Today I am going to talk about credit card account and paying bills. I have mentioned a few times about assigning a credit card for business transactions only. Real Estate investors have an extra step to take because it will all depend on how many properties they have.
I have found cases where the investor will have more than 3 credit cards and will use all of them to purchase supplies to all three or more properties instead of assigning one card for each property. When it comes time to reconcile everything, they get frustrated and many decide to move on without reconciling the accounts.
Mark had 4 properties and 6 credit cards. He purchased supplies for all properties using all 6 credit cards and it was a mess. He had a hard time reconciling the accounts.
Since he had 6 credit cards already, I suggested he assigned one credit card to each property and two for personal matters. Or one credit card for all properties as long as he followed the steps below:
- Keep track of each expense. It requires some extra work but can be done successfully.
- Write the name of the property on the receipt, for instance property “3 Avenue Rd.”
- When you reconcile the credit card statement to the receipt, write (on the credit card statement) “A” for expenses from Avenue Road property and “B” for expenses from Bloor Street property and so on.
- Transfer funds from property “Avenue Rd.” to pay for the corresponding expense charged to the credit card.
- If you use a spreadsheet or software, it will be easier to do data entry without frustration.
By following these steps, you will track your expenses, know exactly how much money to transfer from each property bank account and be able to reconcile the accounts at the end of the month.
The easier you make for your Accountant, the fewer questions he will have and less money spent on extra hours trying to figure things out.
“Reduce risks, pay on time, be efficient and save money and time. “ Renata Magalhaes