Managing a rental property can be challenging, especially when trying to keep track of the costs associated with operating your business. Expense tracking is essential for understanding your company’s spending patterns, reducing unnecessary costs, and maintaining accurate financial records. Fuse Property Management presents the top ways your business could benefit from automated expense tracking.
1. Understand Your Spending
Companies have many moving parts, and Thomson Reuters Practical Law notes that maintaining a successful rental property can come with substantial operating costs. These expenses are necessary for keeping your business running and might include:
- Property taxes
Understanding how much of your revenue goes towards each of these can offer insight into your company’s financial health. Perhaps you realize you are overspending on marketing campaigns or that you could afford to invest more in property upgrades. This is a common problem when purchasing a house “as is” that you plan to renovate and then rent. These properties get their “as is” label because of a large known issue, like a damaged foundation, a leaking roof, or mold problems. Work with an attorney to ensure everything is disclosed and be honest with yourself about the finances involved in the renovation so that you don’t get in over your head.
2. Control Your Costs
Expense tracking software can be helpful when creating, analyzing, and adjusting your company’s budget. These apps sort expenditures into spending categories, which can help your manage costs in several ways.
When monitoring your expenses, try to identify and limit unnecessary purchases and overspending. Pay attention to reoccurring costs, such as routine maintenance, and determine if more affordable options are available. Once you set a budget for your business, watch it closely and make adjustments when necessary.
You may find that, once you review your budget, you have room to hire a property management company to help you with the day to day maintenance and tenant recruiting processes. These aspects of owning a rental property can take up a lot of your time. Fuse Property Management offers services for residential properties that can lessen the daily burden from you, so you can focus on acquiring more properties.
3. Avoid Costly Mistakes
Thorough record-keeping is vital for avoiding mistakes, and many businesses struggle or fail because of critical financial errors. According to Brinks Money, manually tracking your expenses can increase your likelihood of encountering common errors:
- Clerical errors: Typos or input mistakes such as adding an extra zero to a figure
- Miscategorization: Income recorded as an expense or an expense recorded as income.
- Omissions: Missing expenditures, usually due to lost receipts or forgotten purchases.
- Duplications: Single items accounted for more than once.
Even seemingly minor financial blunders could result in payroll issues or unintentional fraud, which might cause irreparable damage to you, your staff, and your company.
Regardless of the size of your staff, having an automated system for payroll can prevent delayed or missed payments. Many expense tracking apps feature automatic pay scheduling and direct deposit to ensure your employees receive accurate and timely pay.
4. Help Tax Season Go Smoothly
As a business owner, tax season can be a massive headache. Knowing which expenses are deductible allows you to maximize your deductions. Ensuring taxes get filed correctly is also essential for avoiding financial and legal consequences. Get a head start on your taxes by investing in expense tracking software that provides automatic tax filing.
5. Form a Corporation
Regardless of the size of your business, protect yourself and your assets from legal issues that might arise involving your rental property. Establishing a corporation provides a corporate veil, creating a legal distinction between your private and professional assets. Use an online service to start a corporation and save money.
Control Your Costs
Financial management for a rental property can be overwhelming. Fortunately, there are steps you can take to get back into control. Focus on controlling costs by understanding expenses and avoiding costly mistakes. Don’t invest in “as is” properties that may be more trouble than they’re worth, and ensure that your business structure is providing you with liability protection. These steps will lead you towards a healthier business that you can expand and enjoy.
Thank you to Ted James, author of the above post.