Optimize Your Workflow with Our Property Management Invoice Template for Enterprises

Property management invoice template for enterprises

welcome to nerds property management with QuickBooks Online this is just an introduction kind of an overview I want you to get especially if you're just starting out with this or new to the accounting part of it I want you to get the kind of big picture overview of what this looks like and why most importantly I find that if you understand why then it makes it much easier to understand what right so you understand why you have to do it you understand what you have to do and here's the bottom line on this if I'm managing my own properties I can do whatever I want because the rental income I receive is mine so I received the money into my bank account and call it rental income and when I pay expenses on behalf of a property I record them as expenses and it doesn't matter because it's my own expenses on my own property right but when I'm managing properties that belong to somebody else it's a whole different ballgame because now I'm taking responsibility for money that doesn't belong to me it belongs to them which means we have to use what's called trust accounting just like when a lawyer has a trust account for their clients same exact thing in real estate I'm holding money in trust for someone else I've collected somebody else's rent that's not my money in fact what it means is if nothing else happened I'd have to give that money to them so it's a liability when I collect that money so every dollar we receive in rent gets goes into the bank account and we set up a separate trust account for each property that's the cleanest way and then it gets booked into a corresponding liability account right and we call that rent and Trust liability right and that's how we distinguish very clearly so I received the money in for the rents I've collected on my on my customers behalf right where I'm the property manager my customer is the property owner and then when I pay for things so assuming I collected ten thousand dollars in rent for somebody and then let's say I pay a thousand dollars in repairs during the month then at the end of the day I'm holding on to nine thousand dollars for that person right I'm holding on to it what remains of their rents which is nine thousand dollars and either I've got to send the money to them I might keep a little back to cover ongoing maintenance and repairs that's between me and the customer and what we've agreed to and probably what's in our management agreement right usually there's a that stipulated that needs to be kept back for ongoing working capital needs so to speak so let's see what this looks like in the actual quickbooks online software we're gonna go create an invoice okay and I've got this all set up we're gonna invoice Brad Smith because he's one of our tenants right I don't know how we got the extra a in there so sometimes it's easier the way this is set up to just type the property address 20700 Coast Avenue and there's Brad okay and normally by the way I would make sure there was always an email I always want my tenants email addresses recorded and then what we do is we set up a separate product or service for each properties monthly rents because as I mentioned just a minute ago we want to make sure when we collect those rents we can use an item on an invoice so that we can use an invoice to capture the rents and that has to go to that rent and trust liability account right and then when we actually collect the money and deposit it that has to go into the corresponding rents and trust bank account right so we have the bank account we have the liability account and the two always have to be in agreement the only disparity there is for a minute while I've posted this invoice the the liability accounts going to show $10,000 because that's the monthly rent we're going to use here's the example and it won't show up in the bank account yet because it's going to be an accounts receivable instead so of course I'll illustrate but if I type 2700 Coast monthly rent there it is and we're gonna book it for 10,000 okay and we'll say this was the rent for May first save and close' right and now if I run my balance sheet you'll see like I said we have the account receivable of 10,000 and we have the rents in less and trust rents and less that's funny rents and Trust liability for 2,700 coasts at $10,000 so if I had a lot more properties I was managing you would see a different liability account here for each of those properties and you would probably start seeing a different bank account for each of those properties you don't see the bank account for the trust yet for this one because I haven't recorded any deposits yet so let's go receive the payment so we can get the full picture of what this looks like so we're gonna go under this is called the quick create by the way receive payment under customers and again I'll just type the property address and then click on Brad and let's see he paid us on the third right and we'll check off the invoice the tenth and here we're gonna make sure it goes into our rent and Trust Bank account which I have set up as a sub-account of rents held I don't know why it's called rents held trust I'm gonna fix that but we're gonna put it right to the sub-account which is the bank account specifically for this property right so save and close and now we have rents and trust 2700 Coast and there's my ten thousand dollars which of course lines up perfectly with the liability for that same property right so these two numbers always have to match the only time there's ever difference should be because it's sitting in accounts receivable while we're waiting for the rents to get collected which should really only happen the first few days of the month right unless somebody just doesn't pay and at that point obviously we're chasing after them okay so that's really really important if these are ever out of sync you have to check and fix it right away because imagine the owner then comes in and says hey I want my money and you can't give them all their money because you don't have it all accounted for properly all right one more thing and then I want to show you a cool little report we can look at so let's say we have to pay an expense the expense on behalf of the property always have to have to be and let's say it's rent a handyman we're paying and it always has to come out of the bank account for that property right so again I need this bank account rents held in trust or rents in trust for 2,700 coast and if that's the bank account I'm paying out of then I'm paying it out of the exact same corresponding liability account right so rents and trust liability and notice what I did I always purposely named the liability account with the word liability in it so it's really clear otherwise it'd be really hard to tell the difference between the bank account and the liability account especially the way QuickBooks kind of gives you these drop-down dialogs you can't see the full sort of context here it starts saying sub-account of rents in something right so I always make sure I name things with these dropdowns in mind to make sure that when I'm in this form like this I know exactly what I'm looking at right and so let's say we pay a thousand dollars to to the handyman and in the description I would put the expense right so I would put you know just repairs probably would be more detailed than that normally and specifically discuss what was repaired right and let's say this happened on May 15th or something like that right so I probably say you know repaired kitchen sink whatever it is right but just be detailed because remember we don't have the usual detail or context that we have when we're booking these kinds of things to an expense account right and even if we did we'd still want more information so that we can make sure we can explain to our property owner customer exactly what we paid a thousand dollars for all right so let's hit save and close and now we'll see I have nine thousand dollars in rent some trust and nine thousand dollars in the rents and Trust liability and finally for now we want to be able to we want to know how to take a look at what you know the details right this is very simple we've got two transactions or rent and a payment for repairs and maintenance but obviously you know as time goes on there's going to be a lot more detail to look at so what I just did before I had a chance to explain it is you click on from the balance sheet so let's start over we go to reports we go to the balance sheet and I'm gonna scroll down to the liability account because this account has all the details it has everything I need to explain exactly what came in for this property and what was paid out so I'm gonna click into this number now from here it's pretty clear to see I can see that this is rent received right and I can see I put my memo in there this is repairs that were paid to rent a handyman right but I want to make this report look a little bit easier to read so we're gonna go to customize and we're gonna go to rows and columns and we're going to say change columns right here I'm going to scroll all the way to the bottom I want my debit and credit I know those are technical accounting terms but rest assured when we put these in here exactly as I'm showing you and notice I'm dragging them each up so that they appear before the amount you're gonna see that's gonna split up money that came in versus money that went out in two separate columns which already makes it much easier to read so let's run that let's see what that looks like sure enough I can see my rents that came in these are credits because remember we're looking in a liability account credits actually increase liabilities so money came in it credits the liability to increase it because we now owe our property owner customer ten thousand dollars until we then have to pay the and Eman $1,000 soon now we only owe them 9,000 so this is how you can see very clearly in a given month or for whatever date range you've run this for exactly what came in exactly what went out and based on that what is left over so that my friends is in a nutshell a good little 10 minute introduction to property management with QuickBooks Online as always if you have more questions you can certainly post your comments below if you want some one-on-one help then reach out to us you can even reach out in the comments and we'll get back to you and help you get signed up for some one-on-one so I can walk you through how to set up your own property management concern and of course I shouldn't say of course you wouldn't necessarily know this but we've got a course coming that's going to go very much in depth on all of this how to set everything up how to record all the transactions that you'll you'll need to know how to record in association with managing properties for others in other words property management with quickbooks online as always if you have any questions concerns comments feedback post it in the comments below or reach out to us give us a call and we'll be happy to help you with anything that you need help with if we've got the experience you