Simple Bookkeeping Systems for the Startup Investor

If you’re just getting started on your real estate investing journey, you might feel a little overwhelmed with all the various tasks that come with managing a real estate business. Now, you might be saying to yourself, “I don’t want to run a business, I just want to buy real estate and collect passive income.” Sure, that is what we would all like, but the reality Is that you’re a business no matter what your goal or strategy is. Here’s the good news. It pays to operate like a business. Not only for the sake of tax strategies, but more so for the value of leveraging systems to free your time and grow your wealth.

One of the most important foundations in starting your business is bookkeeping. Many before me have stressed the importance of having excellent accounting records from day one, as this can really impact your taxes and your investment’s IRR. So I want to lay some simple ground work for how you can nearly automate your bookkeeping and keep your attention on the tasks that will actually grow your portfolio.

Step 1. Set-up a Gmail account.

This is a free resource that provides so much value to your overall business. You will have access to not only a free email that you can designate as your real estate business (ex. KevinbuysProperties@gmail) but google offers free cloud-based storage up to 15gb. If you already have an email that you prefer to keep, in most cases Google will recognize and allow a 3rd party email to create an account with Google. For Instance, I created a Google account using my ICloud email and the features and functionality of Google remains exactly the same.

Add a folder to your Google Drive account. This can be labeled as your business, where you will keep all your files. Inside of this folder you can add sub folders like Bookkeeping/Accounting and inside of that folder, a sub folder for each year. This helps to easily track down records year by year.

Step 2. Download the Google Drive app to your Mac or PC.

By downloading the software to your computer, you can set up your computer to sync specified folders automatically (in real-time) to your Google Drive folders so they mirror one another. The Google Drive app will walk you through the process for syncing correctly based on your computer. As when you drop a receipt from your email into your Bookkeeping folder on your computer, it will instantly be in your Google Drive aka The Cloud.

Step 3. Find a freelancing bookkeeper online.

There are many sites that offer remote freelance services these days. Some that come to mind are Upwork and Freelancer. Once you have established an account, run a job ad explaining the type of business/investing you are involved in and the services you need. Posting a job is free, and in no time you will have many freelancers responding to your ad with their experience, abilities, and price. In the case of bookkeeping, you’re likely to have freelancers responding by their cost per hour. Don’t panic if you see some that are bidding for $20+ per hour. Once you start interviewing bookkeepers, you’re likely to find that you can get a fixed monthly price in a much more reasonable range for your start-up. Remember that everything is negotiable, but you have to ask. As a start-up, you’re likely to have few transactions taking place in the beginning of your career so it’s only fair to negotiate that your cost be on the lower end to start. Once you’ve interviewed and received quotes from several freelancers, consider your long-term relationship with them, their price, and the value they offer. I do not like bookkeeping but I do like understanding what’s going on with everything and expect my bookkeeper to articulate that to me. I also like getting a good deal so I consider the price and how it plays into my business’ budget.

Step 4. Set-up bookkeeping software service, or piggy-back on your bookkeeper’s account. There are many ways to keep track of your transactions, and of course the most cost effective is spreadsheets. If you choose to go that route, Google Sheets is an ideal choice for the system I’m helping you to build.

Option 1: Google Sheets Method (Budget Friendly) - Go to Google and click the grid in the top right corner. Navigate to the sheets program. You’ll want to create a sheets file that can be simply named after your business. You’ll want to share this file with your bookkeeper so they can access and edit it. How they choose to manipulate this file to work with your business will have a lot to do with their experience on Sheets. They are likely to have a formatting template that will make it easier for you to comprehend but more for your accountant to work with when tax time comes around.

Option 2: Create an account with a bookkeeping software like Quickbooks or Freshbooks. These cloud-based accounting programs make it possible for you to share your accounting records with everyone that needs to know. Because many bookkeepers and accountants gain extensive training and certifications in programs like Quickbooks, it makes it an easy go-to for it’s standardized system that’s widely understood. By using one of these programs, it can pull transaction data from your bank account that makes certain your records are precise.

Option 3: Piggy-back on your bookkeepers program. In some cases, your bookkeeper/accountant will already be using a program like the ones previously mentioned. If that is the case, they are likely able to offer you a discount on the software service by using it under their account. For instance, Quickbooks may charge you $30 a month to have your own account to work with. If you choose to piggy-back on your bookkeeper’s account, your fee to Quickbooks may come at 50% off. Consult with your bookkeeper to find out what the rate is, and see if it makes sense for you.

Step 5.

Stop trying to be a bookkeeper and get back to making offers and closing deals. If you’ve followed the steps I’ve outlined, your system should look like this.

1. Transaction receipts are flowing in from your email or you’re scanning them to your computer.
2. You’re saving all records to your accounting folder on your computer.
3. Your accounting folder is syncing with your Google Drive which your bookkeeper can see.
4. You’re bookkeeper is documenting each transaction from your receipts either to your spreadsheet, or within a cloud-based program like Quickbooks.
5. After each receipt is logged, your bookkeeper is dropping the file into the appropriate sub folder for the year.
6. Your records are in balance and tax time will be super easy.

By having an effective system that keeps records up-to-date, you can easily have an accountant review your business situation to give feedback for tax planning. This can really impact your business and drive your success to the next level.

I would love to hear from you. Is this an improvement from your current system? If not, what effective accounting systems are you currently using? Post in the comments below.

Kevin W. Porter