How to use QuickBooks Online Advanced for a real estate company
You may be in the mindset that QuickBooks® is not a program for people who own real estate, or maybe you think the only version of QuickBooks that works for real estate is the desktop version. What if I told you there is an excellent online program for your clients who own multiple properties, or own properties and a management firm? My recommendation is QuickBooks Online Advanced.
My top 3 QuickBooks Online Advanced Features for real estate clients
Value-added feature #1: Unlimited classes. Class tracking gives you a customizable way to track income and expenses by location or property.
When you take on a real estate client that owns multiple buildings, the need for tracking income and expenses per property is paramount. In QuickBooks Online Advanced, this is done by using classes. Each property is set up as a class. You then track each individual invoice and expense, and assign a class to each transaction. This method will allow you to produce a profit and loss statement per property, which is key to knowing if the building is profitable—something that is also required at tax time.
For a property management firm, you can set up its customers’ property classifications using the same method above. That way, you can not only track income and expenses for their clients’ individual investments, but also be able to calculate the management fee collected from the customer. The property management firm typically receives all the income on behalf of the property owner, pays the expenses and then disburses net income minus the property management fee. This fee is typically a percentage of the income agreed upon when the landlord signs up with the management firm to manage the property.
Value-added feature #2: Multiple invoices – time-saving feature for homeowners associations. This new feature streamlines the creation, editing and sending of large amounts of multiple invoices to just a few clicks.
Condo or homeowner associations are the perfect type of business to benefit from QuickBooks Online Advanced’s accelerated invoicing feature for creating multiple invoices. I work with a condo association that includes more than 400 homeowners. Before moving them to QuickBooks Online Advanced, I had 400+ invoices to set up as scheduled, recurring billing. Now, these invoices are automatically created each quarter.
Here is a before-and-after example: The condo association, during its annual meeting, approves an increase to the quarterly fees. Wonderful … for them. Before using Advanced, a development like this was not so wonderful for me. That increase meant opening all 400 recurring individual invoices, changing the amount, and resaving them—a painful process. I should know … it was the way I had to do things for years.
After upgrading my client to QuickBooks Online Advanced, we now have a new and improved workflow. It goes like this:
- Review the customer list report to be sure that we have included all active homeowners.
- Click the Quick Create button or plus sign.
- Select multiple invoices.
- Generate an invoice for one homeowner.
- Click the ellipsis on the left side of the table on the next line entry.
- Select “Duplicate invoice for multiple clients.”
- Click save and the invoices are created.
It feels like magic!
Another sweet perk is using this same feature to create late fee invoices. This is an unfortunate task when you are a landlord or working with a condo association. We use the exact same workflow as I laid out above. The only difference is that we generate an accounts receivable report to get a listing of the tenants or homeowners who have not paid their rent or quarterly dues. By using this method, the process is very quick and easy! Fewer clicks = more time = less data entry!
Value-added feature #3: Fathom reporting. Fathom is an easy-to-use management reporting and financial analysis tool, which helps you to assess business performance, monitor trends, and identify opportunities to improve outcomes. Each active QuickBooks Online Advanced subscription includes one Fathom license, a value worth $39 each month.
Pretty cool dashboard: Did you know you can brand your dashboard with your logo? You can also use presentation mode, which is a full-screen view of the analysis tools. Presentation mode is excellent for team meetings when you go over the data with your employees, and also great for advisors when presenting to clients.
Goal seeking: The goal-seeking function is a fun tool, once you have the client engaged in growing their business. You can look at potential scenarios such as “Can I raise my revenue to X by increasing growth here or lowering expenses there?” Then, you play with key performance indicators, or KPIs, to specify a goal. Just click go. Use the sliders to see if you change “this,” what happens to “that?” It is a brilliant visual for the real estate client and accountant. My homeowners association has a pretty strict budgeting process. Using the goal-seeking tool is a big value-add when they are doing their budgeting. It provides a visual so they can see what happens if they increase homeowner fees or decrease any particular expenses.
Alert monitoring: Once you set your benchmarks and KPIs, you can now set up alerts. It is a pretty simple system:
- The red dot indicates that an alert has been triggered.
- The gray dot represents that an alert is measured (you have set an alert for that metric on that company), but is not currently triggered.
- An alert is triggered when a result of a KPI exceeds the set alert threshold.
- Note: each alert can be turned on or off.
A few KPIs for landlords that I would recommend are as follows:
- Tenant turnover rate
- Vacancy factor
- Average days to lease
- Maintenance and repair costs
- Costs to turnover a unit/apartment
- Debt that is outstanding
As you can see, some of these KPIs are not financial, but are relevant to the real estate industry. Once you have selected your KPIs, the number of alerts that have been triggered across the analysis are displayed in the top right of the screen. In Fathom, if you hover over any alert, it will activate a “tool-tip,” which will give you the threshold and any benchmark that you have reached or not quite reached.
Consolidated reports: With Fathom, I can group my client’s company file into one consolidated report for the property owner. I can combine budgets, targets, and non-financials, and I can exclude any inter-company loans, which are very typical with landlords that own multiple properties. You can have up to 200 companies on one report! The reports are slick, colorful, and create an opportunity for meaningful conversation with my clients. They are more excited and invested in their business when they can visualize it with graphs and charts from Fathom reporting. It has been my experience that my clients are more interested in the entire report, instead of just reading the bottom line of the profit and loss report.
Templated reports: Imagine being able to set up reports using all of the various metrics in Fathom and being able to use them with multiple clients? That is a feature within the program. Think of the time saved when you create the perfect report for a real estate client you service and the ability to use it over and over on different clients in the same industry. Using templates and creating the best industry-specific workflow is precisely the reason behind working to set your firm apart by niching into an industry like real estate.
The real estate industry is experiencing growth. With interest rates still relatively low, many real estate investors find buying and managing property to be a wise choice. I love this graphic because, in Florida where I live, this is the real world! The rental market is so active that rents are rising:
Source: Buildium article: Property Management Trends
2018 rental market trends: The industry is getting personal
As an accountant using QuickBooks Online Advanced for real estate clients, you will set your firm far above your competition for this industry. The ability to help your client grow and add to their portfolio is rewarding!
Most landlords have little time to work on their books and even less time to analyze them and find ways to increase revenue and decrease expenses. As their accountant, you will have the tools necessary to work hand in hand and provide the dialogue, along with expert guidance, to help them become more prosperous.