Major Accounting Principles to Effectively Run Your Property Management Business

accounting principles
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If finances aren’t your main priority as a property manager (after all, you have a lot of other things to worry about), you probably have a hard time keeping them on track.

But it doesn’t have to be a big, difficult job.

These quick tips will help you learn some important accounting principles that will make your job a bit easier.

Keep Every Property Separate

As much as you want to lump everything together, don’t. Despite what you might think, it probably won’t make anything easier.

You do need to have an overall budget for your properties, but each property should also have its own, much smaller budget line. This also means giving each property it’s own line-by-line budget items.

Why?

Because it will help you accurately track your profit (and your loss) and stay up to date with your income ratios. Not only will this bring successful accounting, but it will also keep you protected should any legal issues come up.

Your Documents Should be Organized

Messy documents mean sloppy accounting. Everything should be organized, clear, and easy to find.

Should a tenant challenge a charge (which they have every right to do), you need to have all relevant documents on hand to prove that charge was fair.

This means you need to know what the typical rates for services are in your area. You should only charge as much as a professional in your community would charge for the same service.

So if a tenant calls about broken sink (or something similar) and you decide to fix it yourself, you can only charge what a professional would charge to do the same job. If the professional could finish the job in an hour but it took you three hours, you can still only charge for that one hour.

Keep Meticulous Records of Everything

Each property needs to be declared on a tax return, regardless of whether it was profitable or not. When you declare it on a tax return, you can offset it against future profits.

These are some of the documents that need to be kept organized.

Budget Tax Payments in Advance

Every time you consider a new investment, you should budget in your tax payments right away.

A good way to do that is putting aside at least a quarter of your profit from each property every month. When it comes time to pay taxes, you won’t have to flounder and try to find the money somewhere.

But the exact amount you put aside depends on how much profit you get from what things. For example, if you have a lot of other earnings from other sources, you may have to put aside even more than a quarter of your property profit.

Make Sure You Stay Prepared with Good Accounting Principles

Proper Accounting principles make sure you stay prepared for anything that might crop up during the year. This includes taxes, legal problems with tenants, and other issues.

Keeping your documents clear and organized is a must. Without that, it will be hard to keep track of profits and loss from all your properties.

Want to make your job even easier? Then you need to look at these apps every property manager should have.

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