Property management accounting can range from simple to incredibly complex, depending on the type of business you operate, state guidelines, and more. Outsourcing your property management accounting is one of the keys to maintaining a thriving business and working with reliable professionals.
Did you know that, according to Hemlane, property managers spend an average of four hours per month to manage a single property? Although four hours may not seem like much, it can be daunting for someone who owns multiple properties.
Property management accounting is an ideal solution for owners who desire accuracy and expertise. Outsourcing your accounting operations can bring your business to the next level and even encourage you to expand.
How Does Property Management Accounting Work?
Property management accounting encompasses various features of the property management process. A property manager accountant may take care of some or all of the following tasks on behalf of the property owner:
- Tracking income and expenses
- Maintaining accurate financial records
- Financial budgeting and forecasting
- Ensuring the owner complies with tax law
- Collects and deposits rent and other fees
- Reconciles financial records for accuracy
- Managing and reimbursing expenses
Some property managers may have responsibilities outside of this list, so it is crucial to remember that every property management accounting situation is unique. When working with an outsourced accountant, you can tailor their duties to your specified needs.
What Is GAAP in Property Management?
Generally Accepted Accounting Principles (GAAP) are a set of standardized rules that apply to financial reporting. They encompass how transactions are recorded and the types of records that must be kept to maintain accuracy.
Complying with GAAP is crucial if your property management company relies on outside investors. Using GAAP when compiling reports can give them a detailed and nuanced picture of the business, which is influential when making investment decisions.
Outsourced Accounting Benefits
How can you benefit from outsourced accounting for your property management business? Is it worth the extra cost? The answer is a resounding yes, due to many advantages, including the following.
Rely on the Experts
Although software such as QuickBooks makes balancing the books seem easy, this could not be further from the truth. Accounting is more than just entering transactions; many elements work together to form a complete picture of your business's financial health.
Therefore, it is essential to employ an expert who can understand the ins and outs of your business and work through accounting issues accordingly. Companies such as Balanced Asset Solutions have extensive experience in the property management field.
Save Time and Money
When you are not an experienced accountant, resolving financial problems can take much longer. Hiring an outsourced accountant gives you the benefit of efficiency. You will not have to go back and correct mistakes or spend hours on a task that could take your accountant a mere 30 minutes.
Guidelines for Property Management Accounting
Whether you want to manage your accounting yourself or hire an outsourced accountant, following key guidelines for accurate property management accounting is important. Here are some aspects to consider before you begin.
Document Everything
Keep documents in a secure location, and ensure that you have multiple copies on hand. Consider storing sensitive documents in a locked file cabinet and scanning them into a secure cloud server as well.
Many scanner apps for smartphones and tablets can easily scan receipts, turning them into PDFs for your computer records. You may need to produce evidence for legal proceedings or show a tenant proof of maintenance, among other reasons.
Do Not Mix Money
It can be tempting to have your property management funds come and go from your personal bank account, especially if you only manage one or two properties. However, this is a recipe for disaster.
Mixing money can cause thorny tax and legal issues down the line. It can be difficult to determine where the money came from or is going. Set up a separate bank account for your property management business and pay yourself regularly from that account so the books are accurate.
Frequently Asked Questions
Can I Do the Property Management Accounting Myself?
Technically, yes, but it is not advised. Working with a professional has numerous benefits, and it is important to ensure that you have accurate records should you need them.
If you still want to take over the property management accounting by yourself, consider taking some basic courses online or at your local community college. Beginning accounting courses introduce students to basic accounting principles and help them understand how money flows through a business.
Can My Property Management Accountant Help With My Tax Return?
Definitely. To make sure you can have a streamlined tax return process, hire a property management accountant who is also a Certified Public Accountant (CPA). The CPA licensure shows that they have the expertise necessary to handle complex accounting issues and prepare your tax return with ease.
An added benefit of your accountant preparing your tax returns is that they will likely have most or all of the documentation needed. You will not have to hunt down stray receipts or income statements when tax season rolls around.
Does Property Management Accounting Differ Between States?
It can, which is why it may be ideal to work with a property management accountant who resides in or has CPA licensure in your state. Some of the elements of property management accounting that can change between states include:
- Requirements for owner reporting
- Tenant fees
- Fiduciary accounting
- Licensing fees and requirements
Knowledge of accounting principles between states is essential if you own a property that is out of state and rely on a company to manage it on your behalf.
Find Your Ideal Property Management Solutions
Property management accounting may be a challenging sector of your real estate business, but it does not have to be. With this guide, you can tailor your real estate financial services and experience outsourced accounting benefits from working with a qualified expert.
Would you like to learn more about real estate management? Take a look around our website for tips, tricks, and guides.
This article was prepared by an independent contributor and helps us continue to deliver quality news and information.