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?
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?
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.
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.
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.
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?
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.
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