Property management companies face a lot of unique accounting and bookkeeping scenarios. If you’re just getting started, follow these tips.
Anticipate Fluctuating Cash Flows
Every business has to deal with the ebbs and flows of cash, but that can be even more pronounced for property management companies. For example, if you only manage five properties, and two are empty, you may have 40% less cash rolling in every month. Additionally, you have to deal with late rent payments, surprise repair bills, and other potential hits to your cash flow. To ensure you always have cash on hand to cover the basics, you should have a savings account or a line of credit waiting in the wings. To assess how much you may need, imagine a few worst-case scenarios and crunch the numbers. Consider what would happen if one tenant breaks the lease and moves out unexpectedly right when the refrigerator breaks in another property. Then, make sure you’re ready to respond financially.
Consider an Online Portal
To reduce ebbs in cash flow, it can help to make payments easier for your renters and owners. To facilitate rent payments and management fees from owners, consider investing in property management software. This type of software offers a range of functions, but ideally, you want an online portal where clients and renters can submit payments electronically. Alternatively, consider sending out monthly invoices with online payment options.
Plan Purchase Decisions
As a property manager, you tend to deal with a lot of the same issues repeatedly, such as clogged toilets, dirty carpet, and broken garbage disposals. Develop a listed of preferred vendors so you always know who to call for a solution to your problems. Try to work out a volume discount with local plumbers, cleaners, landscapers, and other professionals. You may also want to curate a list of appliances that are the most efficient and cost-effective to help save time when you need to replace something in a property.
Separate Records Per Property
While you need to track revenue and expenses for your business as a whole, it’s also critical to maintain separate records for each property. Accounting software such as QuickBooks Online lets you set up multiple accounts. If you also want to track overhead on a per-property basis, you may want to use time tracking software such as TSheets Time Tracking that allows employees to note which project or property they are working on.
Generate Reports for Owners
You may want to generate reports to keep owners in the loop. For example, you may want to give owners monthly reports of the income and expenses on their individual properties. Income typically consists of rent, while expenses include maintenance, management fees, and other costs. You may also want to provide information on marketing activities, late payments, renter profiles, and upcoming maintenance expenses. Juggling multiple properties and keeping tenants and owners happy can be challenging. However, with the right tools and a bit of preparation for all kinds of scenarios, you can watch your property management company flourish.