As the year draws to a close, real estate investors face unique challenges and opportunities when it comes to managing their finances. Proper bookkeeping during this time of year as well as all throughout the year ensures you're well-prepared for tax season, helps you maximize deductions, and sets you up for a strong start in the new year.

To help you stay on top of your year end close, here are 5 steps to walkthrough:

1. Ensure your Income is Complete

Go through and make sure you have included all income streams. Ensure every dollar earned is accounted for from:

• Rental properties, flips, other real estate ventures

• Other income from products/services provided by your business.

Pro Tip: If you’ve purchased or sold properties this year, double-check that associated costs (closing costs, agent fees, etc.) are also properly allocated..

2. Ensure Expenses are Accurate

Revisit your expenses to confirm they’re accurately categorized and recorded.

Make sure you’re capturing all expenses incurred in order to run your business. Some examples may be:

• Property management fees

• Maintenance

• Utilities

• Mortgage and loan interest

• Property taxes

• Insurance premiums

• Professional fees (legal, accounting, etc.)

• Travel expenses related to property visits or acquisitions

Pro Tip: Consider pre-paying property taxes or mortgage interest before December 31 to claim deductions in the current tax year.

3. Reconcile all External Accounts

Ensure all bank accounts, loan accounts and property management accounts tie to your bookkeeping system.

• Match bank account balances to bank statements

• Match property management accounts (amounts held by your property manager such as reserve accounts, security deposits etc.) to property management statements

• Match mortgage and loan balances to lender statements

Pro Tip: Automate this process using accounting software like QuickBooks, which integrates with most banks.

4. Update Your Records for 2024

Archive and back up all financial records for the current year. Create a system for saving the following back up documentation as evidence of it being business related:

• Invoices & Income Documentation

• Expense Receipts

• Bank, Mortgage, Loan and Property Management Statements

Pro Tip: Consider adopting a cloud-based or receipt bank system to stay organized and access records anywhere and anytime

5. Analyze Your Results

Review the following financial statements to identify drivers of profitability, areas of risk and trends throughout the year. This is crucial information that can be used to make decisions, pivot and govern business activity the following year.

• Profit & Loss Statement; to identify drivers of profitability and trends month over month

• Balance Sheet; to identify areas of risk such as low cash levels and high Accounts Receivable/Payable balances

• Cash Flow Statement; to identify the flow of cash over time and the ability for the business to stay in operation in the short term

Pro Tip: If you notice profitability or cash flow issues and areas of risk, consider consulting a fractional CFO for strategic guidance.

There we have it, 5 steps to get your books closed off for the year, ready for tax time and to tackle a brand new year with new endeavors! And here's a bonus!

Bonus: Work with a Professional

Navigating the complexities of real estate bookkeeping and strategy can be daunting. If you’re feeling overwhelmed, partnering with a professional bookkeeper who specializes in real estate can save you time and ensure accuracy.

Pro Tip: Fractional CFO services can provide tailored insights without the cost of a full-time CFO or accountant.