question about property management and posting in expenses?

Discussion in 'Quickbooks' started by Craig Bartels, Sep 14, 2006.

  1. All,

    I am struggling with something, that I am sure is very simple, here is
    the scenerio:

    I have an individual that I manage properties for. We collect rent,
    then reimburse him for his rent minus our management fee.

    I receive money as income with a class structured under his name with
    a sub class for each property address.

    I then send him his rent money minus the management fee. How can I
    show this expense in a class so I can track exactly what his expenses
    are? What I had been doing was just putting in what we send him back
    minus management fee as one entry....so income/expense shows up right
    on our end, but I have no way of tracking the $100 in a class? Am I
    making sense?

    Thanks!

    Craig Bartels
     
    Craig Bartels, Sep 14, 2006
    #1
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  2. Craig Bartels

    Allan Martin Guest

    Your assumption is incorrect . This is not a normal run of the mill
    situation. Are you recording these transactions in your own company books or
    a dummy set up books just for this purpose?
     
    Allan Martin, Sep 14, 2006
    #2
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  3. Craig Bartels

    Scott Guest

    Sounds like you're trying to keep 2 sets of records in one QB data file:
    yours and his. From your standpoint, the rent collected is NOT income, it's
    a liability (you owe it to the owner) - we use Collected Rents Payable with
    sub accounts for each owner & property. When payment to the property owner
    is made, the check is split with the full amount of the rent coming out of
    the CRP account, and a negative amount (indicating a credit) representing
    the fee posted to Management Fee Income.

    On the property owners books, they would only record the receipt of the
    check in a deposit by posting the full rent amount to Rental Income and a
    negative amount (indicating a debit) representing the fee posted to
    Management Fee Expense.

    Not sure if you can combine these two into one data file or not, but I
    suspect it would get kinda messy.

    Scott out.
     
    Scott, Sep 14, 2006
    #3
  4. Craig Bartels

    scfundogs Guest

    I do books for a property management company and it took alot of back &
    forth, thinking & rethinking to make it work in QB because QB just isn't
    designed for it.

    Our procedure requires the use of a separate Excel spreadsheet. Properties
    are setup as customers with tenants as jobs. Property owners are setup as
    vendors.

    Rents collected post to income and all property costs, including payments to
    owners, posted as COGS.

    A check is written once per month to the owner for the amount due, taken
    from the Excel spreadsheet detailing rent paid less property expenses less
    management fee.

    Its not perfect, its not the only way to do it, it can be argued that the
    monies collected aren't income but liabilities but it boils down to the
    accountant's preferences and the way the business operates. In my example
    the COGS are always going to be almost as much as the income so the
    difference is the management fee.
     
    scfundogs, Sep 14, 2006
    #4
  5. Craig Bartels

    Peter Saxton Guest

    Is the $100 the management fee?

    You should use classes only for each property. Any transaction posted
    to a client account should be given a class. You need a current
    liability account (not accounts receivable) for the client. The charge
    to the client will show up in the client account. This would mean you
    should prepare invoices outside of QuickBooks and post the invoices as
    Dr Current Liability - Client and Cr Management Fees Revenue.

    You can run a report for each client account and sort them by class.
     
    Peter Saxton, Sep 15, 2006
    #5

  6. No, I am recording these on our books, not a dummy book.
     
    Craig Bartels, Sep 18, 2006
    #6


  7. Scott,

    I have read and re-read what you write, I think what you bring up
    makes sense. I willl play with this and post my results later.

    Craig
     
    Craig Bartels, Sep 18, 2006
    #7


  8. I think this is all starting to make sense. Let me play with this and
    will get back with all on my results.

    Thank you very much!

    Yes, the $100 fee is the management fee.
     
    Craig Bartels, Sep 18, 2006
    #8

  9. Scott,

    Okay, this is making sense.

    A few questions:

    You mention you make a payment to property owner as a split.

    Do you just put these through as general journal entries?

    For example, I have a short term liability account for the property.
    I receive the $1,000 rent, I post this as a $1,000 liability to this
    account and post cash to checking.

    I then sent owner the rent he is due minus my management fee.

    I post 1000 as credit to checking, then debit to short term liability
    account for property $900 and post $100 debit to my management fee
    income?

    Is this correct?

    Thanks!

    Craig
     
    Craig Bartels, Sep 18, 2006
    #9
  10. Craig Bartels

    Scott Guest

    OK so far - you can do this through the Make Deposit or Receive Payment if
    you're invoicing the tenants.
    Craig,
    No need to do this as a journal entry - this can be entered through Write
    Check or directly on the check register via the Splits button. Enter the
    check amount as the rent less management fee. In the lower part of the check
    screen or on the Splits screen enter the amount posted to the short term
    liability as $1000 (this will zero out the liability for this cycle) - this
    should result in a -100 on the next line which should be posted to
    Management Fee Income. This results in correct reporting for YOUR company
    (the management company) but does NOT reflect activity correctly for the
    property owner.

    We use a separate QB file to track the property owners income & expenses,
    keeping owners & properties separated by using classes & subclasses. The
    check cut from the management company is entered as a deposit (or received
    payment if invoicing is used) with a positive $1000 posted to Rental Income
    and a negative $100 posted to Management Fee Expense. Also posted as
    negatives are any other expenses deducted from the rent check (repairs etc)
    paid by the management company. The deposit should then equal the check
    amount and all income & expenses are recorded correctly, so a report can be
    generated any time. I'm assuming you don't actually have access to the
    customer's checking account, so a "dummy" cash account can be used titled
    something like Cash To Property Owners, which can be used for all clients
    since you're not reconciling it.

    I know there's duplicate data entry this way, but we could see no easy way
    to keep the books separated using one QB file, the problem being what's
    income to you is an expense to the owner (management fees), what's income to
    the owner (rent) is a liability to you, etc.

    Scott out.
     
    Scott, Sep 18, 2006
    #10

  11. Scott,

    Thanks again, I think this makes perfect sense. I'll let you know how
    it goes.

    Craig
     
    Craig Bartels, Sep 19, 2006
    #11
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