Author: Alita Hall

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QuickBooks for Property Management – Owners

As many of us know, there are several schools of thought on the best processes for any business when using QuickBooks. Property Management is no different. In this series you have learned about using classes and the best practices for setting up a class as well as how to set up your tenants. Like these two sections,  setting up owners also comes in several methods. The method I practice is to use the Vendor Center in QuickBooks.

Why setup an owner as a vendor when they are your customer?

The reason for this is simply because getting their rents to them is a liability to the property management firm just as a bill for utilities is. It also makes your workflow smoother.

We will get more into workflows under this method of property management in a later post for now let's continue discussing setting up owners. There are two ways that owners can be listed as vendors. One way is to use the "address first owner name" method that is similar to setting up a tenant. This way works well for owners with only one property. The other is  using the owner name for those with multiple properties. Using the owner name overall in your vendor list will work regardless of number of properties, however, it is the opinion of this bookkeeper that associating addresses for single owner units will keep data entry errors down.

Using the owner's name in the Vendor list also makes it easier to cut the checks for the rent. This eliminates the need to issue credit/debit memos and keeps the books looking clean. For self-managing landlords, this is a non-issue.

For more information on setting up your owners in QuickBooks desktop, schedule your FREE, no obligation consultation with AMH.

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QuickBooks for Property Management – Tenants

To continue on from our previous post, QuickBooks is an excellent tool for property management. In this post, I am going to cover Tenants and how to treat them in QuickBooks in a way that is easy for anyone to understand.

My recommendation is to set each tenant up as a customer. Inputting an abbreviated version of the street address along with the tenant's last name will help keep identical records separate and sorts the list by address; making it easier to locate a property. Once a tenant has moved and their record has been reconciled (move out process complete and security deposit returned) that tenant simply becomes inactive, and a vacancy is entered using the same format stated above.

For example:
Tenant is Bob Hall. Address is 1455 Main Ave.
This tenant would be setup like this: 1455Main<Hall>.
A vacancy after the tenant has moved out would look like this: 1455Main<Vacant>.

Using this method comes in handy when you have multiple properties by the same owner and then multiple tenants in that property. This method also makes it much easier to determine the number of vacancies an owner has at any given time as they will be listed along with the tenants. Creating a rent roll has never been easier. Simply add the amount of the rent on the end like so: 1455Main<Hall>1575 and print the customer list. There is your rent roll. How easy is that?

With a glimpse you can see your vacancies and determine how long they have been vacant for your KPI reports such as Average Days to Lease and Occupancy Rates. For more information about setting up your tenants, landlord KPI reports, and how QuickBooks works for property management, schedule your free consultation HERE.

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QuickBooks for Property Management- Classes

Property Management is a unique sector of business and the bookkeeping for it is as well. One of the best ways to manage the books for a Property Management Firm or individual landlord is to use the Classes feature in QuickBooks. Classes is a feature that can give further detail on a business' financial information.

There are several ways that a Property Management Firm can use Classes:

  1. Owners As Classes
  2. Property As Classes
  3. Separate Business Entities as Classes

The best practice in choosing which way to use Classes is to determine what type of information you want to track. For a property management firm this means tracking income and expenses for each owners' property. Setting the owner as a class is the best way to tie the income and expenses to each property; especially if an owner has more than one property. If this is the case, each property held by the same owner can be entered as a subclass of that owner. Utilizing Classes this way makes tax preparation faster and simpler. The IRS requires all income and expenses on rental property to be separated by location on the Schedule E.

Whether you use QuickBooks Online or QuickBooks Desktop, the Classes feature keeps the books looking much cleaner, particularly the Chart of Accounts, and makes creating the tax crucial reports easier; saving hundreds and thousands in tax prep fees.

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QuickBooks for Property Management – Work Orders

Maintenance requests. YIKES! For most landlords and property managers this can be a MAJOR headache. Establishing a smooth, easy to follow process from the beginning can fulfill a request with ease! Once a maintenance request is received, the landlord  or property manager completes a Work Order. There are many steps but like all things, repetition is key to automating this process.

The first step in this process is when the Tenant issues a maintenance request. Depending on how you manage your properties (self-managed or property management firm), the response to this will vary a little bit. For the post we will outline if from the property management firm view.

More often than not, PM firms have a maintenance team on staff that is ready to answer these requests in a timely manner. Others do not and may have to call upon another company to help. In either situation, a well-defined process will ensure a smoother journey from start to finish.

Here is the process AMH recommends:

  1. Tenant issues a request.
  2. PM sends request to Maintenance Supervisor.
  3. Supervisor contacts tenant for further info and to schedule time for Technician to inspect the issue.
  4. Technician inspects issues, taking pictures and documenting findings. Emails info to Maintenance Supervisor.
  5. Supervisor contacts Tenant to schedule repair and creates Work Order in Quickbooks (this form will be created for you).
  6. Technician arrives at Tenant's unit, Work Order in hand, and completes repair.
  7. Technician photographs finished work, Tenant signs Work Order, and returns completed work order to Supervisor.
  8. Supervisor turns the work order over to the PM.
  9. A copy of the work order and receipts, if any, are sent over to the bookkeeper in the event the damage is not normal wear and tear and caused by the tenant.
  10. Bookkeeper sends the invoice back to the PM for verification of work order and repairs completed.
  11. PM issues invoice to the tenant.

I have created a checklist to help follow the process and to ensure each step is performed. Click HERE to download the checklist.

AMH can help implement this process and other processes to help get your back office running smoothly. With our Tailored COO program, we can help you widen those bottlenecks in your processes, help you automate some of your steps, and alleviate holdups in your pipelines. Visit our website and schedule your free, no obligation consultation.

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Employee Onboarding

Just like with new clients, you must onboard your new employees as well. Reading a job description and explaining the job duties to the new employee is not always efficient in acclimating the new hire.

Aside from explaining the duties and assigning them a work area, there are quite a few things that can be done to ease the transition for your new team member.

1. Walk them through accessing their company email. - I know it sounds trivial but this can be so frustrating some times. Walking him or her through this step will help ease some of the nervousness from their minds.

2. Sit with them and give them a short tutorial on any software you use to run your business. - Most people are not up on the latest software or applications so learning a new program is stressful! Trying to navigate it alone!? YIKES! Giving your new hire a hands on tutorial shows them that you understand that learning a new program is difficult and that you value their presence. Yes, I know you can point them to YouTube but your sitting down with them will go a long way to instilling loyalty and a sense of belonging in them.

3. Check in with them. - Once a week check ins during their first 90 days can actually help increase their productivity. You can answer any questions or concerns they have, direct them to the company wide resources, introduce them to key members of the team, let them know who to go to for particular pieces of information or questions. Work them into the culture you are trying to build within your company.

4. Time cards. - How do they submit their time to you for payment? This is a BIG one. Of course you want to know how long they worked and what they worked on and the new hire wants to be paid. How does this process work? What is the payment schedule?

Don't let your virtual business stop you from employing these procedures. Video conferencing software like Zoom have made it easier than ever to chat with your virtual employees and hold weekly meetings. You can share screens, write notes, chat, and even record for future reference. There are also apps like Slack or Microsoft Teams that combine file sharing with team messaging and video conference capabilities that will not only increase your performance within your business but also within your team.

Brick and mortar or virtual, your business will thank you when you implement these procedures to onboard your new team members.

If you are ready for this step or are thinking about your first hire, schedule a call with AMH and ask about our Tailored COO program.

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New SBOs & Bookkeeping

Congratulations on starting your new business venture! It is challenging and rewarding and no day is the same. The key to making it all work is to automate and delegate when and where you can. One of the best things to both automate AND delegate is your bookkeeping.

Starting your business with good bookkeeping practices early, will take a large load off your plate down the road. It is easier to catch mistakes in the beginning than it is to catch them in the end. These mistakes can be extremely costly and come with other consequences such as jail time or seized property if not caught and corrected in time.

Do not be worried about having the money to pay for a professional regularly. My recommendation is to find a professional that understands your industry first. Be intentional. The goal is to find YOUR bookkeeper/accountant. Explain to them what you are looking for and what you need starting out and sign on to work with them.

For example: You are starting an Etsy store and you have some inventory just recently purchased for the products you make.

What you need: A bookkeeper/accountant who understands e-commerce, particularly the Etsy space and 3rd party merchants that work with Etsy. In this scenario, the bookkeeper/accountant can create an Excel workbook for you that includes a place for customers, inventory tracking, cost of goods sold, additional items list, and your reports so that when you are ready to move to a sophisticated accounting system, the transition will be seamless; all while monitoring the workbook for errors, omissions, categorization errors, etc.

The professional bookkeeper/accountant can set up your accounting system, create your chart of accounts, and input all the information from your spreadsheet into your accounting system; giving you your historical data as well as the current data.  Your chosen professional is there to advise you on the financial health of your business, offer cost/benefit analysis on any new endeavors, keep you abreast of all the new tax laws, and do their best to help lower your tax liability and increase your profits.

As new business owners, you may not think you need the accounting right now. You may even have others in business that you know tell you that they waited. Do not let them distract you. It is always better to have this system set up right in the beginning when the chances of IRS audits are low than to spend thousands of dollars getting the mistakes corrected because you are being audited.

AMH Bookkeeping, LLC can help. Schedule your discovery call now and let us get you started on the right foot with your financial management.

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Financial Statements: More than just a P & L.

Profit. This is the buzzword that drives businesses today. How PROFITable were we? Yes, but what was the PROFIT margin? Of course profit is important. If a business is not profitable, it will not survive. One way that most companies find out their profitability is with a Profit and Loss Statement or an Income Statement.

This document totals all income streams a business has and subtracts out all of its expenses to get was is called a Net Income if the income is more than the expenses or a Net Loss if the reverse is true. It does not take into account any outstanding liabilities the company has and this is one of the reasons why it should not be the primary focus when it comes to your financial statements.

To better gauge the financial fitness of your business there are some other financial reports you should add to your monthly statement review.

  • Balance Sheet – The reason it is imperative to review this document is because this is where you will find accumulated depreciation and liability errors.
  • Statement of Cashflows – This shows you how your money moves. Reviewing this document frequently will help your company prepare for the rise and fall of your cash flow.
  • KPI (Key Performance Indicator) Statements – Often created for internal use, tracking the average dollar amount spent by customer, city with highest sales, or most purchased item can also aid in determining the direction your company wants to continue to remain profitable and grow.

Periodical reviewing of the Balance Sheet will let know what your liabilities are and this will aid you in determining what your ‘Working Capital” is. To me, working capital is defined as all the money left over from any and all financial obligations such as expenses, liabilities, and other lines of credit. This number can also include a percentage you, as the owner, would like to retain as profit.

In combination with the 3 reports listed, your financial statement analysis can become the springboard that launches your company into the stratosphere.  Major financial decisions can be made when reviewing these 4+ reports for example, diversifying investments, consolidating debt, establishing another line of credit, and much more. Let AMH help you understand your numbers and advise you on your options.

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Leases: Why They are Important

I am sure this is common place but believe it or not there are still landlords operating without a lease agreement.

What is a lease agreement?

A lease agreement is a document that outlines who is living in the rental unit, how much the rent is, when it is due, and the rules regarding the use of the unit. In addition, the lease agreement details what the deposit is, what utilities will be paid by the owner and the renter, how to send maintenance requests, and how to give notice when moving before the lease is up.

This document is important because it lets the tenant know what to expect, how they are to maintain the property, and what happens if the rent is late. It serves as a layer of protection for both the tenant and the owner. Aside from telling the tenant how he or she must behave while occupying the unit, it details how the landlord is to behave while the tenant is in occupancy.

The landlord is to provide the tenant with notice 24 hours prior to entering the unit for non-emergencies, how to handle the security deposit after the lease has ended or tenant has moved, and how long they are to safely and securely store your items should have difficulty getting help moving them.

The lease agreement is a contract and any breach of it has consequences for the party responsible for the breach. Landlords and property managers, a great process to implement with prospective and renewing tenants is to go through the lease with them section by section. Make sure they understand what is being said in the document so that there is no confusion. Have them initial each section to indicate they have read and understood its purpose. This process will start to slow down the amount of infractions and create a dialogue between you and your tenant that will establish a set of expectations on both ends. The tenant will you see as professional and fair. You will see the tenant as reasonable and responsible.

In addition to the lease agreement, you can addenda that explains the nuances of your business. For example: Pets, pest control, and the move-in/move-out checklist. I will talk about the checklists in another post.

If you find yourself without a good lease and reside in the state of Iowa, the Iowa Real Estate Association has got you covered. For all other states, please reach out to your local landlord association, realtor association, real estate investors association, or contact an attorney.

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SBOs Shouldn’t Commingle Business and Personal Funds

As a bookkeeper, one common issue that I see with small business owners is the commingling of personal and business funds. It usually begins as a small purchase being made for the business accidentally with personal funds or vice versa. This is not a big deal if it is a one-time thing. When it becomes common place, larger issues can arise and the following questions need to be answered:

  1. For those personal purchases made using the business funds, are they being paid back to the business?
  2. Is the business paying the owner back for expenses made using personal funds?
  3. Are those business expenses that were made via personal funds being treated as an equity investment instead?
  4. Are the personal expenses paid for by business funds being treated as an owner draw?
  5. How will they affect the business and personal tax deductions?

Aside from answering the above questions, deciphering what was a personal expense and what was a business expense so that your business receives optimal tax deductions and credits is CRITICAL. The time it takes your CPA or EA to do this can cost you thousands.  In situations like these, having a bookkeeper handle your day to day financial data entry is beneficial. Your bookkeeper can catch these transactions and handle them accordingly so they do not cause long term issues with your financials as well as establish systems to prevent the commingling from happening again.

The best way to prevent the pitfalls of commingling is to stay away from this practice completely. Here are a few ways to make sure your business and personal funds remain separate.

  1. Have separate checking accounts.
  2. Do not maintain your personal financial records in the same accounting software file as your business.
  3. Leave your personal cards at home or locked in a file cabinet when working on your business and vice versa.
  4. Review your bank and credit card statements regularly and notify your accountant or bookkeeper of any misclassification of transactions.
  5. Become proactive with your bookkeeping. Taking part in the data entry or reconciling of your financial records gives you a detailed view of how clustered things can become when funds are commingled.

You do not have to tackle this alone. AMH Bookkeeping, LLC is here to help you sort through things and get you back on track with accurate, clean, and current financial records. Schedule your consultation today!

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