To put it simply, Bookkeeping is the process followed by any business to record all financial transactions performed by them to evaluate and review revenue, profit and losses pertaining to the business at the end of the month, quarter or annum. This process involves preparing source documents for all transactions, operations, and other events of a business.
Running a business in any country or state comes with a set of rules and obligations. Pretty much every government in the world expects registered businesses to declare income and pay taxes to local governments. Vacation Rental Businesses are no exception to the rule.
I get it. You’ve listed your property on Airbnb and are thrilled about growing this into a proper business. However, chances are that you’re significantly less excited about paying tax on that hard-earned vacation rental income.
But the more you learn about accounting and how bookkeeping works, the more intriguing it will be for you to generate revenue and contribute to society with your tax funding. On the flip side, you will also learn about tax deductions which will alleviate some of that burden.
So, let’s dive right in to some of the basics that will help you to keep a meticulous record of all your Airbnb income as well as expenses so that you keep on top of your Accounting game to make your Airbnb business successful.
Possibly the most important step in the process is to open a separate bank account just for your Airbnb venture. If you have used only one bank account all your life, it might sound like more work to have two accounts.
However, actually the opposite happens. When you have a dedicated account for your Airbnb business, you will know exactly which expenses pertain to your business. It will make tracking that much more convenient come tax season. As for the expense of the extra bank account itself, you’ll likely be able to offset a portion of the monthly fee as a tax deduction. You’re welcome!
Unless you are an Accountant yourself, you might be really good at the hosting but not so much with the accounting. Make your life easy and less complicated by enlisting the professional services of an Accountant, because he/she is well informed of local tax laws and will be able to tell you exactly what income and expenses you should keep a record of, as an Airbnb host.
They will also be able to guide you as to whether it’s worth incorporating LLC (Limited Liability Company) to your vacation rental business or keeping it under your personal income declaration.
Pro Tip: You don’t necessarily have to keep the Accountant on retainer year-on-year if you don’t grow your vacation rental portfolio. Besides, once you learn how to track income and expenses, you might even be able to DIY in the long run.
Modern technology has the solution to every problem, including for challenges of tracking vacation rental income and expenses. Befriending Accounting software like QuickBooks or bookingtrust might be your easiest and cheapest solution.
As for tracking income, the ideal solution is a Property Management Platform (PMP) like hostaway.com, which will make it a breeze to review and analyze income generated on multiple platforms in real time. It will also be able to tell you how much income is generated by a particular property at any given time.
The perk of going with a renowned partner like Hostaway is the fact that on top of income generation evaluation, it will be able to feature multi-channel distribution, a central calendar, integrations with other niche vacation rental software, centralized guest communications and much more that will help you scale your vacation rental business.
Needless to say that keeping track of income and expenses of an Airbnb rental manually, is a time-consuming process that might lead the path to mistakes and errors.
On the other hand, as far as expenses are concerned, you’ll find it time-consuming to organize receipts and invoices. Besides, at the next quarterly tax filing, will you remember which receipt relates to which specific property? Which is why you need to automate your filing mechanism. Besides, tracking income isn’t just important for tax purposes. You will need it to keep insightful vacation rental analytics to guide future business decisions.
Hence, my recommendation to you is to go with a software like zapier.com, essentially built to facilitate vacation rental businesses and unlock a more efficient way to work. It can connect almost any two apps together and instruct them what to do when something that fits certain parameters occurs. It can also sort all Airbnb income statement emails into one folder. Or better yet, Zapier is able to extract the information and input it into a Google Sheet or Excel file the minute it comes in.
Setup your discounts, special offers, long-term discounts and check-in/check-out dates with fast and easy bulk edits to maximize your revenue during both high and low seasons. You can set up last-minute discounts on selected properties, or turn every Saturday into a 2-night minimum for the next two years in just two clicks.
This is the single most powerful tool you have at your disposal. You can customize by sales channel, by property, by owner, by location and you can generate dynamic reports that always show you what's going on and which properties are the most profitable at any given point. Create custom formulas for your properties, and calculate your gross and net margins and owner payouts at your own pace.
Provide your guests with a detailed and professional invoice that adjusts based on additional services or adjusted length of stay. Ensuring you provide accurate invoices and keep track of upselling activities, taxes and fees is an important part of ensuring the satisfaction of your guests and sustainability of your operation.
Vacation rental properties are unique. So are their guests. We've all got our unique stories - but once the stories are told, it's time to settle the bill. Keep track of maintenance and cleaning to ensure you allocate these expenses correctly, using our custom formulas and automations so you know each dollar finds its right place.
With robust analytics and reporting tools in the industry, built with years of experience and best practices from short term rentals, vacation rentals and hotels, Hostaway delivers customizable reports for your key performance indicators.