likely be many expenses that your business will incur. Maintaining good records will give you the ability to review those expenses and determine where you may be able to save money. Potential expenses that your business may incur include:
- Maintenance and repairs
- Mortgage interest
- Property taxes
- Trash pickup
- HOA fees
- Management fees
There are some ways in which you can save on expenses, such as with a free tenant check with VerticalRent, but it is still important to ensure that you are tracking and recording your expenses. As part of that process, you need to ensure that your income and expenses are organized. One option would be to keep a folder and handle it the old-fashioned way, but there are many disadvantages to this option. For instance, there is always the risk that receipts could become lost. You may find that an online property management solution can be a good fit for your business needs by allowing you to add income, track expenses and even flag certain transactions for follow-up. With this option, you will receive instant notification when a tenant makes an online payment. This type of solution is also excellent for allowing you to organize and categorize your income and expenses. You can even customize your accounts so that you can keep tabs on what is going out versus what is coming in. Thanks to mobile technology, you can also track everything on the go.