From screening tenants to drafting lease agreements, managing rental properties is a complex business. But perhaps one of the potentially daunting aspects of property management is tax preparation and filing.
Whether your firm has a whole team who manages financial documents throughout the year, or it's a one-person operation, getting your finances in order may seem overwhelming. Considering the ever-changing nature of the business, there is plenty of room for potential errors or missed savings opportunities.
Fortunately, there are several ways property managers can simplify their financial organization process and strategically manage their funds.
Lower your tax obligations
Property managers face a number of expenses that can be used to reduce their taxable income. Many business owners don’t take advantage of all the write-off options available during filing. Here are a few key examples of expenses that you may be able to claim so you can get ahead and start saving:
- Annual gas safety certificate and service
- Electrical condition report
- Internet and cellphone plans
- Insurance costs
- Repairs and maintenance costs
- Utility bills
- Legal fees for evictions
- Interest paid on a mortgage
Be sure to meet with your accountant to determine which of your expenses are eligible to be claimed. Staying aligned with your financial partners can help ensure you are saving as much as possible during filing and throughout the year.
Increased efficiency: Create a designated data storage space
Keeping up with financial organization throughout the year can be challenging. By utilizing a digital system, property managers can gather critical files and backup documentation at a moment’s notice. By investing in a digital organization software, you can automatically store and update your files year-round, making managing your financials on a monthly, or more frequent, basis easier. From important tax documents to vendor information, you have everything at your fingertips.
Digital property management platforms can help detect errors in your files that can save you money in the long run. An incorrect digit in a Social Security number or an extra digit in a ZIP code could result in fees or an unexpected audit. By utilizing custom-built digital management systems, you can ensure your data is accurate, up to date and ready to reference when the need arises.
Take advantage of Earnings Credit Rate programs
Tax season often highlights opportunities to cut costs in order to save wherever possible. Property managers might consider taking advantage of Earnings Credit Rate — or ECR — programs offered through your financial institution. These programs can lower banking expenses by allowing property managers to apply their various banking service fees from business credit cards, merchant services or business loans against Treasury Management services like Positive Pay, to take a proactive stance against check fraud. Many property management companies are drawn to ECR programs to break down stagnant balances managed by their treasurer.
ECR programs come with varied structures and can be customized to suit your company's needs. When determining the right fit, it’s important to consult your banking partner to help you analyze your accounts. Alongside your banker, be sure to:
- Access your gross and net profit margins
- Identify the accounts receiving earnings credit and consolidate to maximize benefits
- Understand how gross and net ECR are impacted by the rate environment
- Ask about whole or partial reimbursement programs
Reach out to your banker to learn more about their ECR program if they offer one, and how you can strategically incorporate it into your financial plan moving forward.
Work with a consultative banking partner
Providing a high level of service, consultative bankers give tailored guidance and enhanced services designed to maximize long-term financial and business success. From making maintenance recommendations to managing relationships with vendors, a bank that specializes in property management can offer customized financial services and financing options.
A consultative banking relationship proves particularly valuable when a creative financing solution instead of a traditional loan may be in the best interest of a business. Only with an understanding of the nuances of your business and knowledge of a wide array of financial products can a banking advisor recommend and assist with non-traditional financing products.
Learn more about our Property Management Banking group to learn more information about how a consultative banker and a relationship with Enterprise Bank & Trust can help your property management company reach its financial goals.
