The start of a new year is more than a prompt to start your tax prep—it’s also a great time to review and adjust your accounting processes to get your books for 2025 started right. Use these five tips to create a strong foundation for your books, account for tenant updates, budget for business changes, plan for unexpected costs, and streamline your accounting processes.
Have a Clear Starting Point
Start your books for 2025 with a strong foundation for your accounting records. Reconciling your bank and credit card accounts for 2024 is a great way to ensure your January starting balances are correct.
Double-check your credit card transactions for late December and early January. You’ll see two dates associated with each transaction on your credit card statements. Remember to record your credit card expenses using the transaction date, not the posting date. This is especially important in January.
Let’s say you made a credit card purchase at Lowe’s on December 31, but it didn’t post to your credit card account until January 2. That transaction should be recorded as an expenditure for 2024.
Did you know? REI Hub’s import feature uses the transaction date, so your reports give you the most accurate picture of when you incurred costs.
If you make New Year’s resolutions (or even if you don’t!), commit to keeping your personal and business expenses separate this year. But let’s be honest: Mistakes happen, and using the wrong credit card is easy when we’re in a rush.
If you use business funds to pay for a personal transaction, follow these steps to account for the funds correctly. However, the best practice is to differentiate your personal and business expenses. Getting in the habit now will save you time and headaches for the rest of the year.
Review Reports and Leases
January is a great time to review not only the past year’s financial reports but this year’s tenant and lease updates. Check your leases to see if any rent increases should go into effect this year, then note those dates on your calendar so you can remind your tenants if needed. As you create the budget for this year, factor in those rent increases.
Review the security deposits you’re holding on to. Do you need to return deposits to tenants who moved out recently? Make those payments now to clear them off your books. Did your tenants damage the rental unit? Are you keeping some or all of the deposit? If so, remember to move the funds out of the liability account into your income account as reportable income.
Update Your Budget
Once your books for the previous year are finalized, compare your year-end financial reports with your budget. Was your budget on target, or did you have significant variances? Investigate any discrepancies and determine whether you should integrate them into this year’s budget.
For example, a spike in electricity costs over the summer may have prompted you to sign up for the utility company’s budget plan for this year. If so, you’ll need to update the budgeted amount to account for the adjusted monthly fees. Don’t forget about the possible shortfall payment when the utility company reconciles the estimated payments with the actual usage.
Maybe your rental property was vacant for longer than you expected last year. You may need to be more conservative with your expected income line for this year. Or you could allow for an increase in advertising for that unit when the current lease ends.
Budgeting takes time and effort. But by putting in the time to review and learn from last year’s budget, you’ll create a more accurate budget that helps you make sound financial decisions this year.
Plan Ahead
No matter how much time you spend on a budget or how carefully you inspect a property, unexpected expenditures will happen. Costly improvements cut into your bottom line, and even small repair bills add up. Planning now will help reduce the financial burden of these unanticipated charges.
Update Your Savings Goals
You’ve already separated your personal and business accounts, but have you set up savings accounts for your rental properties? A designated savings account gives you a place to build up a cushion for capital improvements, tax payments, or emergency repairs.
Make a habit of setting aside a percentage of the rent each month to put into the savings account. Depending on your state and local laws, you may be able to store security deposits in a savings account as well.
Not sure how much to set aside for your property’s cash reserve? Check out our guide to setting your savings goal.
Set Aside Admin Time
As you update your weekly or monthly schedule, build in time to reconcile your accounts and review reports. Compare your budget with your monthly financial reports to ensure you’re not missing any of the expected transactions.
Mail can go astray, and electronic invoices can get caught in spam filters. If you’re not signed up for automatic payments, you may have missed an invoice and not realized it. By reviewing your books each month, you can catch errors and potential problems sooner. Building review time into your schedule now helps you get into the routine early and avoid possible penalties and late fees.
Streamline Your Methods
Before you jump into your books for 2025, think about how your bookkeeping went last year. What worked well? What parts did you find tedious? Maybe setting a designated time to work on your books helped you focus. Or was sorting through envelopes of paper receipts time-consuming and irritating at the end of the year?
Don’t settle for methods that aren’t helping you. Fine-tune and streamline your bookkeeping methods now so you can benefit from the improvements all year long.
Go Digital
If your paper-based organizational method caused you headaches last year, try going digital this year. REI Hub lets you store digital copies of receipts, invoices, leases, documents, and notes.
Just take a picture with your phone or webcam, then attach the file to the transaction. Your documents will be securely saved in the cloud instead of your desk drawer, giving you easy access to records no matter where you are.
Clean Out Your Files
If you’re storing your documents electronically, cleaning them out isn’t a pressing issue, but space is a concern with paper-based storage. As you update your organizational methods, remember to clean out any old, unneeded files.
The IRS recommends keeping tax-related files for a minimum of three years after filing the associated taxes and up to seven years, depending on your tax situation. Since litigation with former tenants is always a possibility, keeping records for a minimum of seven years is advisable for most rental property owners.
When you’re ready to dispose of unnecessary documents, don’t just throw them in the trash or recycling bin. Financial documents often have sensitive information like your social security number, account numbers, or other personal information you don’t want to share accidentally. Shred your old papers or dispose of them in another secure way.
Still trying to decide what to keep or shred? REI Hub’s spring cleaning guide for document retention can help!
Update Your Books Regularly
Setting aside time to work on your books each month is great, but tracking your expenses as they occur is even better. After all, you’re busy. It’s so easy to get sidetracked and then forget about a transaction, especially if you’re waiting for the end of the month or quarter before you tackle your books.
Designate half an hour at the start or end of each workday to update your accounts. With REI Hub, you can link accounts, import transactions, set up matching rules, and use templates to save time and hassle. These more efficient bookkeeping processes give you more time to focus on your properties or other businesses.
For a deeper dive into streamlining your bookkeeping process, refer to our article on accounting workflows.
How REI Hub Can Help
A new year means you have a new opportunity to improve your bookkeeping processes and give your rental property account books a good foundation. Adopting these five habits will improve efficiency and ensure accurate, organized books for the new year. But why not pair these good habits with a comprehensive bookkeeping solution like REI Hub?
We can help you set up and maintain clear, accurate books for your investment properties.
We designed our software for rental property owners like you, so our platform covers everything you need to face the new year confidently, from account reconciliation to CPA-approved reports. And if you have questions, our customer support team is standing by!
“Great software, extremely affordable software for an individual who has a few properties to manage. Customer Service always picks up, and they are stateside. Highly recommend.” —Mike Mattice, REI Hub client
Let us help you start the new year right. Sign up for our free 14-day trial today!
