Did you know that maintenance expenses are often higher on older properties?
You might be new to rental property accounting, or you might've been doing it for a while. Either way, there are a few critical mistakes that you'll want to avoid.
Accounting for rental properties can be a hassle. There are many things to keep track of, and it's easy to make a mistake if you're not careful.
While property management can seem daunting, there is hope! Once you know the critical mistakes, you can avoid them and make your life easier.
Want to learn more? Read on to find out!
Not Tracking All Income and Expenses
One of the biggest accounting mistakes is not tracking all income and expenses. This can lead to oversights and inaccuracies that can cost the business money.
There are a few different ways to track income and expenses. The most important thing is to be consistent, as well as making sure to account for all transactions.
One way to track income and expenses is to use a spreadsheet. This can be a simple Excel document or something more elaborate like QuickBooks. Whichever method you choose, be sure to update it often and make backups in case of data loss.
Another way to track income and expenses is to use a physical ledger. This is a more old-fashioned way of doing things, but it can still be effective. Be sure to date each entry and keep all income and expenses with a running total.
Whatever method you choose, tracking cash flow is essential to keep finances in order. This will help you make better decisions about where to divide resources and how to manage them. It can also help you avoid costly mistakes that could set your business back.
Common Accounts Easy to Slip Up On
There are a few specific accounts that are easy to make mistakes on. These include but are not limited to:
- Advertising
- Association dues
- Maintenance and repairs
- Insurance
- Legal and professional fees
- Property taxes
- Utilities
Tracking these items can be difficult, but getting accurate numbers is essential. Otherwise, you could end up overspending or under-budgeting. And that will cost you in the long run.
Not Depreciating Assets the Correct Way
Another easy mistake to make is not depreciating assets the right way. You do want to record rental income and expenses, but you also need to account for the wear and tear of the property.
This is where depreciation comes in. Depreciation is allocating the cost of an asset over its useful life. This is important because it allows you to write off a part of the cost each year.
There are a few different ways to depreciate assets. The correct method depends on the type of asset and how it's used.
Not all assets depreciate at the same rate. That is why it's essential to seek out a professional. They can help you determine the best way to assess your assets.
Simplify Your Rental Property Accounting
Now you know some of the most significant accounting mistakes to avoid. You're well on your way to simplifying your property management, as well as keeping more accurate records.
Knowing the types of income and expenses is critical for rental property accounting. This will help you budget and make informed decisions about allocating your resources.
Do you still have questions? We can help! Contact us today!
