The bookkeeping side of private lending: what I've learned holding notes
I recently had to reconstruct the payment history on a seller-financed note from 2008 — eighteen years of monthly payments, late fees, and interest, most of it living in a spreadsheet. Doing that will teach you a lot about what you should have been tracking all along.
A few things I'd tell my earlier self:
Get the amortization schedule right at the start. Every downstream number depends on the principal/interest split, and it shifts every month. If you're tracking by hand, verify your formula against an independent calculation before you rely on it for years.
Record payments the day they arrive, not later from memory. Partial payments especially — note the shortfall or it quietly disappears.
Decide your late fee policy up front and apply it identically every time. Inconsistency causes more resentment than the fee itself.
Track interest received on a cash basis, grouped by when payments actually landed rather than when they were due. That's the number your CPA needs, and rebuilding it in April is miserable.
Give your borrower visibility into the same record you keep. Most disputes I've seen came from two people holding different versions of the truth, not from bad faith.
Anyone else have a hard-won lesson on the record-keeping side?