Overview

Handling the accounting aspect of property management may seem like a daunting task. Don’t worry—we are here to help! DoorLoop handles much of the accounting and reporting for your financial statements in the background. All you have to do is record the correct tenant charges, incoming payments, outgoing payments, deposits, and then let DoorLoop do the rest.

Accounting Cycle

While there are different versions of the accounting cycle, the basics are the same. For the revenue part of the cycle in DoorLoop, you make charges, receive payments, and deposit those payments in the bank. For your outgoing payments, you pay vendors, distribute money to owners, and refund tenants for things like their security deposits. Finally, you will verify your DoorLoop accounting through bank reconciliation and use DoorLoop’s reports for financial reporting purposes. We will explain each step in further detail below.

Charges (Accounts Receivable)

A charge is a transaction on a lease in DoorLoop recording that the tenant owes you money.

  • Charges are associated with revenue accounts, allowing the associated lease payments to record revenue to the correct account in your chart of accounts for reporting purposes. For example, paid rent charges show rent revenue on the profit and loss report. Late fee charges show as late fee revenue, pet rent charges show as pet rent revenue, etc.

  • You can add charges to leases in multiple ways. The recurring rent schedule you set up when you created the lease automatically adds lease rent charges. You can also set up other recurring charges and create one-time charges as needed.

Payments

A payment is a transaction on a lease in DoorLoop recording that a tenant paid you money.

  • Usually your tenants will pay you in response to charges, but they might also pay you early. Lease payments without charges become credits on the tenant’s ledger and show as “unapplied lease payments” on your profit and loss report. This credit automatically pays the next charge on the lease.

  • If your tenants pay online through their tenant portal, DoorLoop records the lease payments automatically. If a tenant pays you directly, you will need to record the lease payment manually.

Bank Deposits

A bank deposit is a transaction in DoorLoop recording that you deposited one or more payments into your bank account.

  • Just because a tenant paid you doesn’t mean you’ve deposited the money into your bank account. For example, if a tenant gives you a check or cash, they have paid their rent, but this amount won’t yet reflect in your bank account balance, so you might not want to record a bank deposit along with the lease payment.

  • If your tenants pay online through their tenant portal, DoorLoop creates the corresponding bank deposit automatically when the money reaches your bank account. If a tenant pays you directly, you will need to record the bank deposit manually. Note that you can create a bank deposit at the same time you record the lease payment if you wish.

Pay vendors (bills/expenses)

Renting properties incurs expenses, such as repairs and management fees. Record these expenses in DoorLoop using Expenses and Bills so that property income (revenue minus expenses) shows correctly on DoorLoop reports for your financial records.

  • Expenses record the cost incurred and the outgoing payment for the expense all in one step. This is the common method for those using cash basis accounting.

  • You might also know Bills as invoices or accounts payable. If you use accrual basis accounting, Bills are the way to go.

  • The key difference between Bills and Expenses in DoorLoop is that Bills are created and paid in two different steps.

  • Whichever you use, you can create and send checks to pay your vendors if needed.

Pay Owners

An owner distribution records that you paid owners income from their properties.

  • DoorLoop automatically calculates the balance sheet and available funds for your properties to determine how much money you can distribute to the owners. So it is really important to record all revenue and expenses accurately!

  • Owner distributions are equity transactions, meaning they show that money was withdrawn from the business as well as reducing the available funds on the property balance sheet.

  • If needed, you can also create and send checks to actually pay out the owner distributions.

Pay Tenants

Tenant refunds are for things like returning security deposits and sending money back to your tenants for overpayments.

Bank reconciliation

Bank reconciliation is how you compare your actual bank account transactions to what you’ve created in DoorLoop. This helps ensure you didn’t make any mistakes or miss creating transactions in DoorLoop.

Use Reports

After recording accurate transactions in DoorLoop and verifying their accuracy using bank reconciliation, accurate financial reports are the payoff.

  • DoorLoop has a full suite of reports that you can share with your property owners. For example, your owners are likely interested in their profit and loss reports, cash flow statements, and balance sheets.

Other Accounting Considerations

Cash vs. Accrual Accounting

  • Put most simply, cash basis accounting focuses on cash flow, recognizing business transactions when the money actually flows into or out of your business. For example, when a tenant pays you, or when you actually pay an expense.

  • Accrual basis accounting dates business transactions when the money is earned or the expense is incurred, regardless of when money changes hands. For example, rental income is dated when you charge for rent, regardless of when the tenant pays. An expense is dated when you received the goods or services, not when you actually pay for them.

  • In DoorLoop, you can run reports in either cash or accrual basis.

Accounting Start Date and Opening Balances

  • One of the most important decisions you have to make in DoorLoop is picking your Accounting Start Date. This is the day you begin tracking your property accounting in DoorLoop. Everything from before this date is summarized in DoorLoop by setting opening balances, and you enter all transaction details from this date forward in DoorLoop. In other words, this is the day you move away from your old system and begin doing business in DoorLoop.

  • Once you implement your accounting start date, DoorLoop recommends not changing it unless you are comfortable with advanced accounting principles. Choose carefully!

Property vs. Business Accounting

DoorLoop is designed and built for property management accounting, meaning that all transactions and bank funds are associated with a property. It may seem tempting to also track your business-specific accounting in DoorLoop, but we don’t recommend mixing property accounting with your business accounting.

  • The difference is subtle, but very important. For example, if you are a property manager managing properties for other owners, your management fee is an expense incurred by their properties, and you are the vendor. The profit and loss reports for your owners will reflect that their property income is reduced by your management fee. At no point is DoorLoop recording the management fee as income for you, the vendor, to also track your business financials. This type of accounting for your property management software is best done elsewhere, such as using QuickBooks.

  • If you have expenses or money in a bank account that you truly don’t want to associate with any one of your properties, there is a work-around for this. In DoorLoop, you can create a property that represents your business so you can record expenses and bank account funds to this “property” that is actually your business. You could also record revenue deposits for this property to track your business income, but DoorLoop doesn’t support this and you should only do it if you are comfortable with advanced accounting and bookkeeping methods.

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