Bookkeeping is for everyone who has invested capital. When it is on a property or real estate, one must keep a record of whatever flows in and out. Following are some tips for realtors to keep in mind before and while investing money.
Many first-time investors ponder whether they require a different bank account for their rental property. A company account is required for a variety of factors. You’ll be able to save time and money. You can secure your assets by opening a business account. Additionally, it will enable you to manage a better company and keep better books.
7 Tips for Keeping a Record of Invested Money
- A Business Bank Account
Separate accounts are used to make it simpler to handle transactions for various properties, but they might become unmanageable as the portfolio increases. Accounting software now allows for the precise tracking of spending for numerous properties inside a single bank account.
Does each of your properties require its own bank account? Unless you own all your properties in different LLCs, it’s generally not essential. If you’re unsure, you must consult a lawyer or CA.
Security deposits come with a warning. You may need to hold security deposits in different accounts. So, check your local rules. Your real estate business will have a strong foundation if you use a business bank account. Your risk is decreased. Bookkeeping is made simpler and more precise. It helps ensure that all your personal and corporate finances are kept separate.
- Classify Expenses
To calculate your taxable income, it is important to keep track of your income and itemise your real estate costs. Taxes are paid less by you the lower your taxable income. Your taxable income is the amount you earn after deducting all necessary expenses. Particularly, if you are saving all your receipts, categorising expenses should be quite simple.
Although it increases the likelihood of mistakes, you can think about delaying categorising costs till the end of the month. It’s ideal to update your records as you make payments on invoices if you manually categorise you’re spending. Categorize expenses using Google Sheets or Excel. You may manage your bookkeeping with a basic spreadsheet if you only have a few units.
- Keep Receipts
You don’t need to store hard copies. So, relax! Since they are considerably simpler to deal with, we advise using photos or scans of receipts. Receipts may be scanned and made searchable by most of the accounting software. Additionally, the software allows you to link receipts to bank and credit card transactions.
- Reconcile Accounts
The practice of double-checking that the recorded transactions match your actual is known as reconciling your accounts. The accounts are in balance when everything is in line. If you are employing technology, this process ought to go very quickly and possibly even automatically.
Error rates used to be substantially higher in the past when each transaction had to be manually entered into a paper ledger. The majority of the outsourced bookkeeping services we suggest can reconcile your accounts in real-time by connecting with your bank account. It is nevertheless advised to double verify even though a direct connection should eliminate most data entry problems.
Monthly bookkeeping will help you see issues quickly after a transaction when the details should still be fresh in your mind. This makes resolving any problems that arise considerably simpler. Try to reconcile your accounts once a month.
- Review Statements
You can improve your decision-making by reviewing your financial statements. They will also give you detailed information about the performance of your real estate assets. You can see a summary of your revenue and expenses on a profit and loss statement. It’s crucial since it reveals how much money you have made. A balance sheet is a picture of the assets and liabilities of your company. It reveals how much equity you have put into your company.
- Hire A Chartered Accountant
Any Chartered Accountant can assist you in streamlining your bookkeeping process. A tax expert with real estate knowledge can provide guidance and suggestions that could result in lakhs of rupees in savings. He or she can assist you in structuring your investments in a way that is tax efficient.
When considering hiring a CA, be careful to investigate their credentials and find out how long they have been in practice. Find out how much real estate experience they have and inquire if you can contact any references.
- Rely On the Latest Technology
New apps and online tools can make it easier to automate calculations. Save time and improve efficiency while estimating investment returns. Technology holds the power to upgrade your real estate bookkeeping services.
The Conclusion
It is evident that bookkeeping requires the right person, the right time, and the right technology. It’s nothing but managing your money before incurring a loss. One must rely on the best services to get maximum management.
