Simplify Your Finances with Our Property Management Invoice Template for Accounting

Property management invoice template for Accounting

are you a property manager struggling to streamline your process well we can do just that with QuickBooks Online QuickBooks Online is an amazing tool for streamlining your entire workflow from finances to Property Management hi I'm Nick from income digs and in this video I'm going to show you exactly how you can optimize your QuickBooks Online setup for your property management business for your real estate investing business if you're interested in this if you're a real estate investor if you're getting into bookkeeping for this industry I encourage you to check out my endtoend course real estate en counting boot camp you can check out the details and you can sign up we have a link in the description but let's get into today's topic which is specifically QuickBooks Online workflow optimization for property management so what we're going to talk about today is we're going to talk about your basic Qbo designs we're going to talk about some essential elements of that your setup okay how we're going to establish tenants how we're going to establish properties how we're going to differentiate those two how we're going to start managing our finances when it comes to accounts receivable accounts payable being able to see what those reports look like we're going to talk about automation opportunities when it comes to getting some of these transactions on autopilot day-to-day expense tracking and finally we're going to talk about integration opportunities and scalability all today so starting out with our design challenges and our setup here so what we want to do is we want to establish what's called a two-dimensional versus a onedimensional chart of accounts your chart of accounts is your list of categories right and one of the main pitfalls I see from Real Estate Investors and their bookkeepers and property managers is we create this really long chart of accounts where we have very specific accounts for various Properties or owners that we're dealing with and that's is going to get way way too challenging for us okay so we want to be able to have it two-dimensional I'm going to show you how to do that we have to understand that these multiple dimensions are not necessarily connected and we have to realize too that there's some reporting shortcomings of one way versus the other so we need to know too QuickBooks Online was not created specifically for Real Estate Investors we're a little bit different we do things a little bit different we have a pretty complex business okay so if we can make some tweaks to QuickBooks Online it's an amazing tool for streamlining our processes we just got to know what those tweaks are that's what we're going to talk about so let's get into QuickBooks Online see what uh the setup looks like so the first thing is that two-dimensional chart of accounts and again by far one of the biggest most common pitfalls I see with new investors new property managers is you're going to go into your chart of accounts and do this here creating really specific accounts for specific properties we do not want to do that it's not scalable it's not possible for us to grow we want to create something a little bit more generic like this okay so if you're the owner of the real estate it' look like this if you're a property manager you're going to have some accounts for the owner funds payable right so those are the the funds that you receive on the behalf of the owner and that you're going to pay them out generic accounts is essential and we also want to think about how we're going to differentiate properties and our owners okay properties owners and tenants so if you're a property manager you almost definitely have tenants for whom you're responsible for collecting rent if that's the case you're going to want to set up every tenant as a customer here and I'm going to suggest this hierarchy here notice that the human being Juliet and Olivia these these two renters here are down to the third level of a hierarchy so what I want you to do is I want you to create a customer for your owner so this is EAB properties that's an owner for whom I manage properties and then a property 122 Buffalo Street 123 Main Street and then below that your actual tenants are going to go here and it's these tenants who you're going to invoice now this covers one aspect of it this is going to cover us getting our funds getting our funds from our tenant and managing how much we might owe to our property owners it won't necessarily give us property by propy reporting for that I'm going to request that you add another attribute so if you have multiple properties multiple owners you're kind of scaling you have a few okay more than one I think it's worthwhile for you to have QuickBooks Online plus if you have QuickBooks Online plus I want you to turn on class tracking so we're going to do that right here I'm going to go to advance track classes I'm going to turn that on I'm going to click save okay so now what I'm going to do is I'm going to have two aspects here I'm going to have my customer and I'm going to have my class okay so when I create an invoice for one of my tenants let's do one for Olivia let's do one for Juliet okay so let's there's Juliet so she's Apartment A okay I'm going to do this as of 2018 just so it shows up on a report and so we can see it clearly okay so I'm going to do uh the the rent for the unit that Juliet is renting here so that' be 122 Buffalo Street Apartment A okay $850 and here I'm going to add class as well now notice when I add class I'm just going to do it to the prop level nothing further than that I'm going to save and new I'm going to create another one for Olivia okay so there's Olivia in apartment B I'm not going to send it to her and here I'm going to do 122 Buffalo Street Apartment B rent okay and here I'm going to indicate class as well and then the last one I'm going to do is let's do another owner a different you know actually we'll do two more we'll do one for uh 122 Buffalo Street I think we had or no 2 three main street so that's another uh property owned okay John Smith I don't know if I have a product or service let's see here I'm just going to do this one okay and then I'm going to do one more for a different owner altogether okay so this one's going to go to Anvil properties Bernie okay so this is 456 okay so again adding class and adding my um my 10 okay so when I save and close this what I'm going to gain here first and foremost is I'm going to get this really nice little setup where it shows me how much is overdue how much hasn't been paid yet for my various different customers my tenants right so that view is really good from a accounts receivable standpoint that's absolutely essential okay and I can see my balance uh for each okay here right that's great however if I go to my reports let's do balance sheet here all right so I I've got 3500 in accounts receivable and I've got 3500 in owner funds payable so again we're doing this from the perspective of the property uh manager okay if you're the property manager those funds you receive those aren't Revenue yet notice my net income is blank these are funds that I actually owe to the owner okay so I'm going to track them right here now here is where we have to think about the difference between tracking at a hierarchy level and doing it at the single one to one level so if I display my columns by customers notice how gigantic my p&l gets right so I have here's one owner a property owned by that owner tenant and then a total and then a total right then I have another owner property tenant tenant and so on okay so I'm getting this gigantic report that's almost impossible to read right so this is why if we go back to my report list while I am gaining huge value by having my tenants listed because I can manage who owes me what having class if I go track columns by class super nice and neat shows me how much is showing up in the owner funds payable for each of these properties okay and then I can filter this down to say just give me the properties owned by this one owner right we can do all that okay so that is super Dynamic right we're able to do a little bit of both we're tracking who owes us what in our accounts receivable and we're able to track a nice neat in this case balance sheet by property now you could also do this by owner you can do this in a few different ways but we have to understand that it's a two-dimensional account that lets us enables us to do exactly that now I don't want you to use location for tracking properties that is usually going to be reserved for tracking multiple entities within one QuickBooks Online subscription if you're interested in that I encourage you to check out the Deep dive that I do on that so multiple business entities and one QuickBooks Online subscription I have a deep dive video on that check that out as well because that is something that um is really really valuable especially for us Real Estate Investors a lot of us have multiple accounts multiple entities right okay so those are our properties and tenants now we talked about too having the two-dimensional chart of accounts from a owner standpoint so if you're the owner and the property manager you're going to have your properties on your balance sheet okay if I'm the property manager I don't have my properties on my balance sheet here right you you don't own the properties okay now you might do a little bit of both which in which case this is going to be really valuable so let's get a property on our balance sheet now again I have some specific lessons on exactly how to transport HUD onto QuickBooks online so I'm going to kind of whip through this one relatively quickly from a how the journal entry happens but what I want to show you is the difference between a one-dimensional chart of accounts and a two-dimensional chart of accounts so what I'm going to do is I'm going to take this like the bad way of doing it meaning like 122 Buffalo Street buildings 122 Buffalo Street land 122 Buffalo Street closing cost I'm going to put this property on my books I'm just kind of putting arbitrary numers so don't pay attention too much to you know why it's 100,000 versus 25,000 Etc I'm just throwing something on there I'm also going to put a convention mortgage okay so 122 Buffalo Street mortgage I'm going to put on there all right and then I can do the same thing for that 264 Union that's another property that I'm going to demo with here so 264 Union land 264 Union building 264 Union closing costs and 264 Union Mortgage okay so let's say this one's worth a little bit more 50,000 150,000 closing cost of 7500 and then a mortgage of let's see what is that that is 200 75 okay so if I were to do this let's see what it looks like on my balance sheet okay so I've got 122 Buffalo Street 264 Union and then I have my mortgages down here and so this looks fine this looks you know I have my total per property it's nice and neat and it's great but the problem is we had one two purchases of property you know two properties are on there and look how many lines we've added to the balance sheet so what we're doing is we're growing vertically without taking advantage of the potential to grow horiz horizontally or um you know laterally okay so what we want to do is instead of using these accounts here let's drill down into that journal entry and let's make one adjustment I've already turned on class tracking so my class field shows up here so what I want to do is instead of using this really specific 122 Buffalo Street Building I just want to use a really generic account for building a really generic account for land a really generic account for closing cost and we can do the exact same thing for our mortgage as well we can have an account say for conventional mortgages now when I do that now I'm going to use class okay and so what I'm doing here is I'm I'm really retaining the exact same information I did before but now I'm doing it in two Dimensions okay and so we're going to see what this looks like on the balance sheet there's land Building closing costs and then here's my conventional loans and here I'm going to go 264 Union okay now when I save and close this on my report okay it's tightened things up I have it way more generic it's totaling what I have for those two uh properties but now when I go display class display um columns by classes I'm going to be able to see the value of my properties okay so there's 122 Buffalo Street here's 264 unit here's how much I own for each of those and so this could be a situation where like maybe I own 122 Buffalo Street and 264 Union but I don't own 123 Main maybe I'm I'm managing that property on somebody else's behalf okay and if that's the case then maybe I'm going to be tracking this more as income and we're going to talk about that pretty much next on the financial management side of things but what I want to make sure we're clear on is a two-dimensional chart of accounts is absolutely essential again we talk about this in great detail in the course check out real estate accounting boot camp I promise you it is jam packed with tons of examples and tons of reasons why this is the absolute best way to set up your books so let's talk a little bit more about financial management now I have my owner's funds payable here okay so that's all sitting right here now when I pay those out okay that's when I'm going to start recognizing income okay so when I write a check to my owner I'm going to pay them out this $1,800 is $850 this $850 right so if I were to do that just for one two3 main okay I could write an expense I could write a check I owe them $850 right so I'm going to do that for um and I think who owns one 123 man I think it's Anvil oh no it's my EAB right so EAB is my my customer there so I'm going to write the check to them here I'm going to write it 41 123 Main right and here I'm going to indicate that I'm going to pay them out of my owner funds payable account $850 okay I'm going to indicate this as 123 Main Street but I'm not going to give them $180 or $850 right I'm going to retain some funds for Property Management Services okay so Property Management income will now show up here and I'm going to do a negative let's say that um I'm going to charge them 6% right so I do 006 * 850 gives me $51 I can do negative 51 and this is the check that I write to them $799 so what that will do is that'll move the $850 out of my account the money is going to come from my checking account right and um and I'm going to recognize $51 in income so if I save and close that let's see how this reflects on my balance sheet again we'll display columns by classes okay so notice what happens here is that this owner's funds payable for 123 Main zeros out and my net income increases to $51 and this as a property manager shows my income okay you don't want to record all of your rent as a property manager on your p&l you're just going to be tracking your property management income now there's another way that we can do this we can invoice our tenants or I'm sorry our owners for the property management fees and then we can record some credits now I have a specific video on that as well so I'm going to encourage you to watch that one to get into that way of doing things I we'll link to it here it'll take a little bit too long to get into here but there's another way to do it where you can start invoicing your owners for the property management fees and then use credits to offset what you owe them and what they owe you so next I want to get into some automation opportunity so if we are invoicing our tenants we want to think about the fact that hey every single month rents pretty much the same right so can we automate this and so we absolutely can I'm going to go into I'm going to drill down into one of these uh invoices that we have so this is my invoice to Juliet all right and we want to make this automated so what we can do is we can go make recurring now before we do that I want to go to a few settings that we can take a look at so we go into our uh gear icon here and go to account and settings we're going to see that we have uh on sales we have a few different items here so um late fees okay so we can do a default late fee we can do a flat fee with a grace period now we we realize that this is probably a little bit restricted as far as what your late fees might actually be PR your lease you might do a flat fee then a daily fee after that QuickBooks isn't quite there yet they're only giving us one but notice here I have a flat fee 20 $20 once uh per invoice with a 5-day Grace be is going to automatically get um attributed and I also want you to take a look at invoice reminders definitely turn those on these are items that seem really simple but they used to not be part of QuickBooks Online they are now so make sure you have invoice reminders on now let's go back and and let's make this a recurring invoice okay so I'm going to go here click make recurring okay and it's going to immediately bring up this recurring invoice template now here's my template name it's just going to default to whoever the customer is that might be fine you might I want to add something else to it so this is going to be scheduled okay as opposed to reminder or unscheduled it's literally going to make this invoice okay and this is where I want to probably create it X days in advance okay so typically with rental properties you're invoicing on the first of every month so notice here my interval is first of every month that's the date that the transaction is going to hold so my invoice will have that date we can create it ahead of time and it's still going to have the future date so what I mean by that is like let's say that I have a recurring invoice set up for the first of every month I'm sitting here in February okay and so on March 1st the invoice will get created but on uh February let's call it uh 20 18th February 18th okay it will create the invoice that is due on the 1st of March and the benefit of that is if we include our email okay if we include the email for our customer it's going to automatically send her an email that she can then pay ahead of time which is fine they don't have to pay ahead of time but they often do and I want you to also include unbuild charges that's a really good idea I'm going to show you those in a second and you definitely want to set up your automatic uh your online payments I'm going to turn that off cuz I don't think I have it set up yet so we're going to create monthly on the first of every month starting uh with March okay and then end date you could either say hey I know when the lease ends or if you have one that's probably going to go month to month you can leave it as open-ended for now come back and delete it if and when your tenant leaves all right here you're going to go down to the actual invoice itself unfortunately we got to turn off service date because it's not going to automatically update with every month but your product and service is going to stay the same descript you can do monthly rent if you had like a pet fee you can put that in here too I don't know if I got one of those let's see yep pet deposit or pet fee whatever okay and notice my class is coming up to I can save that template and I'm ready to go every month it's going to create all right it's a really really valuable now I mentioned unu uh unu charges you probably want to have those as well so setting up billable expenses is essential for a property management company so going into expenses and then here uh make expense items billable you definitely want to do that okay track billable expense items as income the reason for that is when you incur expenses as you typically do as a property manager so let's say I incur like a repair expense okay so um let's say that I paid Lowe's okay came out of my checking account let's say it's for repairs and maintenance right there and um let's say it's for 122 Buffalo I can indicate who it's for so if like Juliet will owe this back to me I can indicate Juliet here and that's going to add it to her next invoice potentially with a markup if you want to do that as well we can also have billable expenses to our owners right so if it's not the tenants responsibility but it is 122 Buffalo Street's responsibility the owner for that property this will help us track to ensure that when we pay out to 122 Buffalo Street to that owner we're not paying the 632 that they're owed back to us okay the last thing I'm going to talk about with recurring transactions is going to be um your expenses okay so just like uh recurring invoices we often have recurring expenses and these often take shape in utility bills or mortgage payments so let's say that we spend every single month let me see what we got here a certain amount on a mortgage payment something like this right so this 5653 okay so I can categorize this right here and I can say that I paid MNT bank I believe is a vendor here and I'm going to split this okay so I paid some to conventional loans meaning I'm paying principal for 122 Buffalo Street conventional loans let's say that $150 and then some of it was for interest okay so the rest of this was for interest for 122 Buffalo Street now I can include here my customer as well would I really be paying a loan on behalf of my owner probably not but um again this could be the situation where you own and manage the property okay so what I'm going to do here is I'm going to record this transaction 565 503 so I can apply and accept now once it's created I want to I want to get into that transaction so I'm going to go to my audit log and what you can do to save yourself time you can take that expense that you know is going to hit your bank feed every single month and you can make it recurring and you can say hey every single month on the X day of the month I'm going to have an expense that goes to principal and interest now we know that our principal and interest allocation is going to change every month but just the simple idea that the transaction will be created and the total amount will be accurate really helps us we can have that transaction created then we create a workflow where we go in and make some edits to this now I talk about the day-to-day the operation side of that in real estate accounting boot camp and we actually talk about how we can make use of a VA a virtual assistant and a bookkeeper to really help to track these principal and interest payments exactly okay so that is another set of automation definitely check out recurring transactions for sure now when it comes to the day-to-day expenses most of that that is going to happen through your bank feed here so you're going to set up your bank feed you're going to have transactions coming through and you're going to need to have some rules in place to understand what expenses are for which properties which owners okay so you can have one account and manage it all in one place you're going to need some kind of receipt tracking infrastructure such that you understand which expense goes where or you could set up different bank accounts I personally like to have one bank account everything funnels in there and then we have some rules set up potentially different vendors potentially different different amounts we know are going to go to a certain place we're going to take all of these transactions and every single time they come through we're going to categorize potentially split them up okay so repairs and maintenance okay definitely indicate who the customer is every single time if it's something that the tenant would be responsible for will indicate the tenant if it's something that just the property is responsible for indicate the property indicate billable if it is and then add that extra layer for class this again is going to give us that super simple reporting this is going to track who owes who what this gives us the reporting part okay and we can add that and certainly add attachments as you go all right so I know this we're whizzing through this but this is your general setup for property management again we have those little offshoot videos I want you to check out as well now QuickBooks Online the reason I why we're going to recommend this as the best financial solution for a property management company is because it's scalable it's customizable and we can actually integrate it with other apps so if you check out uh other apps here so some of you are probably using build or Strat toolio um and you can do some Integrations as well there's also some apps within this Marketplace whether it's for reporting whether it's for CRM uh website setup uh there's a bunch of released by the way uh tenant cloud is in here as well so there's a lot of connection points and when it comes to financial management software bookkeeping QuickBooks is really the leader it's not set up perfectly for property management we know that but it has the biggest potential because it has has all these different connection points okay and that allows us to potentially scale so again this is an introductory you know optimization of our workflow for QuickBooks Online I'm interested in your questions I want to know what else you want to learn about this topic we have several other videos kind of coming out in uh this series as well so it I guess the the essential element here is to know that QuickBooks was not created specifically for us as property managers but it can be super powerful if we set it up the right way so if you found this video valuable I'd really appreciate if you give it a like subscribe to my channel that way