Posted about 15 years ago

Bookkeeping Strategies for REI - Pt 2

Last time I introduced you to Accountant-In-A-Box (AIAB) which is a specialized tutorial program for real estate investment bookkeeping created by Dube & Associates.

Today, I want to help organize your flawless bookkeeping ‘system’. Don’t worry, this is really easy!

The most important part to any business is the financial stability and even if you don’t want to do the bookkeeping data entry, you should still understand HOW to retrieve it once it’s filed away…both physically and electronically.

Let's Get Started

Organizing your paper files for bookkeeping entry and retrieval is super easy if you do it from the beginning. If you don’t, it becomes overwhelming and many times ignored until its too late. Many just hand this off to someone else or worse, ask their accountant to sort it all out and wonder why they have huge bills to pay after receiving their empty shoe boxes.

So why not set up an easy filing system now and save yourself time, stress and money?

What You Need

To properly set up your bookkeeping system, you will need:

A Filing cabinet (even a bankers box for now will do)
File folders (get a variety of colours minimum 4 but try for 6) you’ll see why in later posts
Banker’s boxes or plastic storage bins for long term paperwork
Receipt book for cash payments from tenants
Stamps – received and paid (they have combo stamps or you can just write “received” and “paid” with a red pen)
And most important; a software program like QuickBooks Pro 2011, Canadian edition.

I left the software to last because sometimes it freaks people out when they have to learn a whole new program having to do with accounting but believe me, when you see how easy this actually is, you will wonder why you waited so long.

The Folder System

To keep your bookkeeping paperwork flowing properly, you will use a few folders for each property all color coded for a specific task. AIAB suggests these:

Temporary folder (Green)
Tenant folder (Purple)
Property Permanent folder (Blue)
Property Contents folder (Orange)
Vender/Suppliers folder (Beige)
Corporation Long-Term folder (Red)

If you recall my post on organizing your properties, I used the ‘folder system’ as suggested by REIN and upgraded that to use binders. It’s up to you how you want to color code your properties and files and with AIAB, there are a few other folders associated with the property. There is nothing wrong with switching up the colors already in your system and applying them to these categories.

The Flow System in Action

With using these file folders you will use a few to organize accounts payable transactions through your business.

1. Collect invoice/bill/receipt

2. Store in GREEN Temporary folder

3. Review outstanding bills and make payments weekly

4. Enter info from Green folder into QuickBooks Pro 2011, Canadian edition (weekly or monthly is best)

5. Move paperwork to BEIGE folder after entry

6. Supply accountant/investor with required reports for government filing (quarterly or annually)

This is just the basic flow of accounting but as you can see, it is VERY simple to understand and implement. AIAB dives into more detail on why and how to use this same system.

I’ll have more strategies next post so stick with me through this special series.