5 Vacation Rental Accounting Tips
Five ways to ensure your accounting process keeps your office moral and your margins as high as possible!
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Managing vacation rentals is a lucrative business- however accounting for them can get complicated quickly. Depending on the location, owner, and occupancy rate of the inventory, you could wind up accounting differently for almost every property! To make sure that doesn’t happen, here are five basic tips that will ensure you have an efficient, uncomplicated accounting process.
1. Record Everything at a Transactional Level
Recording every transaction, be it a pet fee or a maintenance task, ensures you have the ability to parse out any future records as needed. That way, you always have the ability to move a particular transaction to its corresponding property or property owner without having to unravel any other charges. This is also expedited if your software contains the ability to unroll any incoming booking. The workaround for that though, is anytime a booking comes in, train your staff to unroll the booking right then and there into applicable taxes, fees, deposits, etc. It’s a more manual process and therefore more expensive than having the automated capability, but it’s far better (and less expensive!) than having a nightmare accounting experience at the end of every month.
2. Keep Individual Property Ledgers
Keeping property ledgers makes it possible to know what revenue was earned and what expenses were incurred per property. That way you know what is owed to each owner, each month, depending on the terms of your contract. Each property has its own income, expenses, owner, and owner contract.
One property may have maintenance done on the refrigerator, one may have recently been repainted, another may have needed the couch reupholstered. When you have multiple properties, it quickly becomes confusing which lightbulb or maintenance order corresponds to what property, and therefore how much you need to pay your owner. In order to keep your accounting simple, it is crucial to keep track of all expenses and income on a property level.
3. Check Tax Rates Regularly
Death and taxes. Those are the only two certainties in life. Every country, state, and city have their own set of taxes and corresponding tax schedules...and the IRS doesn't play around. For example, counties in Utah charge travelers who stay at hotels anywhere from 9-11.85% as a 'transient room tax'. Vacation rentals and other 'alternative accommodations' are charged up to 4.25% TRT in addition to that. This additional TRT also varies by county; some charge more and some charge less. Those taxes can also potentially be updated every month. If you do not collect the correct taxes & amounts per booking, it could adversely affect your margins- because you’ll be on the hook for them.
4. Standardize Owner
Every owner is going to have their own idiosyncrasies. If there's one thing that will simplify your relationship with them, it's having a standard contract and sticking to it. Do not deviate from it except in extreme circumstances. Every exception breeds additional work for both you and your staff. It may seem easy to adjust from a 60/40 to a 70/30 split, however, the process that goes into the differentiation adds up quickly. You will need to update your staff on the new contract, that contract's process (for example how transactions will behave, what costs are shared or not, and so on), while they also maintain the process for the other contracts. By limiting changes, you control how much work you and your staff have to do to be successful.
5. If You're Overwhelmed Every Month, Something Needs to Change
One of the most important indicators as to whether you have a strong accounting process in place is how you feel about it. Are you overwhelmed? Stressed? Burnt out? If so, that’s a sign something is being done incorrectly. Accounting, with the right tools, should be a painless process that is only occasionally stressful. Make sure to continually evaluate how long your month-end process takes, how organized it is, and most importantly, how you feel.