Enhance Your Accounting Workflow with airSlate SignNow's Property Crm Systems for Accounting

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Property Management chart of accounts what is it and why is it essential one of the most important steps for any business whether you're just getting off the ground or you've been around for a while is setting up and keeping a property management chart of accounts as a property manager your chart of accounts will help you keep tabs on every transaction for every property in your portfolio every rent payment every asset and every Bill it'll also keep an accurate record of your own income and expenses from overhead to licensing fees so how exactly do you set up an effective chart of accounts in this video we'll walk you through setting up a chart of accounts for the properties you manage and discuss some best practices we'll take you through some sample charts of accounts and give you a breakdown on QuickBooks versus our purpose build accounting software for property managers let's get started first things first what is a chart of accounts a chart of accounts is a record that organizes each transaction made for the properties you manage into accounting categories these categories help you separate what you spent from what you've earned and the cash you have on hand from your expenses trans actions fall under one of five overarching categories assets liabilities expenses income or Equity assets include checking accounts savings accounts and properties owned whether they're your assets or your owners liabilities could include refundable security deposits credit card balances and taxes or Insurance owed on properties anything you're going to have to pay out down the road income includes fees paid to you by owners and tenants or other sources of revenue Equity entries typically include net income retained earnings and any contributions or distributions made for your properties each property gets its own coding system within your chart of accounts put those together all of those accounts become your chart of accounts every transaction is coded and the codes can get pretty granular but that's a good thing by giving each transaction for each property a specific code it's easy to keep track of where every penny is going and which of your properties are making or losing money but before we get into coding let's dig a little more into organizing your entries our chartered account is set up in a hierarchy of entries you might even think of it in terms of apparent child organization the highest level of entries would be the five we already discussed you remember what they are then each of your transactions would be grouped as children underneath for example under the parent category income you might have child categories for rent amenity fees or HVAC fees meanwhile payroll licensing fees and electricity would fall under expenses now let's talk about coding many experts recommend numbering line items using ranges of a thousand for example income would be assigned the high level number 1000 and all income would be coded between one thousand and a thousand nine hundred ninety nine each high level category owns a range of a thousand under that you can assign different subcategories their own numbers under income rent might be 1100 and under expenses electricity might be fifty one hundred makes sense finally you'll need a way to identify which income comes from which property while leaving room to add for future properties to keep line items straight make sure each has a clear and brief summary something like this now that you know what a chart of accounts is let's talk about how you can use it to keep your property management business on track in the days before computers each transaction had its own page in a ledger book recording income expenses assets liabilities and Equity at the bottom of the page the numbers for each transaction were tallied to get a total picture of profits and losses an accountant simply had to add up income assets equity and then subtract expenses and liabilities first start inputting every transaction that comes through your business you can do that manually sure but that's going to get really cumbersome really quickly now is probably the time to look for a software solution that will automatically turn your rent payments bills invoices and other entries into line items in your chart of accounts automatically take a look in the description for a link to how buildium's property management accounting software automates entries once you've started recording your transactions you're going to have to reconcile them with your bank accounts on a regular basis most likely monthly again you can do this manually going line by line to check each number against your various bank accounts or you can use a software solution that automates it for you and yes building can do that too just look for the link below at the quarter and year level your chartered accounts with every dollar you earned and lost will take a lot of the time and headaches out of filing taxes and Reporting even filing your 1099s for your vendors and you guessed it philium can do that link okay that's the nuts and bolts of a chart of accounts but how can you use it to help expand your business to grow more with less to build your portfolio and to help your owners grow too let's take a look at how a chart of accounts is the backbone of all Financial reports and forecasting you can do for both your company and the properties you manage it allows you to report the Financial Health of properties to owners and boards determine rent and fee increases and forecast marketing Staffing and other budgets with a well-maintained chart of accounts you can pull data on profits and losses for rental owners and Association boards do this by pouring over your spreadsheets and pulling numbers or use a software solution that organizes data automatically and helps you filter to look for patterns use your chart of accounts to look at the profits or losses your properties are putting in compare rent or fee rates to the market in your area and determine when and how to increase your own user chart of accounts quarterly and annually to look at the health of your company and the properties you manage based on your revenue and rate of growth forecast your budget hiring an expansion moving forward once you get a chart of accounts up and running set up a training session with members of your staff explaining the coding system then it's time to get some best practices in place here are five steps you can take to make sure your accounting process is a well-oiled machine best practice number one assign a single process to update the chart of accounts my chart of accounts is definitely a Cooks in the kitchen situation too many people accessing and adding entries will only cause mistakes and chaos and by too many we mean more than one your property manager should be submitting entries and changes to a single person for approval and that single person should make submitted changes themselves best practice number two update frequently and consistently get your team on a regular reporting schedule give them deadlines to get all their transactions in that way there's time to update and reconcile by the end of the month best practice number three stick to your coding system of course you'll have to add new line items for new transactions but each new item should be sorted into existing categories that follow the coding system you set up best practice number four record absolutely everything don't keep anything off the books or even in a separate chart of accounts record every single transaction in the same place taxes compliance property forecasting and investment decisions all depend on a complete picture of your property's finances you probably have a junk drawer at home right that one place to throw random stuff you don't know what to do with when it starts filling up you end up spending the day figuring out what to do with all of it the same goes for your chart of accounts while you may have some miscellaneous income or expenses you shouldn't use a miscellaneous category as a catch-off for transactions you just don't want to deal with at the moment you'll end up with a mess that'll be tough to reconcile at the end of the month quarter or year now accounting software that's purpose built for property managers makes setting up a chart of accounts that much easier right off the bat it'll include a chart of the accounts template with fields that cover categories specific to Property Management second purpose-build accounting software should be integrated with all of your billing invoicing and payment portals so you don't have to enter transactions yourself third purpose build accounting software will help you automate taxes in 1099s if you want to learn more click the link in the description and read all about how buildium's accounting software Stacks up against generic software such as QuickBooks okay we've taken you through what a property management chart of accounts is why you need it and how to set it up we've also walked you through the advantages of a purpose-built accounting software solution like building that was a lot but we think you've got this now go get out there and start accounting if you want to learn more about how buildium can help you control compete and Thrive subscribe to our Channel or check out our blog thanks for watching