Managing a commercial property is a busy job. From managing lease renewals and sourcing new tenants to working with vendors and managing the property bookkeeping, there’s a lot on your plate at all times. It can be hard to know what to prioritize and how to divide up your time. But you can’t let your seemingly never-ending to-do list keep you from handling your commercial property accounting.
To successfully manage vendor invoicing, rent payment, security deposits, and other financial aspects of the business, you need a proven bookkeeping process in place. To help you understand the bookkeeping basics and improve the accuracy and efficiency of your commercial property accounting, Price Commercial Management has compiled a few bookkeeping basics.
1) Have Multiple Bank Accounts
When a tenant moves into your commercial real estate property, they pay a security deposit that the commercial landlord holds onto throughout the lease. This deposit covers any damages incurred so that the landlord can fix them upon the tenant’s move-out. In most states, the landlord is required to hold onto the security deposit money in a separate bank account than the everyday account. This ensures the funds are available when the tenant moves out and they don’t get mixed up with your other finances.
In North Carolina, commercial landlords are required to inform the tenant within 30 days of the lease starting with the name of the financial institution where their money is being held, as well as the address. This provides both the tenant and the landlord with peace of mind throughout the lease.
2) Keep Your Accounts Organized
As a commercial landlord, there are likely a lot of different accounts for you to keep track of. Even if you are the sole person at your company managing the bookkeeping, having a chart of accounts can be extremely beneficial. This is essentially a list of all assets, liabilities, equity, income, and expense accounts so you can easily keep all your financial transactions organized. This can be managed through something as simple as an Excel spreadsheet or you may opt to invest in bookkeeping software.
3) Invest in Property Bookkeeping Software
To save your team time and improve efficiency, you may want to consider switching your accounting from manual spreadsheet to specialized software designed to make your life a bit easier. Using property management software helps commercial landlords tackle all of their accounting tasks with increased accuracy. By making the switch to a centralized software, everything you need in regards to your general ledger will be located in one place. This makes it easy for anything on the team to step in and know exactly what needs to be done instead of sifting through hundreds of different spreadsheets.
4) Choose an Accounting Method
If you’re just starting out or overhauling your commercial property’s accounting, you need to determine the ideal accounting method that your team will follow. Solidifying the bookkeeping process will make it easier for everyone to be consistent in the work they do. There are two main methods of accounting for you to choose between — cash and accrual. Do you want to record all money coming in and leaving your bank account as it is received and paid? If so, you may be in favor of the cash accounting method. Another option is accrual accounting, where the bookkeeping records keep track of revenue and expenses as they occur. Property management software can help you keep track using whichever method you opt for.
5) Keep Invoices and Receipts Organized
For the most accurate bookkeeping, you need a process for managing all invoices and receipts. Every month, you may be dealing with invoices from vendors to fix some of the building facilities, charging tenants for monthly rent or access to building amenities, or working with local retailers to surprise and delight tenants around lease renewals. With so much money coming in and out, there needs to be an efficient process to keep a record of all these invoices and receipts.
6) Take Time to Reconcile Accounts
Reconciling your accounts may not be the most fun part of your job, it is a necessary step in your commercial real estate accounting process. To avoid bookkeeping errors and inaccuracies such as duplicate entries, missing entries, typos, or bank errors, you should be reconciling your account every month. Monitoring your ledger will minimize the chance of missing money or overpayments — ensuring you have all the money you’re supposed to in the bank!
7) Keep an Eye Out for Tax Deductions
The goal of any business is to find ways to increase the bottom line — one of the easiest ways to do that is to take advantage of the various tax deductions available to you. By keeping your bookkeeping accurate and up-to-date, you will easily be able to pinpoint areas of opportunity where you can save money through tax deductions. However, you need to be aware of what the various tax deductions are to take advantage of them, which leads up to our next bookkeeping recommendation.
8) Outsource Accounting Help When Needed
With so many responsibilities on your plate, it’s alright to wave the white flag and call in an assist when you need it. If your bookkeeping has gotten a bit out of control or you have more complex transactions to keep track of, it may be beneficial to seek the help of a professional. Whether you hire a commercial property manager or a Certified Public Accountant, you’ll be in good hands knowing your books are taken care of.
Ready to Seek the Help of a Professional?
Hire a successful property manager to handle your rental property bookkeeping on your behalf.
At Price Commercial Management, your investments are our top priority. Our management team works in conjunction with you as an extension of your organization. We proactively manage your property as if we own it personally. Our team can assist with:
- Rent collection
- Lease enforcement
- Monthly property reporting
- Expense management/Revenue enrichment
- Scheduled property assessments
- Routine and preventative maintenance
- Valued relationships with licensed and insured contractors
- Aesthetic maintenance
Owners have access to our online owner web portal to check account balances, make contributions, review payables, approve bills, and more! Contact us for a free quote and consultation to optimize your property management based on your needs.