If you’re a landlord, keeping track of your finances is important.
With many landlords renting out multiple properties, there can be a lot of incomings and outgoings when it comes to accounts.
We recently wrote a guide to landlord accounting, which covered why an accountant can be a huge help in submitting tax details and making sure your finances in check.
But how can you, the landlord, manage your bookkeeping alone?
This can seem tricky, and that’s why the team at Blue Rocket Accounting have compiled these five handy tips on how to become brilliant at bookkeeping.
Let’s take a look.
1. Do Your Research
The world of finances is volatile, and if you are naïve to the changes taking place in your industry, then you may soon find yourself in trouble.
If you’re planning on submitting your tax returns yourself, what is the best way to go about this?
Are you up to date with the Making Tax Digital changes coming next year?
Do you know what to count as business expenses and what not to?
These questions are important and can have big consequences if they are misunderstood. When keeping track of your finances and tax implications, knowing the best way to store and record all figures can save a lot of time when it comes to filing your tax returns.
2. Embrace the Latest Software
Long gone are the days of marking down every financial movement in a book.
There are now some great technological solutions that can make bookkeeping for landlords much more simple.
Two of the most popular choices are Xero and QuickBooks.
These platforms are used by millions of users to help them with their bookkeeping.
Not only does it make it easier to store and update your finances, but it also provides some really handy reports which is a great help when wanting to see an overview of how your rental property income is looking.
This landlord bookkeeping platform is simple to use, so even the most technologically adverse people will find it quick and easy to get their finances in order.
3. Keep Your Bank Accounts Separate
Something that is essential is to keep your bank accounts separate.
Using the same bank account for business and personal life is something over a quarter of business owners do, so if you fall into this bracket, it’s time to change.
As soon as you start making an income from your rentals, you should create a business account where you can keep track of the money being spent on your properties, received from your tenants, and nothing else.
When it comes to bookkeeping, simplicity is key, and that’s why if you can keep all transactions to one bank account, and remove all personal transactions from this account, it should make it much easier to pinpoint payments and keep track of spending.
When you and your accountant sit down at the end of the year, you will go through your accounts. This can be a time-consuming task but is certainly a lot more arduous when business transactions are interspersed between personal ones.
It also is a great idea for your personal spending, as you may end up spending business money accidentally that you didn’t want to spend on yourself.
Having a separate personal account provides you with a way to always be on top of your finances and having a business account makes bookkeeping throughout the year (and especially in April when it comes to assessing finances) much easier.
4. Don’t Throw Away Your Receipts
There are many things that you can claim as expenses at the end of the financial year. This means they can be deducted from your tax payments.
This includes some maintenance and repairs jobs that are used to make your rented property habitable.
When it comes to the end of the financial year, your accountant (and HMRC) will want to see proof of some of the payments that you are claiming as expenses, so make sure you are organised and have all receipts ready should anyone need to see them.
Organisation is key when it comes to landlord accounting, so it’s always wise to keep files of your yearly payments for five years after they occur.
If you can keep these labelled and filed, even better as you won’t waste any time finding the right receipts for the transactions in question.
5. Check Your Finances Regularly
Keeping track of your income and expenses is vital in knowing how well your business is operating.
For example, if you are spending a lot of money on mortgage payments and repairs, and not recouping this in income from your tenants, then you will be losing money.
Checking your finances regularly, such as every month, is a great way of making sure your business is on track to make a profit.
This will also help you make ongoing business decisions, such as if you need to raise rent or stop spending as much money on certain aspects of the business. It also means that you can choose to set money aside for repairs or decorating of your properties if you are making a good profit.
Not only this, but when it comes to checking finances at the end of the year, having a full years worth of finances to calculate can take along time and lead to confusion.
If you can provide a month-on-month account for the full year, the whole process of submitting your tax returns will be much more simple and efficient.
Landlord Accountants at Blue Rocket
If you need help keeping track of your finances and submitting tax returns, then why not look into Blue Rocket Accounting.
Our team have experienced accountants who specialise in many different industries and can help you take control of your finances and always make sure your tax return is just right.
We use the latest software and always keep up to date with the latest news and trends in the accounting world, so you don’t have to.
If you want to know more, then get in touch today, or why not check out our landlord accounting service here.
