When it comes to accounting, one thing you’ll discover at the core is the charts of accounts. You see, a business can’t function without accounting, and accounting itself is incomplete without charts of accounts. So, as a property manager or owner, you definitely don’t want to overlook the management of charts of accounts.
Now, you may wonder how you can truly grasp this concept of charts of accounts. Well, Propertese is here to lend you a hand.
In this article, we’ll guide you through setting up a chart of accounts for your rental properties. So make sure to give this article a read.
What are Charts of Account?
If you’re not an accountant, “Charts of Account” can sound like jargon you don’t need to know. But if you’re managing a business or organization, these charts are essential for tracking your finances.
Put a Chart of Accounts that lists all your company’s financial transactions. It helps you categorize each expense and revenue clearly and organized. Without them, you may struggle to understand what your business can afford and where your money goes.
Learning about the Chart of Accounts may initially seem boring, but it’s crucial to keeping your finances in order and making informed decisions. We’ll do our best to make this article as engaging as possible so you can easily grasp the concept.
Alright, let’s get to the thing you’re here for.
What Is a Property Management Chart of Accounts?
A property management chart of accounts serves as a meticulous record, systematically categorizing each transaction related to your properties. It’s an organized system that separates your expenses into categories, making it easier to see where your money is going and where you need to make adjustments.
The chart of accounts for property management is a must-have tool. It gives a clear and organized view of the financial data for each property. So, it’s not just about being organized but also about making wise financial decisions based on a solid understanding of your financial situation.
Why is a Chart of Accounts essential for your Property Management Company?
Back in the good old days, before computers took over, managing finances was like telling a story in a giant ledger book. Each transaction had its own special page, narrating the tale of income, expenses, assets, liabilities, and equity. The numbers at the bottom of each page held the key to the financial saga, and accountants simply added up the income, assets, and equity, then subtracted the expenses and liabilities to reveal the grand finale of profits and losses.
Now, let’s talk about the chart of accounts property management, the unsung hero in your financial adventures. It’s the backbone of all the financial reports and crystal ball gazing you do for your company and its properties. You might be wondering why it matters.
Well, let me break it down for you:
Talking Money with Property Owners:
Ever had to spill the financial beans to property owners? The chart of accounts is like your script. It helps you tell the story of the financial health of those rental properties. Owners don’t want a Shakespearean tragedy; they want to know the facts. The chart of accounts lets you dish out the details they need without any unnecessary drama.
Rent and Fee Wizardry:
Want to work your magic on rent and fees? The chart of accounts is your spellbook. It lets you determine the perfect potion for rent and fee increases. There is no hocus pocus here—just solid financial insights that make you and the property owners happy.
Budget Crystal Ball:
Forecasting budgets is like predicting the weather for your company—tricky but essential. The chart of accounts is like your weather app, helping you forecast everything from marketing to staffing with precision. No more budget surprises, just smooth sailing through the fiscal storm.
Tax Time Tales:
Ah, taxes—the inevitable chapter in the financial story. The chart of accounts is your trusty scribe, ensuring that when tax time rolls around, you have accurate financials ready to roll. No last-minute scrambling or plot twists, just a straightforward, tax-friendly narrative.
Setting Up a Chart of Accounts for Your Property Management
Let’s begin by setting up your chart of accounts for your property management business.
Consider it as organizing a family tree, with parents, children, and various relatives (or transactions) involved in the process.
Step 1: Parent Power Moves
Let’s start by giving some power to the parents—the big shots in your financial family. We’re talking about Assets, Liabilities, Shareholder’s Equity, Revenue, and Expenses. Each gets a unique code like they’re in their exclusive club.
Assets get the VIP code 1000-1999, Liabilities rock the 2000-2999 range, Shareholder’s Equity claims 3000-3999, Revenue struts in with 4000-4999, and Expenses cozy in the 5000-5999 zone.
Step 2: Child’s Play
Now, let’s dive into the kids – the transactions that bring life to your financial family. Each type of income gets its number. Rent could be the cool kid at 1100, while HVAC maintenance fees chill out at 1200. It’s like giving them a badge that proudly says, “I belong to the Income Club.”
Step 3: Property Party
Your properties deserve their special mention. Imagine each property having its own VIP section. So, 123 Elm St. gets 1101 for rent and 1201 for HVAC fees. Other accounts? They still get a one in the 1s place.
It’s like a secret code telling you exactly where the money comes from. And don’t forget to keep things short and sweet with clear summaries for each line item.
There you have it—a chart of accounts organized as a well-planned family reunion. Parents, kids, and properties, all with their unique codes, living harmoniously in your financial world.
Property Management Chart of Accounts Examples
Picture your chart of accounts as a financial roadmap, guiding you through the dollars and cents journey. At the very top, you’ve got the big shots:
- 1000 – Income
- 2000 – Expenses
- 3000 – Assets
- 4000 – Liabilities
- 5000 – Equity
Now, let’s zoom in on the juicy details:
- 1100 – Rent
- 1200 – HVAC Fees
- 1300 – Application Fees
- 1400 – Other Income
- 2100 – Electricity
- 2200 – Heating
- 2300 – Payroll
- 2400 – Other Expenses
And now, the nitty-gritty of your property-specific transactions:
Property: 123 Elm St.
1200 – HVAC Fees: $225
- 1201 – [Next Expense Code] – $75
- 1202 – [Next Expense Code] – $75
- 1203 – [Next Expense Code] – $75
And that’s it! It’s pretty easy.
Well, that was just an example, and you don’t have to worry, as none of it can be done manually. The whole purpose of this article is that technology is making things much easier to do. We at propertese are helping you achieve it in the blink of an eye. Yes, that fast.
So, if you want a demo, get in touch with us, and you’ll know what Propertese can do for you!
To sum it up, mastering the art of the chart of accounts is like uncovering the secrets to financial harmony for your property management business. It’s not just about categorizing transactions; it’s about telling a clear and organized economic story.
With Propertese by your side, setting up and managing your chart of accounts becomes a piece of cake. We understand that in today’s fast-paced world, manual efforts are a thing of the past. So, embrace the efficiency and precision that technology, specifically Propertese, brings.
Get in touch for a demo and witness the Propertese magic firsthand!