Good financial practices are a critical component of success in any business, including property management. Accurate numbers enable timely and data-driven decision-making. The more soundly you run your business, the more your clients will grow to trust you, which means greater longevity and a better bottom line. Let’s take a look at five best practices to not only keep your books in the black, but also maximize profits as much as possible.
Stay on top of receivables.
The money owed to you does you no good until it’s actually in your bank account. Don’t let your collections get out of hand, or you’ll find yourself behind the eight ball struggling with your own cash flow issues. Set realistic payment terms and implement policies to encourage timely remittance. For instance, assessing a late fee for payments not received within 5 days of the due date may be enough to prevent most delays, providing you faster access to the cash you need to operate your business.
Plan for the unexpected.
Oftentimes a business that is running smoothly can easily be driven off the rails by unexpected expenses that pop up. Rather than having to scramble to come up with the cash to cover that last-minute purchase or repair, or worse – having to borrow and pay unnecessary interest – it’s a wise idea to keep a separate fund for just those situations. Examine your unexpected expenses over the last year or two and use them as a guideline to determine how much money you’ll need to set aside, just in case.
Reconcile your accounts regularly.
If your company is big enough that you have a dedicated bookkeeper or team of accountants, this probably isn’t an issue. But, if you’re a smaller operation or a one-person show, accounting can sometimes be put on the back burner. Reconciling on a regular basis, however, helps you quickly identify and correct things like duplicate or missing entries and other errors. Putting this off will make the process that much more tedious and increase the risk of costly financial mistakes.
Use technology to its fullest advantage.
Keeping track of financials can be daunting, but with the right technology, it can be an absolute breeze. Property management software will enable you to manage your accounting in one central place. From there, you can balance your books, run financial reports, perform cost analyses, track expenses and much more. You’ll also eliminate the risk of human error, which can wreak havoc on your bottom line. The technology is available – take advantage of it!
Maximize tax deductions.
Businesses are able to deduct certain expenses to offset their revenue and lower their tax liability. Make sure you stay on top of all the available deductions so you can make the most out of them for your business come tax time. If you don’t have the time or feel unqualified to handle this, hiring a tax professional may be worth the investment. If you can’t hire someone in-house, there are plenty of CPA services that can help on an ad-hoc or contract basis.
Solid financial management does more than just keep your business in the black. It will also help to keep you compliant and reduce your risk of liability. By implementing the five strategies above, you’ll be able to get your books in tip-top shape so you can focus on future growth and revenue increase.