How often do you reconcile and record expenses?

71 Replies

Do record expenses and organize receipts as they come in, at the end of the week or month? Currently, I am doing them in excel as they come in but this proves to eat up a lot of time, sporadically throughout the day. 

Updated 7 months ago

Edit: Do you* record

Quickbooks.  Pretty much every night for 15 minutes or so...

@J Scott Thanks for your reply. I am on the fence of whether or not to pay for quickbooks as this is my first project. With your experience in mind, would you suggest sticking to excel for now and upgrading to quickbooks down the road?

Book keeper does his thing twice a week and reconciles monthly. 

I track 4/5 properties in excel as they happen. Don't really see a need for Quick books for me.

Originally posted by @Harry Williams :

@J Scott Thanks for your reply. I am on the fence of whether or not to pay for quickbooks as this is my first project. With your experience in mind, would you suggest sticking to excel for now and upgrading to quickbooks down the road?

Do you plan to use an accountant for your taxes?  If so, I would invest in Quickbooks, and have your accountant set it up for you and show you the basics of how to use it.

If not, and if you're comfortable doing your taxes based off the spreadsheets, then that should be fine.

Bookkeeper chiming in: 
I'd suggest scanning/digitizing your documentation as it comes in and then doing data entry into your accounting software at minimum once a week, more often as needed.  

@Nina Casey I do this more often than once a week, with my software being excel. 

@J Scott I do have a CPA who will do my taxes, and all they need are a list of my transaction by type. What does quickbooks cost per year anyway?

Originally posted by :

I do this more often than once a week, with my software being excel. 

 Yes, I wasn't very clear - "more often as needed" was intended to mean "on a more frequent basis if needed"

@Harry Williams we usually have 2-4 flips going at once and I do my reconcile once/week.

Good luck!

sjw

Originally posted by :
@J Scott I do have a CPA who will do my taxes, and all they need are a list of my transaction by type. What does quickbooks cost per year anyway?

In that case, it sounds like Excel is fine...

I like QB, simply because I can run reports to see how my business is doing.  I can see my P&L, balance sheet, costs per project, basis, etc., all with the touch of a button.

I think QB is about $200 for the Pro version...and you can use it for a couple years before they make you upgrade...

Originally posted by @Harry Williams :

@Nina Casey I do this more often than once a week, with my software being excel. 

@J Scott I do have a CPA who will do my taxes, and all they need are a list of my transaction by type. What does quickbooks cost per year anyway?

Bank Reconciliation should be done each month. I do this for my clients. Either each quarter or year-end I would compile the bank rec report along with other financial reports for their CPA.

Another bookkeeper chiming in here...

If you don't have more than one LLC, I'd recommend Quickbooks self-employed. $5/mo and connected to your bank account, it guarantees that you're not missing anything and cuts down on data entry. Also tracks your mileage automatically.

Quickbooks provides checks and balances, where Excel does not (did you forget to enter anything? Or enter it twice?). Excel also provides no profit and loss and is entirely too manual for my taste. 

More than one LLC, and I'd recommend regular Quickbooks. I prefer the online version, though as a monthly subscription it's more expensive than the desktop version @ $30/mo, however I can keep up with my REI books while sitting in the waiting room at the doctors office (or anywhere else). You can snap pictures of your Home Depot receipt right into the software and then pitch the paper.

A bookkeeper can also set up your accounts at less than what a CPA charges. They are generally more familiar with the software than most CPAs (at least the dozen or so that I work with) and less expensive. 

Sorry, to answer your question. I’d recommend weekly updates 

I track my expenses immediately in the mobile app adding also photos of the receipts. Then at the end on month add those directly charged/deposited on card/bank account. 

@Cathie Kovacs thanks for your reply. Currently, it is one LLC with one property underneath it (more to come hopefully). Would upgrading from the self-employed version be easy once I had more projects going? Being young and "tech savvy" I feel as though I could set it up myself without the assistance of a bookkeeper, but maybe not?

If you have a small portfolio, I would not use anything.  Keep a separate account and all money received and expenses that go out.  Save the statements each month.  You will have a list of all income and expenses.  There should not be a lot of transactions in the account, 30 a year?  12 rent / 12 mortgage / 6 misc.  I am currently run 6 properties this way and I am doing a flip.  There is a point that it becomes necessary to use a system like QB, but there is a lot of time and expense associated with using it.   

 If I were you I would invest the time in actually doing your own taxes this year.  It will be far more profitable in the long term.  You could have a CPA check your work before you file.  Many investors I work with do not understand how much taxes takes from their bottom line.

@Harry Williams If you want to try to move from excel to something a little more automated you could try mint.com.  I currently have 6 rentals and am on my 3rd flip and I use mint.com to track expenses for the rentals and make sure the flips stay on budget.  Mint.com mixed with google drive for invoices/receipts makes tax time pretty simple.  Also it is free so that's a plus.   Also to directly answer you question, I probably log into mint once a week during a flip to make sure every transaction is placed in the correct budget/category.  If I don't have a flip going on then I might log in once a month when rent is paid. 

I digitize receipts and book expenses immediately from mobile phone.

bank accounts have alerts for any withdrawal/receipt.

I check statements every month to deal with anything requiring attention, and update consolidated accounts only every six month.

The whole point of reconciliation is to RECONCILE.

When you use QB to import all the transaction from your bank account, of course, they would be in agreement.

If you are small and don't plan on expanding, then you can do everything yourself.

Setting up anything takes time and money. You have to set up properties, units, tenants, bank accounts, chart of accounts, and some other things.

Again and again, not sure why investors decide to go focus on "accounting" when their expertise is in "investing".

Originally posted by @Harry Williams :

@Cathie Kovacs thanks for your reply. Currently, it is one LLC with one property underneath it (more to come hopefully). Would upgrading from the self-employed version be easy once I had more projects going? Being young and "tech savvy" I feel as though I could set it up myself without the assistance of a bookkeeper, but maybe not?

Being tech savvy has very little to do with using Quickbooks correctly. I know Quickbooks experts who are otherwise techno troglodytes. 

I come from a tech background (CS/BA in college with an accounting focus; long time nerd), and I still royally screwed up the QB setup when I did it myself. I ended up paying tens of thousands to a proper CPA a few years later to go back and fix years of bad entry. 

Getting QB set up properly and having someone at least show you how to run it isn't ultimately that big of an expense, but doing it wrong could be very expensive.

I try to enter all my receipts at the end of each week. In reality, its more like every other week. It's easier and faster for me to do them as a batch, rather than a one at a time. If I needed closer tracking, I'd do it daily at the end of each day.

I reconcile all bank and credit card accounts monthly. When my bank balances were very low, I did it far more often, sometimes daily.

Overall, I use QuickBooks Pro for all my investments and businesses. As a real estate investor, you need a version that has the feature "Classes" as soon as you have two properties. Each "Class" is a property. (Currently QB online Plus version, or Desktop Pro version) For the desktop version, you'll get about 5 years before support stops. I know one person still using QB 2003.

If I was starting out and flat broke, I'd make do with Excel or similar until I had enough cash for QB. 

Watch the specials and club stores, and you'll see good deals a few times a year. $200 or less for Pro.

Getting QB early will help you in the long run. Once you get to a few properties, it becomes indispensable.

At tax time, I pass the QB file to the CPA along with all my scanned HUDs, and I'm done. Theoretically, all the HUD info is in the QB file, but it's a good double check. We don't pass over copies of receipts, they're all entered into QB.

Updated 7 months ago

It looks like QB desktop support ends after 3 years, not 5. I found this on their website. --Support, updates, and addon services, including online banking for QuickBooks Desktop 2014 software, will be discontinued after May 31, 2017." The product will continue to work otherwise. I'm guessing you could still download transactions and import them.

It is always a good idea to implement good habits right from the start.  Book work, believe it or not, will make or break you as a business.  You can be a Millionaire, but if you don't know where you stand financially, you won't be a Millionaire very long.

Now, it may seem boring to have to enter  one little item per day, if that's all you have, but you do it anyway.  If you don't do it,  and let things pile up, with the excuse you are just too busy, then you will never be able to keep up,  and pretty soon,  you are overwhelmed.    You will be unorganized and your filing system lacking,  and your data will be out of date and you are going to stumble and stutter and make yourself look foolish, if asked for these figures from your CPA, a tenant, or a  hard money lender, etc.  Plus, you won't know whether to buy or sell, or have enough money available for those emergencies or anything else, just because we were too busy to take care of one little item into QuickBooks or on a ledger.  Therefore, little things do matter very much!

So. this is a hot topic for me.  It never ceases to amaze me how so many people in whatever field of business they may be in, do not take into consideration before they jump into a business, to implement Office Procedures which includes handling their finances.  And that a software program is crucial to helping you know where you stand financially any time you need to see your data.  And sometimes you need to know something right now. This minute!!  

The reason?  They are too excited to get a business off the ground, and so they jump right into it, with no plan in sight.  No research on the Industry they pursue,  until they get their selves in a mess and then realize they should of focused on a filing system, financially software programs, websites, etc.  

I've also noticed that new investors have a habit of being cheap.  They pay a lot of money for the houses they purchase and therefore they say they are broke and so they pinch pennies.  They don't want to pay for the necessities they need to keep themselves in the black.  

Instead of financing houses and the extra things they need, like office equipment and other things pertinent to being successful, they don't.  They borrow just enough money for the house or they finance just the house, and depend on the rents they receive to pay for any extras, which is a no no.  Don't depend on your rents as income to purchase startup equipment.  Finance everything you need to begin this business (unless you have cash) and use the rents as income, which of course will make the payments on your startup money loan, which is what you do.  But don't use rents as your start-up funding.  Good grief, you're already putting yourself in the hole.  

Well, anyway, that's my rant on this topic.  I get that way at times.  LOL.  Take it with a grain of a salt.  My lecture is over.  :)

Nancy Neville

@Lesley Resnick I’m sorry. I strongly disagree. 

Do your own taxes? Please, don’t do it.  Once you move beyond W2 income only, I wouldn’t recommend this to anyone. 

This isn’t the place to save money, my fellow investors.   Do you cut your own hair? Odds are, you don’t. There’s a lot more at stake with your income taxes then a haircut so why take chances there?

Beyond that, I would recommend a good CPA to provide tax advice regarding S corps, subcontractors, payroll taxes etc. Hire a CPA for that and have them do your taxes too. Please. 

Originally posted by @Harry Williams :

@Cathie Kovacs thanks for your reply. Currently, it is one LLC with one property underneath it (more to come hopefully). Would upgrading from the self-employed version be easy once I had more projects going? Being young and "tech savvy" I feel as though I could set it up myself without the assistance of a bookkeeper, but maybe not?

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