The average fair market rent in Alabama is one of the lowest in the nation, ranking as the 4th lowest state. Regardless of how much you charge for rent, you'll still have the same amount of rental property accounting to handle.
Many landlords find their accounting challenging, to say the least. The good news is you can manage it correctly with the right tips and by hiring a company to help.
If you're a North Alabama landlord who needs some advice, check out the following rental property accounting tips.
Separate Business From Personal Finances
You must use methods to keep your personal income and expenses separate from your business expenses and income. One option is to get a business checking account if you don't already have one.
You can then use your business account for all your business finances, allowing you to keep them straight by having a dedicated business account.
Implement a Digital Record-Keeping System
In today's world, you'll need a digital record-keeping system to manage your finances. For example, purchase accounting software and use it for rental income tracking. Additionally, use it to track your expenses.
Accounting software can store, analyze, and manage your data. The only thing you must do is input the information into the system.
For example, you can record income when you collect rent money from your tenants and expenses when you pay for repairs and bills.
Track Key Metrics and Data
Accounting software can do a lot of things for your accounting, but you must set it up properly. An example of this is setting up your chart of accounts. These are various expense accounts you post expenditures to.
You can use your accounting software to print reports, including balance sheets, cash flow statements, and income statements. These reports summarize your business information.
These reports help you budget and forecast, but they're also ideal for preparing your income taxes at the end of each year.
Establish an Effective Rent-Collection System
One of the best landlord accounting tips is to establish an effective rent-collection system. An excellent system helps you collect all the money your tenants owe without tracking people down.
Establishing an online portal is one way to handle this goal. Tenants can use the portal to pay their rent or communicate with you.
They can also use it to apply for your rental properties or pay their security deposits.
Seek Help From a Professional
You can find the answers you need with these tips or hire them out. Property managers offer accounting services for landlords, but make sure you find a reputable property manager.
Look for a local company with experience, and talk to other landlords to find out who they use. Then, interview the company to see what you think.
Get Assistance With Your Rental Property Accounting
Accounting for landlords can be one of the most challenging parts of managing a business, yet rental property accounting is crucial for your rental properties.
You don't have to handle this alone, though. Instead, hire a company for help.
Stutts Properties Inc. can help. Our team can help with every area of rental property management, and we provide free consultations to landlords.
We serve all the communities in North Alabama. Get in touch with us to learn more!
