What follows are some tips to help you with your property management accounting, so you can avoid trouble and take advantage of what’s available.

Be meticulous with financial records

The better you keep your records, the easier it will be to keep track of what you’re doing and provide solid protection in case you get audited. Plus, you’ll be able to see trends and answer common questions about your real estate investment. This means that you may be able to spot potential problems in the early stages and make plans to counteract their effects. Also, keeping good financial records helps with the following;

– Maintenance issues

– Market performance

– Local market competitiveness

The more documents you can keep for each transaction, the better off you’ll be. This is where digitization can really help if you have proper backups.

Create trusted accounts

You want the funds allocated to run your business to be used appropriately. So you’ll need to start by creating trust accounts to help you organize and make sure your money is spent the right way. Unfortunately, misuse of trust accounts is the #1 reason property management companies get audited, so you’ll need to be careful.

Create an account for security deposits and an account for collecting rent and paying bills for each customer. It may not be required, but it will help you keep separate records that will protect you during the audit process.

Separate personal and company funds

Proper property management accounting keeps your personal funds and those that manage the business separate. You may be tempted to funnel one into the other, but pooling the funds together is illegal and will get you in trouble. You will need to check your local, state, and federal laws, but here are some areas to be aware of.

– Deposit funds to the right account

– Withdraw commissions and fees from the appropriate account

– Set time limits on when funds can be withdrawn

– Do not mix personal funds with funds from your business

By following these simple rules, you can avoid getting into trouble and keep your funds properly separated.

Effective property management accounting means you can build on your success and minimize mistakes. In essence, you can avoid the basic problems that often plague property managers simply by maintaining separate accounts and careful records that ensure your protection should you be audited.

Plus, if you employ the right property management accounting practices, you can spot potential problems along with good opportunities to make your business even more money. It takes a bit of time, but following the right practices brings rewards that you may not see today, but will enjoy tomorrow.