The importance of keeping your rental accounts
Benjamin Franklin wrote in his autobiography some 200 years ago :
I mention it as a lesson to those young men who may be employ’d in managing affairs for others, that they should always render accounts, and make remittances, with great clearness and punctuality. The character of observing such a conduct is the most powerful of all recommendations to new employments and increase of business.
But these words ring true to this day. Why does accounting matter so much? It matters because it keeps your business in shape by asking some straight questions. How much money was spent? How much money was made? How much money was lent? What amount was returned? On any given day/week/month these questions seem common place. But periodically they add up. You will not for instance remember that you lent $56 to Joe last month and that he has only returned $35.
You can only improve what you measure. If you have no idea about how much you are spending on your business then you will have no idea on how you can cut your costs or what is a fair price that you can charge your tenant. Great but how does it matter in a rental business?
Glad you asked. My grandfather in his day used to have 5 tenants. Being a busy man he had little time to interact with them on a daily basis. But every last Saturday of the month he made it a habit to visit them and set his accounts straight. He would collect rent from all the tenants. Divide the electricity and water bill according to each persons usage measured by sub meters. Make a note of unpaid dues in case a person was unable to pay in full. All of these details were arranged neatly month after month, year after year in a small red notebook he bought for that purpose. At the end of the day when all accounts had been settled he would issue them rent slips. For 20 years he enjoyed full cooperation from his tenants and there was no instance of any dispute between them.
On the other hand I have seen lawsuits being filed due to the inability of landlords to keep an account of their dues. Whether the sum was actually owed or not is of little importance, what matters is that there was no trust between the parties due to the absence of written record of their dealings. They spent a huge amount of time and money fighting in the court over a matter which could easily be avoided just by keeping a written log of business.
As a kid I used to look at my grandfather’s ledger, pages upon pages of numbers and it used to look pretty dull to me. But now, years after, when I read it I feel great pride in his ability to manage his accounts in such a precise manner.
But I will concede that maintaining accounts can get a bit tiresome. People are busier than ever. Little time that we get from our hectic schedule we want to spend it with our family and friends. Which is why we feel that there is a need of automating your rent collection and accounting activities. If you are diligent a simple excel sheet will suffice. But sometimes you need more than just a log of your collection and expenses. People prefer to pay their rent electronically. They want electronic reminders to be sent when the due date of payment is near. So it is important that you put in place a system that allows you to
- Collect rent electronically and issue rent slip on successful collection
- Send email reminders as the due date draws near.
- Keep your accounts up to date.
Whether you do it with PayPal+excel sheet or you automate it with some other rent collection software is up to you. But please save yourself unnecessary trouble by failing to keep your account in order.
- On January 26, 2016