Property managers handle a large number of tasks for their clients. 80% of property managers deal with a wide range of activities beyond the usual advertising, leasing, and property inspections that most companies handle. One of the main tasks property manager companies handle is their clients’ accounting.
Finding the best property management bookkeeping software that is designed to streamline many processes can reduce the stress placed on property owners and their management companies. However, finding the top bookkeeping software can be challenging.
This guide will cover the top seven essential software features you should look for when choosing bookkeeping software. Save yourself time and money by investing in the right financial management tools for your property management business.
1. Rent Collection
One of the best features property management tools can have is making collecting rent easier and more efficient. Fortunately, many property management software programs offer these capabilities, such as:
- Automatic and online payments
- Late payment reminders
- Rent payment portal with a mobile app
- A tenant portal
This feature makes it easier for property managers to know who’s on top of paying their rent. They can track rental payments as they come in and the software will automatically let people know when their rent is late and add on any fees they might incur because of that. Renters can also pay their rent in the way that works best for them, such as:
- ACH transfers
- Credit or debit card
2. Manage Accounts Payable and Receivable
Accounts payable refers to money that a property management company owes to a creditor, vendor, or supplier. These types of expenses typically get recorded once you receive an invoice or receipt. Payment of these fees is based on the payment terms settled on by both parties.
Accounts receivable is any money that’s owed to the property management company. Some examples of these types of fees include:
- Rent
- Late fees
- Vendor credits
An advantage of property management software is that it manages all the money going in and out of the company in the chart of accounts. It often has built-in calculators that show you what you owe your property owners, vendors, and your business. You can also easily translate work orders into bills and get them paid.
3. Reconcile Bank Accounts Automatically
You should look for financial management tools that automatically reconcile your bank accounts. Bank reconciliation allows you to verify that the information in your bank matches what’s in your accounting records. Many property management bookkeeping software allows you to automate the process, providing you with benefits such as:
- Eliminates human errors
- Reduces your financial risk
- Cuts down on cost and time
4. Create Client Files
Another feature you should ensure your property management bookkeeping software has is the ability to create client files. You can set up your vendors and tenants within the software. Your rental property clients would typically be considered vendors since you pay them an income based on what their tenants pay.
What’s great is that you can set up multiple property owners as vendors within most programs. This works for property management companies that have multiple clients.
You can track each expense a property incurs within the client file. Property management bookkeeping software allows you to categorize each expense, ensuring it gets added to the right account.
5. Built-in 1099 Creation
Many property management bookkeeping software allows you to automatically create 1099s from the program. Property managers need to issue 1099s if they make payments of more than $600 during a calendar year to a property owner for services or rent.
1099 forms are needed to report to the IRS any income that’s not subject to payroll taxes. Rental property income falls within this category.
Property managers receive rental payments on behalf of their clients. The property owner needs to report their income on their tax returns. The payer needs to file a 1099 to report the amount they paid.
1099 forms ensure that the recipient of the money reports the right amount of income on their tax returns. It also allows the IRS to verify and track tax return accuracy.
6. Useful Tools for Property Owners
Property managers can disburse funds to rental property owners with property management bookkeeping software. You don’t have to worry about printing the checks and mailing them to them. Property managers can electronically transfer funds into the owner’s bank account and they’ll receive it within a few days.
Property management bookkeeping software programs allow managers to create custom reports for their clients showing them the health and profits of their properties. Some of the types of reports you can create and share include:
- Profit and loss
- Financial health
- Record transactions
- Income and expenses
7. Manage Unexpected Expenses
Rental property management companies must be prepared for any unexpected expenses that might arise. Accounting for a rental property needs to include budgeting for different events that might impact the company. This can include some of the following things:
- Pest treatments
- Appliance replacement
- Painting
Property managers also need to make plans for when units don’t have tenants. Sometimes it can take several weeks or longer for a new tenant to move in. The landlord will be without income for that unit during that time.
Another unexpected financial expense may be paying more business taxes than you expected or rising insurance premiums. While it can be challenging to prepare for every circumstance, property management bookkeeping software will allow you to see how much money you have budgeted for these types of costs. This allows property managers to monitor savings closely and inform property owners if additional funds are required.
Elevate Your Business With Property Management Bookkeeping Software
A well-designed property management bookkeeping software can help your business run smoother. The more efficient your company runs, the happier your clients will be. Working with an experienced bookkeeping company will ensure your accounting stays in order.
Whether you need real estate bookkeeping tips or help picking out new software, the experts at Cloud Bookkeeping are here to assist. We offer a wide range of solutions, such as full-service payroll, managed bookkeeping, and more.
Reach out to our office to schedule a consultation to discuss our property management bookkeeping solutions.
