Real Estate Bookkeeping 101: How to Set Up Your Business for Success

Are your books up to date, clean, and spitting out the numbers you need?

First, I want to present some questions to get you thinking while reading the rest of this post:

How are you managing your business finances right now?
Are you using Quickbooks, Xero, a spreadsheet, a napkin, anything?
If you are using software, do you know if every single purchase or sale your company makes is being recorded?
If yes, how often are they being recorded? Is it done daily, weekly, monthly, quarterly?
Do you know if your books are being reconciled every month?
Do you know the different reports you should be looking at during the month?
If you ask for a certain report, is someone able to put that into your hand? And are you confident in the numbers on that report?

I know, it’s a lot to think about. But as you can see, there are factors that are very important to you as the business owner when it comes to your books. One of the best ways to ensure you have clean books is to work with a profitable bookkeeper and CPA.

The keyword here is profitable. What do I mean by profitable?

Identifying the Qualities of a Good Bookkeeper and/or CPA

Here are some things to consider when working with a bookkeeper and CPA (even if they are W-2 employees on your team).

Is your bookkeeper’s mindset surrounding profitability and keeping that in front of you?

Bookkeepers can be one of the people on the team that makes sure you focus on your profitability as they will be the ones in your books every day.

Is your bookkeeper keeping your books without hassle?

You should not have to make a lot of decisions for the bookkeepers. They may have questions from time to time, but they should not be taking a lot of your time unless it’s to make your more profitable or to save you from making a grievous error.

Is your bookkeeper keeping your books up to date?

If you want your books up to date daily, as long as that is reasonable for your purposes, then the bookkeeper should do that. If it’s not reasonable, then make sure to make clear up what interval is acceptable to you (whether it be every 48 hours, weekly, monthly, etc.).

Is your bookkeeper generating the reports you need to make the decisions you need to make?

Generating the reports you need is crucial to your success, but they should not just be generating them but giving them to you in a way you understand them and can make profitable decisions.

Is your bookkeeper taking items off your plate to focus on a higher-dollar-per-hour task?

This might go without saying, but bookkeepers should focus on documenting your transactions so you can go out and do the higher-dollar-per-hour task that you should be doing as an entrepreneur. If you are constantly having to be sucked into the lower-dollar-per-hour tasks, it’s time to look for a new bookkeeper.

Is your CPA doing all he can to reduce your tax liability and keep you out of trouble?

Is your CPA keeping up on the tax laws and focused on how to keep more money in your pocket while making sure you don’t end up wearing an orange jumpsuit?

Is your CPA talking over you, and you’re not able to understand him?

You want to make sure your CPA isn’t always talking over your head, and you understand what he is saying. I’m not saying you have to understand every single word, but when it comes to your business, you both better be on the same page.

Is your CPA a heavily involved part of your team?

A good CPA is going to free you up to work on your business and even give valuable insight.

Hopefully, these questions help you if you are currently working with a bookkeeper or CPA to know if they are profitable for you. They are both crucial components to your team, so you want to make sure that you audit their performance to ensure they’re suiting your needs.

Advantages of Cleaning Up Your Books

Yes, bookkeeping is a lot of work. It’s also integral to your success as a real estate investor. Here are the five most important advantages of ensuring your records are clean, organized, and accurate.

Decrease your chances of being audited—or at least help you out in the instance you are.
Improve overall knowledge of your business, as well as revealing strengths, weaknesses, etc.
Enable you to make faster, better decisions.
Decrease your day-to-day stress—you’re always aware of the health of your business from your books.
Increase your profitability by identifying opportunities to improve revenue.

Real Estate Bookkeeping: Key Takeaways

Do you really know your numbers? How can you be sure?

Know which numbers you need to track.
Have confidence in those numbers once they are tracked.
Ensure you’re able to access reports providing those numbers at a moment’s notice.

All of this is specifically related to the finance pillar of your business, but overall, keeping tabs on your numbers across your company is what will generate true wealth.

Questions? Comments?

We’d love to hear from you below!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.