I’ve already learned more on your web site than I’ve learned in two years with my current accountant.
I’ve used Excel. I bought a QB Pro program last year but never figured it out; I’m my own bookkeeper. December is my month to organize and understand for taxes. I have through June on an Excel sheet, but I’m willing to put all the numbers into QB if I can figure it out. Now I record my numbers but am unable to see any kind of a big picture.
Q: What do I need to get started? I also need help with organizing my rental property incomes, deposits, late fees, etc.
Thank you for the compliment.
QuickBooks is a double-edged sword. It’s powerful alright, but it takes a LOT of time to master. I’m very cautious recommending it to people without accounting background, despite all that propaganda how easy it is. It isn’t, particularly for real estate investors. The only “quick” thing about QuickBooks and REI is that you can mess it up very quickly. It’s all too common for investor to claim “but I entered everything in QB!” – however the results are completely useless.
The analogy I often use for QuickBooks is power tools. It takes time to learn to use them correctly and safely. Otherwise, you can create a lot of damage very quickly. You may be better off with a simple tool, especially on small jobs.
You If you do decide to go with high-end accounting (i.e. QuickBooks or Xero), then you will need to customize it. QuickBooks is unsuitable for REI bookkeeping out of the box, and even professional bookkeepers usually do it wrong. REI business has too many specific issues:
- all income and expenses must be tracked separately by property
- overhead expenses must be separated between rental and non-rental part of the business
- closing statements like HUD-1 and Closing Disclosure need skillful dissection
- tracking repair escrows requires understanding of short-term funding
- owner-financing of properties presents unique challenges for bookkeeping
- and so on
In our 2-day REI bookkeeping boot camp, we analyzed some examples of QuickBooks jobs badly botched by professional (and expensive!) bookkeepers. At the first glance, their statements look neat and professional, but only at the first glance.
Bottom line: QuickBooks is powerful, but it requires customization and a steep learning curve. Do not try it if you’re not willing to invest time and money into proper implementation.
What is an alternative? If your business is relatively small, you may get away with an expense-tracking software like Quicken or one of the countless phone apps for expense tracking. Google current reviews, as new and better apps are popping up all the time.
Nothing is wrong with Excel or Google Sheets, if you’re comfortable with spreadsheets, as long as you record everything. I’m old school: don’t fix it if it ain’t broken.
June 2017 update
Q: Realtors: what programs are you using to keep track of your accounting etc?
I assume you’re asking about keeping track of expenses as a Realtor. If so, it’s straightforward, and there’re tons of phone apps that do a good job recording expenses and mileage. Some of them are reviewed here, and Quicken should’ve been included as another choice.
You mentioned the word “accounting” – which is a completely different game from tracking expenses. Accounting software is confusing and complicated, especially the granddaddy of them all, QuickBooks. The newcomers – Xero and Kashoo, to name just a couple – are more user-friendly. FreshBooks pretends to be an accounting software, but it is not, it is really just a fancy expense tracking.
All of the above can be DIY, as long as we’re talking about Realtor or wholesaling business. However, if we’re talking about REI business – flipping and landlording – then you either need a professional bookkeeper with REI experience or an extensive training. Most people do not realize how complicated REI accounting is, compared to the traditional accounting like that for Realtors.