Accounting for Landlords - AMH Bookkeeping, LLC

December 2, 2019December 8, 2019

Schedule C & E: Using These Forms for the Setup of Your Accounting System

Depending upon your entity type and industry for your business, setting up the books for bookkeeping can be quite simple. For the purpose of this post I am going to discuss the two setups I am most familiar with.

The first is based upon the IRS Form Schedule C. Page one of the form handles the income and expenses of your business to arrive and the profit and loss. The business expense categories listed are all that is needed in your accounting systems' Chart of Accounts. Having this form handy keeps the Chart of Accounts clean and streamlined. You can always add sub-accounts for the things you want broken down for reports to be used internally.

Another form I like to use as a reference is the IRS Form Schedule E. I love this form because my specialty is rental property accounting and it helps keep my clients Chart of Accounts clean as well. Page one of this particular form deals with the income from rent or royalties and the other page deals with other kinds of passive income such as income from Partnerships or S Corps. For this purpose, only the rents concern us. When you have property that you allow others to use, you must report all the income and expenses for EACH property, using multiple sheets for multiple properties, on the Schedule E.

Using a combination of these forms, in particular the listing of expenses on each, and the classes feature in QuickBooks, the Chart of Accounts will be comprehensive and will make creating a tax return a lot easier as all of the information for these two forms will be incorporated into the business books. This method keeps thing simple, organized, and clean; just one aspect of quality you can expect from AMH Bookkeeping, LLC. For more information on our setup process or to work with AMH, schedule your consultation HERE. AMH Bookkeeping, LLC...Your Books. Clean and Simple.

November 4, 2019November 4, 2019

QuickBooks for Property Management: Owner/Tenant Workflow

Now that we have classes, tenants, and owners all set up, it is time to talk how these three things will flow together. The workflow for property management does not have to be daunting. The goal is to make it simple, easy to follow, and repeatable. Let's dive right in!

Step 1: Assessing Rent Charges to Tenants

Statement charges are a great way to assess the charge for rent. It is a register for each tenant that shows all the transactions that involve that tenant. The process for assessing a rent charge this way is very simple. Open the tenant register and input the charge for rent.

Step 2: Collecting Rent from Tenants

Next, process the payment from that tenant. You can right click on the tenant name and choose receive payment. Here, it is imperative to make sure you have the right account listed that you want the payment to post to. If you do not have a main account where all tenant payments are kept, please pay attention to this. It will save a lot of headache in the long run.

Step 3: Paying Owners

Enter what you owe the owners as a bill minus your property management fees. You can do this by selecting the owner's name from the Vendors list, right click, and choose "enter bills". This step is important as it will leave a trail of what has happened and as a check and balance of whether an owner received their rents or not.

In the memo line you can denote that the amount listed is net of property management fees.

Once the bill is entered, write a check from the property management firm to the owner. Even if you use ACH, use the check writing feature and use ACH as the check number.

For the majority of your business this is the going to be THE most performed workflow. Keeping it simple lessens the risk of mistakes and missed payments. AMH Bookkeepers are well versed in bookkeeping for landlords. Let us take this work off your hands. Schedule your free consultation today.

October 28, 2019October 27, 2019

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.

October 20, 2019October 27, 2019

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.

October 14, 2019October 27, 2019

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:

Owners As Classes
Property As Classes
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.

October 6, 2019October 27, 2019

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:

Tenant issues a request.
PM sends request to Maintenance Supervisor.
Supervisor contacts tenant for further info and to schedule time for Technician to inspect the issue.
Technician inspects issues, taking pictures and documenting findings. Emails info to Maintenance Supervisor.
Supervisor contacts Tenant to schedule repair and creates Work Order in Quickbooks (this form will be created for you).
Technician arrives at Tenant's unit, Work Order in hand, and completes repair.
Technician photographs finished work, Tenant signs Work Order, and returns completed work order to Supervisor.
Supervisor turns the work order over to the PM.
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.
Bookkeeper sends the invoice back to the PM for verification of work order and repairs completed.
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.

September 23, 2019September 30, 2019

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.

August 1, 2019November 17, 2019

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:

For those personal purchases made using the business funds, are they being paid back to the business?
Is the business paying the owner back for expenses made using personal funds?
Are those business expenses that were made via personal funds being treated as an equity investment instead?
Are the personal expenses paid for by business funds being treated as an owner draw?
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.

Have separate checking accounts.
Do not maintain your personal financial records in the same accounting software file as your business.
Leave your personal cards at home or locked in a file cabinet when working on your business and vice versa.
Review your bank and credit card statements regularly and notify your accountant or bookkeeper of any misclassification of transactions.
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!

June 26, 2019June 26, 2019

7 Reasons to Reconcile

One of the most recurring themes I have noticed as a bookkeeper is most business owners have not reconciled their bank or credit card accounts. I think this is due to the fact that some of them may not understand how powerful a simple task like this is AND how much information it can tell them about their businesses.

Here are 7 reasons why this task is so crucial to the overall financial health of your business.

Errors - Performing a reconciliation of your bank accounts every month can help locate errors made by you or the bank. Not to mention can catch illicit transfers performed within your accounts. This is especially essential if you have set up bank feeds in your accounting software.
Prevention - Unauthorized charges by the bank, check fraud, and other serious issues can be identified AND corrected. Miscellaneous charges and large, out of the ordinary purchases are some prime examples.
Powerful Decision Making - When you know where your money is coming from and where it is going, when you know all transactions are accurate and that balances are correct, you as the owner can make some very powerful decisions in regards to your company. You can determine if that new office building is obtainable for starters.
Financial Fitness - Performing a bank reconciliation is like going to the doctor for a regular checkup. With frequent monitoring, any issues that arise can be solved quickly before things get out of hand. And it is a great, built in checks and balances to ensure all transactions have been recorded.
Saves Money - Bank errors can sometimes mean thousands of dollars are misplaced leaving your account in dire straits. Transposition of numbers when entering a check is an example of how large sums of money can be misplaced by the bank. (This is rare).
Mitigating Risk - When errors are found and reported to the bank in a timely fashion, the financial risk is transferred from your company to the bank. Translation: You do not have to pay for their error.
Peace of Mind - There is no substitute for the relief knowing that your finances are accurate and every income item and expense transaction is accounted for.

Double deposits and checks still outstanding 1 year after being mailed? All of these issues can be identified with frequent account reconciliations. With online banking being what it is today, business owners, you know longer have to wait until the month is over and you are mailed a statement to reconcile. You can simply log in to your online bank account and download transaction data to reconcile daily or monthly; giving you faster response time on catching errors and fraudulent activity.

For more information on the power of reconciliation, schedule a consultation or email us at [email protected].

AMH Bookkeeping, LLC. Your books. Clean and simple.