Originally Posted by John Dessauer on January 11, 2016
Show me the Money!! An integral part of a real estate business is keeping accurate records and this involves bookkeeping. Good bookkeeping skills are essential for legal reasons, such as paying taxes. Also, a real estate investor should be able to determine how their money is being spent. Good records can provide a tracking tool and can help with other aspects of your business, such as budgeting.
A very useful tool to use is bookkeeping software. There are many different ones on the market and several programs are designed specifically for real estate. In the beginning, be sure to choose a software program that is not too complicated for ease in learning. Some bookkeeping software can even work along side your property management software.
Bookkeeping software is efficient and easy to use. After installing the program on your computer, key in the information at regular intervals to create expense and income statements for use in paying taxes, and in order to track expenses. To keep your bookkeeping task as manageable as possible, don’t let your paperwork or receipts accumulate until you have a huge pile of work. Enter the information into your system in small batches so a mountain of paperwork that needs to be processed won’t overwhelm you. This can be done daily, weekly, or at the least monthly.
Another thing that will ensure your bookkeeping success is to develop a good filing system. Start by putting your receipts and other paperwork in one place at the end of each working day. After a few days, take all the paperwork and key all the information into your bookkeeping program. Once that is done, safely store all the paperwork using a reliable system.
Some real estate investors like to use large envelopes and write the date, month, year, and the address of the property on the front. These envelopes can then be stored in order in a filing box or cabinet for future reference.
Some real estate investors do not maintain a physical backup filing system such as the one described above, preferring instead to keep all their records virtual. However, these days when computer hacking and hardware crashes are very common, it is a good idea to maintain a physical copy of your records as well as a virtual one. Virtual information can very easily be lost. Physical records can also be lost or destroyed, but it is highly unlikely that you will lose both virtual and physical copies of your information. Therefore, to be on the safe side, keep more than one copy of your records and one of these should be virtual.
There are also phone apps for cell phones that will make it possible for you to take photos of any important paperwork for a digital copy that can be archived. These apps can make bookkeeping a lot easier for busy real estate investors.
Another good way to track expenses is to put them all on one credit card designated for that purpose. This will provide a very accurate way to track expenses from month to month. Also, if you pay the balance in full at the end of each month, this can be a low-cost method. A debit card can also be used in this manner, but make sure the card is used for business expenses only.
For more training or if your thinking about hiring and CPA and/or accounting firm, check out www.markjkohler.com and his accounting firm Kohler and Eyre (Certified Public Accountants). They are the best in the business at bookkeeping training for your investment business. (Mark, is with me in the picture – Your welcome Mark!)
“Remember, wealth has nothing to do with money, success has everything to do with failure, and life is as simple as you make it!” – John Dessauer