8 Financial Statements Every Property Manager Needs
Property management financial statements are vital in ensuring how well you manage your properties. They help you keep track of your finances and highlight areas of improvement, so you can adjust expenditure if necessary.
In this article, we highlight property managers' most important financial statements. We'll also cover how the right technology can help you manage your workload effectively while performing accurate and timely tasks.
- Accounts Payable
- Balance Sheet
- Income Statement
- General Ledger
- Tenant Receivables
- Rent Roll
- Service Charge Budget Reports
- Monthly Bank Statements with Reconciliation
- The Importance of Technology
1. Accounts Payable
Accounts payable describes your short-term financial obligations and helps you make sure you’re making payments to the correct vendors or suppliers. These reports also ensure you’re not carrying delinquent accounts, which are accounts that have not yet been paid despite the passing of the due date.
Payments may include:
- General goods and services.
2. Balance Sheet
Balance sheets provide an overview of the equity you hold in each property at any given time. It reports on the assets, liabilities and equity of a rental property.
- Assets include cash, land, buildings, equipment and furniture.
- Liabilities are monies you owe, such as mortgages or accounts payable.
- You can determine equity by subtracting the property’s liabilities from its assets.
3. Income Statement
The income statement – sometimes referred to as a profit and loss statement – summarises a property’s cash flow by outlining each property's income and expenses.
Income statements are typically prepared monthly, quarterly and annually. They include income information such as capital and property management fees and expenditures such as rent and insurance. An income statement is valuable for determining the efficiency of your property management and ensuring you are maximising profits.
4. General Ledger
A general ledger is the primary accounting record for your company and summarises each financial transaction found in the balance sheet and income statement. Your general ledger is the foundation of your accounting process, so it’s essential to prepare it accurately.
Transaction data is separated into accounts for assets, liabilities, equity, revenue and expenses.
5. Tenant Receivables
This ledger refers to the individual receivable amounts from each tenant and is summarised on the balance sheet and income statement.
These payments could include:
- Service charges.
- Utility payments.
- Security deposits.
- Sundry recharges.
6. Rent Roll
Rent roll predicts the revenue you can expect from a property. You can produce rent roll reports so you can analyse whether a property is meeting financial targets.
The rent roll report will include the following on each property:
- Lease dates.
- Estimated rental value in the current market.
- Total of amounts deposited.
- Recurring costs.
Essential information in the rent roll report includes gross scheduled rents, renewal rates, collections, evictions and revenue generation.
7. Service Charge Budget Reports
Service charge budget reports predict the shared costs between tenants for servicing communal areas of a property that a landlord is responsible for. Often completed annually, it outlines a plan of future expenditure, which is then divided between occupiers.
Begin by looking at a property's costs and determine if you can supply a reserve fund to deal with future expenditures or any one-off issues in the next year. Then, divide the expenses between tenants, who pay towards and benefit from communal maintenance.
8. Monthly Bank Statements with Reconciliation
These bank statements describe the bank account balances on the balance sheet, as well as the deposits and debits on the general ledger. They ensure that all figures in your bank account are reflected on the general ledger and balance sheet.
The Importance of Technology
Using the right technology can ease the burden of your financial responsibilities when managing properties. Specialised property management and accounting software such as Propman can handle all your essential property management tasks.
The comprehensive accounting functionality allows for the production of full management accounts, giving you more time to focus on the things you love about property management. The correct software can help you to reduce inefficiencies, provide valuable insights and deliver an enhanced level of service.
To help you even further, we’ve put together a handy comparison guide that looks at the pros and cons of popular accounting software. To download your free copy, click below.