I'm horrible at Accounting!!

[Brian Orr]

And taxes!!

I'm developing my strengths in estimating and budgeting, but I am so bad at keeping track of everything! Spending more time with my accountant trying to figure last year than I am working on any deals this month.

Any advice or tools, spreadsheets, anything that can get me and keep me on track?

[Russell M.]

Since you are already in the thick of it, I would spend a little more time to get organized now.  It may literally save you thousands of dollars in the future.

The first step is to get some sort of financial program.  You could use Excel, but it doesn't have the database and reporting capabilities that actual financial packages have.  Whether you use Quicken, or Quickbooks, or a free package like Gnucash, which are equally capable, pick one.  Take the time to learn how to use it and get it set up with appropriate accounts for your properties.

My account set up has income and expense categories for each property I own.  The expenses are broken down based on the expense entries from the IRS Schedule E, assuming you are in the United States.  If not, I would suggest structuring based on your local tax laws related to real estate investing.

Keep track of everything.  Set up file folders for management and expenses for each property that you can use to archive your information year by year.  This will allow you to be able to pull past information easily without having to search through a stack of papers, or a cardboard box.

If you do most business electronically, then set up the same sort of directory structure to keep track of records.  Scan Receipts, or print electronic receipts to a pdf when you make a relevant purchase.  Keep track of payment confirmations for mortgages, utilities, etc.

In your financial program, set up standard Balance Sheet and Net Worth reports for each property and for all properties together.  This will allow you to run them on a monthly basis to track how each one is doing.  Also set up reports to track expenses throughout the year.  This will let you see anomalies in your expenses, if something is higher one month, it can trigger you to investigate for a problem.

Also set up transaction reports so that it is easy to create lists of expenses and income per property at the end of the year when preparing to do your taxes, or send to your accountant.

As I said at the beginning, starting now and getting organized will save you a lot of time and possibly money in the future.  The more detail you can capture, the better you will be able to keep track of your situation for each of your transactions.

If you are interested, I'd be more than happy to share my chart of accounts, as well as a specific property spreadsheet I use at tax time for my Schedule E.