Accounting Workflows: Streamline Your Bookkeeping Process to Protect Your Business
As a rental property owner, you wear many hats, and it’s hard to balance administrative tasks with tenant requests and property maintenance. All too often admin work like bookkeeping gets pushed aside, forgotten, or ignored until your inbox overflows with receipts, invoices, and bank statements. But letting your accounting tasks pile up leaves your business at risk. Late payments, cash shortages, and incomplete or lost records can hurt your business and reputation, so staying on top of your books is critical. We’ve categorized key bookkeeping tasks by frequency so you can customize a workflow, allowing you to use your time efficiently, keep your books in shape, and run your business smoothly.
To be clear - every business is unique, and you should adjust your workflow based on your specific circumstance. A 1 property portfolio and a 100 property portfolio have different needs!
Daily Recording Steps
Set aside a portion of your day for small bookkeeping tasks. Starting or ending your day with these steps helps you stay organized and on top of your business’s financial health.
Update your financial data
Most accounting systems will sync your bank account and credit card activity with your bookkeeping system. By clicking just a few buttons, you’ll have current transaction and balance information that will give you a clear picture of your cash position.
Review, categorize, approve, and record transactions
Once you’ve synced your accounts, categorize and review the new transactions. This is a great way to catch any fraudulent activity quickly. If you see suspicious activity, notify your bank or credit card companies and put a freeze on your accounts.
Review your cash position
How much cash you have on hand affects how you’ll conduct your transactions. Do you need to make a transfer from your business’s savings account? Do you need to make an additional payment on your credit card to prevent an over-limit fee?
Update your activity log
The IRS’s real estate professional designation requires documentation. Maintaining complete and accurate records is much easier if you keep a running log and update it daily. Make sure your call log, mileage records, and calendar reflect how you’re spending your time.
Collect receipts from the day
We’ve all lost receipts at some point, and it’s a pain to get duplicates. Save yourself the headache and collect all your daily receipts to store them in a designated spot. Desk drawer, folder, or inbox—the location doesn’t matter as long as your receipts are safe and at hand.
Open your mail
Too many business owners let mail pile up because they expect nothing more than junk mail. However, letters about vendor updates, IRS notices, bills, checks, and returned deposits can get caught in the junk mail pile. Don’t be caught unawares just because your mail is sitting unopened. Even if all you do is eliminate clutter, this small daily task is worth the time.
Weekly Bookkeeping Checklist
Every week, schedule a block of time to knock out these accounting jobs:
Deposit cash and checks
Although you should record payments daily, if your cash position is strong, making deposits can be a weekly task. Just be sure to store all checks and cash in a safe. To save even more time, see if your bank allows for check e-deposits.
Schedule bill payments
Staying current with your vendors helps build positive relationships and an excellent reputation. Reviewing your accounts payable and scheduling your payments in advance also helps you monitor your cash flow.
File or scan documents and receipts
Your tax returns depend on your supporting documentation. If you’re ever audited, you must be able to produce that documentation. By filing your paperwork on a weekly basis, you prevent losing or damaging documents. Scanning your receipts and paperwork is even better! Electronic documentation cuts down on the physical storage space you need and keeps your documents secure. The REI Hub app includes receipt and document storage features, so it’s easy to attach receipts to your transactions.
Monthly Accounting To-Dos
Set calendar reminders to complete these tasks each month:
Reconcile accounts
With online banking, you can certainly reconcile your accounts on a daily or weekly basis, if you’d like. But at the very least, reconcile all of your accounts on a monthly basis.
Review statements
Keep track of how your business is doing by reviewing your financial reports each month. To make informed decisions for your rental properties, you need to monitor your cash flow, income, expenses, assets, liabilities, and equity.
Send invoices and review any past-due items
If you send invoices for rent or late payment notices, complete this step all at once. This task-batching technique helps you avoid multitasking, increase efficiency, and reduce errors. If any of your renters are seriously delinquent with their rent, follow up with them more often.
Check your budget
Compare your statements with your budget regularly. This helps you spot trends and variances. Are there areas where you need to reduce spending? Are invoices from one vendor running higher over the last few weeks? Do you need to adjust your budget for the coming quarter? This is also a good step to include in your quarterly financial checkup.
Back up data
Losing your files is frustrating at best and, at worst, can set your business back. If you use a cloud-based recordkeeping system, back up your data every month. Just because something is stored in the cloud doesn’t mean it’s backed up. If the primary data is lost, you’ll still have your backup to rely on. If you store your data on your computer, not a cloud-based system, do this weekly.
Quarterly Financial Tasks
These quarterly responsibilities are important, but it’s easy to overlook them. Set recurring calendar reminders to ensure that they’re completed on time.
Compare your reports
Make sure you’re looking at year-to-date reports and month-to-month comparisons. Looking only at reports for a single month doesn’t give you a complete picture of your business’s health. Running a financial checkup on your rental property business each quarter helps you assess your performance to date and make adjustments to better position yourself for the rest of the year.
Estimated taxes
If required, your estimated taxes are due on a quarterly basis. Your tax preparer will help you understand if this is a requirement with you and will assist you with the forms, but you’re responsible for making the payments. This will generally depend on your anticipated tax liability and the rest of your financial situation.
Annual Accounting Requirements
Since you’ve been keeping up with your daily, weekly, monthly, and quarterly bookkeeping tasks, you’re in good shape for your annual financial to-do list.
Close out your books
Part of closing your books for the year is confirming your deductible expenses. REI Hub has a tax time double-check to help you cover your bases, and subscribers can also use the built-in Tax Review feature to examine their books.
Generate year-end financial statements
Before you can work on your taxes, you need to prepare your annual reports and gather information. Make sure you have your balance sheet, cash flow statement, and profit and loss statement ready for your tax preparer.
Prepare tax returns
Whether you prepare the return yourself or hire a tax preparer to handle it for you, US businesses are required to file a tax return. Most rental property owners use the Schedule E to report their profits and losses.
File Form 1099-NEC if required
A 1099 is like a W-2, except it reports nonemployee compensation. When businesses pay an independent contractor or freelancer for work, they must issue the contractor a 1099-NEC if they paid the contractor $600 or more during the calendar year. This generally does not apply to property owners who paid contractors for work on their own properties, but you should confirm with your tax preparer to be sure.
Takeaways
Bookkeeping takes time and effort. But by streamlining your accounting workflow, you can use your time more efficiently and operate your business more effectively. Every rental property business is unique, so it’s important to tailor your workflow to meet your business’s needs. Break up your bookkeeping tasks into daily, weekly, monthly, quarterly, and annual tasks. Take advantage of time management techniques like task batching to maximize your time. Use a checklist and calendar reminders to make sure you complete each step. Start implementing your new accounting workflow today to protect your rental property business!
