How Property Management Bookkeeping Services Are Key To Scaling A Property Management Portfolio
Solid property management bookkeeping and accounting processes are pivotal to a successful rental property business. Get a leg up on growth with insights and actionable tips from expert bookkeepers for property managers.
February 7, 2022
Growth is the key to a successful rental property business, but you may be asking yourself, “How do I scale up, keep everything organized, and enjoy a balanced life?” Here is your answer: offload and outsource. When you think about outsourcing for your business, property management bookkeeping may not be at the top of the list – but it should be.
Here’s how property management bookkeeping strategies can keep you working on your business instead of in your business.
Optimizing Your Bank Account Structures Helps You Stay Up To Date
An optimized bank account structure = accounting that’s simpler to maintain.
As the wise mathematicians, The Offspring once said, “You gotta keep ’em separated!” Surely they were referencing keeping separate accounts for each entity. Always keep the cost of running a property separate from the cost of operating your business. Additionally, you want to keep your property operations account separate from your corporate operation accounts.
Once accounts have been properly separated, it’s time to set up a schedule to reconcile accounts monthly. While bank reconciliations can be the bane of your property management existence, they are essential for catching errors, bank mistakes, and even embezzlement. You can’t scale up if you can’t account for all of your cash. The best bookkeeping services for property managers know that bank reconciliations have to be done monthly at a minimum. Unless you’re able to complete your bank recs in under 1,390 hours on your own, the very best way to do reconciliations is to hire someone else to do it for you. (Here at Proper, our team of expert property accountants can take this tedious task off your hands forever. And give them attention weekly!)
Your Accounting Tech Stack Can Impact Your Ability To Scale
Using a mishmash of technologies that are not Sympatico makes it impossible to scale! When choosing your tech stack (technology or solutions stack: the group of technology services a company uses), do the research to be sure they can stay as connected as possible.
You need property management software that scales and our property management bookkeeping team knows PMS inside and out. Here are some of Proper’s favorites that can grow with your business: We like Yardi, PropertyWare, and Entrata, and have spent a lot of time with Appfolio and Rent Manager — so much so, that we wrote one blog about Appfolio tips and one about Rent Manager tips!
Establish Standard Operating Procedures For Day-To-Day Operations To Facilitate Growth
SOPs are step-by-step guides on how to complete a process that serves as a clear roadmap for your team to follow, taking any nuances and necessary controls into account. Thoughtfully planned (and tested!) accounting SOPs are recipes for success and are essential to growth. Start by making an Accountability Chart — mapping out company structure complete with key responsibilities for each position that should last through major growth.
When crafting your SOPs, anticipate risks — think about what could possibly go wrong at each step and work-appropriate controls into your SOPs. For example, in your SOP for collecting management fees, once the accountant has calculated the management fees for a client, instead of sending the payment batch straight to the client, the accountant should first send it to the accounting manager for review so any possible errors are caught before final approval.
Use your SOPs to create automation. Most of the repetitive, redundant tasks of property management are perfect for automation. Beyond using an online portal for rent collection, here are some other areas that can be automated: sales, renewals, repairs, and even recruiting.
One of the beautiful things about SOPs is that they make it much easier to understand opportunities for automation. When you map out the whole process, you’re able to identify triggers and tasks so your team knows what to do when.
Automation allows your business to begin to run itself. More automation = more free time for you to focus on taking on more doors.
Tracking Long And Short-term Goals With The Right Data Is Essential
Knowing your goals will determine how you’re going to achieve them! What are your long and short-term goals?
To stay focused on growth, ask yourself these questions:
- What occupancy rate do you need to maintain profitability?
- What profit margins do you need to stay on your growth path?
- How many doors do you want and how many can you take on as you grow?
Choose the data you’re tracking based on the goals you set, and continue to re-evaluate as you grow. To do this, you need to know your KPIs. All businesses should be aware of Key Performance Indicators (KPIs) like revenue and margins, but property managers also need to keep an eye on things like occupancy rates, properties won or lost, turnaround time, maintenance costs, and management fees.
In addition to this hard data, be sure you are collecting qualitative metrics like client experience. Keep track of your turnover rate and survey your tenants regularly to get a gauge of how satisfied they are.
Organize Cash Management To Plan For The Future
A simple aspect that’s easily overlooked in PM is organizing cash management. This sounds deceptively simple, but sometimes property managers lack the real-estate accounting experience to manage cash wisely. For instance, forgetting the importance of allocating for future repairs and unforeseen expenses.
You got into property management to manage property, right? Make sure you don’t get stuck in the rut of accidentally becoming an accounting company (it’s happened to more property managers than they’d care to admit).
All you need is proper focus on the importance of accounting and cash management. When you do spend cash, do so to have a big impact and build value, but conserve enough for the unexpected.
Stay ahead by:
- Have the foresight to plan for seasonal maintenance in the off-season. Patch the roof before the rainy season, and service the H-VAC system before summer.
- Work these future maintenance and repair costs into your budget along with funds for unforeseen emergencies.
- Take capital expenditures into account when forward planning. Outside of operating expenses, capital expenditures are assets whose usefulness or value to a company exceeds one year, like the above-mentioned roof replacement.
- Take advantage of the fact that these capital expenditures can deduct expenses in the year in which they occur, benefiting you at year-end and potentially saving you money instead of costing you at the moment. More deductions mean a lower tax bill, which means more cash on hand for expansion and further investments.
- Make a multi-year taxation plan incorporating capital expenditures with your CPA.
- The cost of remodels and refurbishment can pay off with higher rental rates and tenant retention.
- Be cash-ready for turnovers, heavier fit-outs, and upgrades.
Keeping impeccable records
- Bookkeeping is important for many reasons, including budgeting and fraud prevention.
- This is where we really shine! As we focus solely on bookkeeping for property management companies, keeping impeccable records is our strong suit.
Find out how we can free up more of your time to grow doors and save you money. Talk with us today!