Ari Chazanas is the Founder and CEO of Lotus West Properties, a property management firm based in West Los Angeles.
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Many of my fellow property managers will ask me which accounting software is best for their business. The immediate assumption is a basic accounting program like QuickBooks because it's versatile, highly functional and easy to use. There's a reason it's one of the biggest sellers out there. By comparison, a dedicated property management software suite can offer a multitude of features and conveniences that can make a property manager's job a whole lot easier and more efficient.
This begs the question, is it worth using expensive property management software, or can you just use Quickbooks and tailor reports as needed? Both options provide you with the tools necessary for keeping track of your expenses, rent payments, maintenance costs and so on. However, basic accounting programs may not provide enough advantages to larger firms tasked with managing multiple properties at the same time, while more specific software such as AppFolio and Yardi may pose too great an expense for mom-and-pop landlords.
Working With A General Accounting Software
The industry leader in accounting software, QuickBooks offers the essentials for keeping accurate ledgers. You can monitor all of the business accounts of your investment properties and maintain thorough records that will come in handy around tax time. But you will have to adapt to the software's user interface when using it to track expenses and generate reports outlining important financial information, such as a property's funds in reserve or profit statements for a particular building.
What I've found lacking in basic accounting programs is the absence of more comprehensive features for property management firms. I think that property managers who are overseeing one or two properties at the most can rely on them as a useful accounting tool for balance sheets and expense reports.
Property Management Software Options
In my opinion, accounting systems should never be a one-size-fits-all service. Using QuickBooks for managing properties can sometimes feel that way for managers working with large-sized housing properties or landlords who own a variety of different types of investment properties at once including residential, commercial and community buildings.
For those owners, a property management software solution like AppFolio or Yardi could be extremely valuable. These programs have been built specifically to cater to the exclusive needs of property managers with specialized features that general accounting programs don't offer. But be sure to look for a program that is well-reviewed.
Advantages Of A Property Management Accounting Software
A dedicated property management software package allows for flexibility and simplicity in managing your properties. They often offer tiered product options. You can select one of two service packages depending upon the size of your investment property portfolio. Each package comes with accounting features as part of a full suite of programs and applications.
These are products designed especially for landlords who want to take control of their business accounting platform without the hassle of jerry-rigging it into a general accounting interface. AppFolio and Yardi, for example, give you the financial management tools to allow you to build and monitor budgets, compile detailed financial reports, share data with all stakeholders in your properties, sync multiple bank accounts and create side-by-side comparisons of income and payment records. The AppFolio software even scans invoices digitally from your smartphone to automatically input them into your ledgers.
These products typically also come equipped with additional features. Online rent collection portals can give your tenants the ability to make rent payments with debit cards, credit cards and bank transfers. If a tenant incurs late payment penalties, those are automatically added to their rent due. Online payment processing can be extremely helpful to managers who are operating a large portfolio.
In the event you have a non-paying tenant whom you need to send into collections, some programs can take some of the hassles out of that process. For instance, AppFolio is affiliated with a collections agency that will do the work for you because all of the pertinent past-due information is already logged into the ledger. This takes a lot of the busy work out of chasing after monies owed by past tenants who have an outstanding unpaid balance with your property. The software can even report delinquent tenants to credit bureaus.
Is Property Management Software Worth It?
These types of programs offer a full range of services and capabilities. But keep in mind that they do come at a cost. Depending on the package you choose, you might be looking at a minimum monthly cost of anywhere from $100 to $1,500 per month. It's an expense that might not make a lot of sense for property owners who are seamlessly managing a handful of properties already. But for those managers who welcome a full-service software product that assists in running day-to-day property management, it could be a necessary expense.
Before you commit to any of these types of software, I highly suggest trying them out first. Get a feel for the user experience on a variety of brands to see how they meet the needs of the properties you manage. The features and conveniences they provide may be of great benefit to you or they might be useless in the long run. But you won't know until you've tried them out. So, treat this like any other investment decision, and do your due diligence first to make a fully informed choice going forward.
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