Only 30% of small business owners hire accountants to handle their paperwork. However, every business can benefit from hiring a professional to handle their bookkeeping.
You might wonder if you need an accountant for your rental property business. After all, do you know how to handle your rental property accounting?
You might benefit by hiring an accountant for this purpose, or you could hire a property management firm. A property management firm can help you learn how to manage your bookkeeping activities or do it for you.
If you'd like to handle it without an accountant, you might want to follow these three effective accounting practices.
1. Don't Combine It With Your Personal Finances
When you manage your own properties, you might inadvertently combine your business and personal finances. However, it would help if you avoided this habit.
Instead, it would help if you separated your business finances from your personal finances.
For example, if you need to buy supplies to fix something at your units, you might want to use a business credit card instead of your personal credit card.
Additionally, you might want to open a bank account for rental properties to have a separate account to use for your rental property transactions.
Keeping these things separate helps you maximize your expenses for your business and ensure that you record every receipt.
2. Use Software
One of the best financial management techniques is to use software to track your records. You can purchase accounting software for this purpose, and you can use it to record everything.
Additionally, you might want to use other forms of electronic management for your business. For example, do you need some effective rent collection tips? One option is to accept electronic payments.
You might even be able to connect your electronic payments to your software system, making the process even easier.
3. Track Everything Consistently
One additional principle of rental property finances is tracking everything consistently. You can start by choosing a bookkeeping method, and the two choices are cash vs. accrual accounting.
Cash systems record all transactions when you receive or spend cash. An accrual system records transactions when you earn money or incur expenses. You can ask a property manager or accountant to learn more.
Next, you'll need to ensure that you record every transaction. For example, you must record every dollar you receive for rent from your tenants.
Additionally, you must record every dollar you spend on your business expenses. Tracking all these things consistently through accounting software provides accurate records you can use for budgeting and tax preparations.
Follow These Tips for Effective Rental Property Accounting
Using these tips can help you manage your rental property accounting activities effectively. Effective bookkeeping habits can help you avoid IRS issues and other tax-related issues.
Do you need some help with your rental property business tasks? Did you know you can hire a property management firm to handle your accounting and other tasks?
Contact us at HomeRiver Group in Pittsburgh to learn more about our services.