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Guidelines For Documenting Expenses
There are 2 main reasons why you would want to keep track of possibly every transaction that occurs during the course of business operations.
Firstly, it is so that you know exactly where your money is going towards specific expenses. This allows you to tweak, if necessary, expenditure so as to improve your bottom line.
Secondly, it will make accounting tasks much more easier when the time comes to file for taxes.
The problem is that documenting expenses is never an easy task for any type of business.
In fact, documentation activities for rental property businesses are often much more extensive than the typical type of business.
Extra paperwork can especially come in the form of split expenses where expenses are paid for both business and personal resources.
Whatever the case, here are some guidelines to keep your transaction records as clean as possible.
1) Leave a trail
Intentionally leaving a trail of your expenses allows you to avoid “forgetting” about certain payments.
As things get frantic sometimes during the course of business, even the most meticulous book keeper can miss out on expense items through forgetfulness or pure carelessness.
This is why a business credit card or a business checking account used solely for business operational expenses can serve as a critical backup plan when tabulating and scrutinizing expenses at the end of any accounting period.
Should you find the bank balance, petty cash box and expenses failing to tally up, referring to the bank account statement should reveal a clear picture of:
- When a particular payment was made
- How much was paid
- And if applicable, the merchant
But what if your staff and you cannot recall who the payment was made to?
This problem can be prevented by making full use of the checking stubs that come with every check book.
Be mindful that leaving a trail will not be necessary for accounting. But it sure as hell makes any investigation into any expense easier.
2) Write down payments when no receipt is issued
Expenses with no proof of payment can happen.
And it happens very often with hiring freelancers like the electrician called in to replace a florescent tube, or a nephew who spent the day mowing the lawn.
It can also happen when making small purchases, especially from provision stores that issue no receipt.
Sometimes, it’s simply a matter of receipts being thrown away or getting lost.
In such instances, write down a record of the payment including details like:
- Item paid for
- Amount spent
Keep the paperwork into your folder.
While this might not be an official receipt, it serves as a replacement and helps you keep track of the cash out flow.
3) Use credit or debit cards
There are various advantages of using credit cards for business expenses.
Other than tracking all the payments in the monthly statement, it can also offer perks like cash backs, rebates, and reward points.
What’s more, if ever there are merchants who conduct shady business, you can always call up the bank to request for chargebacks.
4) Client accounts
If you happen to make considerable monthly purchases with a store or vendor, consider setting up an account with them.
Creating these key accounts will allow you to avoid paying them each time you need supplies.
You basically order and take what you need, and settle the accumulated bill at the end of the month.
This practice also helps landlords build relationships with important service providers and possibly obtain special discounts as well.
Once a vendor gets more comfortable with doing business with you, you can also request for better credit or payment terms.
Similar to weight loss, documenting transaction records pretty much goes down to consistency.
Every record keeping system is conceptualized with effectiveness and efficiency in mind.
Yet a lot of businesses, in fact too many of them, still fail to address the challenges of documenting real estate business operations properly.
The problem here is consistency.
Make it a habit, or even a religion, to consistently practice and implement the record keeping systems you have set in place.
Spare no effort in following procedures and protocols while ensuring your employees do the same.
No matter how tedious it might seem, it will all be worth it at the end of the day.