It is practically impossible to be a prosperous investor if you do not have a basic understanding of where your money is going or coming from. You do not need to be a financial genius, but you should have a basic knowledge of debits, credits, and all expenses.
If you just glance at your books once a month, you very well could be throwing away money. Knowing what is going on with the numbers can be tiresome, but it is the only way to know what is going on.
By taking the time to teach yourself and spending a few minutes a day staying on top of your numbers, you will make your finances work for you.
Benefits of Bookkeeping for Real Estate Business:
1- Business Performance Metrics:
Real estate bookkeeping is not just an exercise to document financial transactions, but a significant way to evaluate the performance of your venture. Review your ledgers on a quarterly, or even monthly, basis to examine the status of your business’ financial well-being.
2- Job Review:
Your books can be used to assess the performance of specific jobs and not just your business as a whole. Is your renovation crew adhering to the various resources that you set in your scope of work? By keeping a separate spreadsheet for each property, you can promptly evaluate whether or not you are staying on course.
3- Tax Preparation:
Come tax period, you will be glad that you already have a system in place for keeping track of all of your financial transactions and documentation.
4- Cash Flow Awareness:
Keeping track of live data on your transactions can help you stay on top of your finances, and ensuring that your spending does not exceed your monthly benefits. Mentioned above, organizing separate spreadsheets for each property can help you know which properties are rendering a healthy cash flow, as well as those who are eating into your earnings.
5- Credit Score Management:
Setting up an efficient bookkeeping system can ensure that you pay invoices and credit card balances on time, and in the correct amounts. By avoiding late or incorrect payments due to disorganization or oversight, you will have a better chance of protecting your credit score.