The right choice of accounting software helps track the profitability of your vacation rental business and provides the information you need when it is time to file your taxes. If QuickBooks Online is your software of choice, you will have to decide among several versions of the software. Here are some pointers that compare how different versions relate to vacation rental owners.
Ability to Enter Bills
Available in All Versions Except Simple Start
A bill in QuickBooks allows you to record an expense on one date even though you may have actually paid the vendor on a different date. For vacation rental owners this can be useful when recording housekeeping expenses. You may pay the cleaner for May housekeeping on June 5. If you enter this expense using a bill dated May 31, the expense will show on the May Profit & Loss Report even though you paid it in June. Note: This method is called accrual accounting. Never fear if you are a cash basis taxpayer though. The reports in QuickBooks can be switched to cash basis and then the expense will show up on the day it was paid instead of the date you entered for the bill. This feature allows you to match cleaning income and expenses to the same month, but still provides a way to have cash basis reporting for your taxes.
Manage 1099 Contractors
Available in Plus and Advanced Versions
With this feature, QuickBooks will automatically keep track of how much you have paid to each vendor, automatically fill out 1099 forms for the vendors that need them, and even send the vendor an electronic copy by email and a paper copy by mail. This feature requires the name, address, email address, and either social security number or EIN for each vendor. You can enter this information manually or have QuickBooks request the information from the vendor by email. There are some settings that must be set up which make sure QuickBooks knows how to fill out the forms. A small fee is charged to send the forms; however, the fee is usually much less than it would cost you to hire an accountant to do the 1099s or to buy forms and do it yourself (and much less of a hassle).
Class and Location Tracking
Available in Plus and Advanced Versions*
Classes allow reports to be run for individual properties. With this feature, you will be able to assign a property to every expense or income amount that you record. You will then be able to run reports like the Profit and Loss by Class which divides the income and expenses into columns—one column for each property with a total at the end. You can also include a class for general business expenses like office supplies or cell phone bills that do not relate to any specific property. Using classes to separate properties is a much better option than setting up different categories in your chart of accounts for different properties. Classes make the reports much easier to read, and they apply to income and expenses. This feature will give you great reports and keep your chart of accounts manageable. The ability to separate income and expenses by property is required for some tax filers and is essential to having a clear understanding of the operation of your business.
Locations in QuickBooks is another tracking option. If you use more than one booking channel, you can use Locations to track the performance of each channel. Every time you receive reservation income, you would set the Location to the correct channel. Then you would be able to run a Profit and Loss by Location that will show you how much of your income is coming from each booking channel. Note: the label “Location” for this tracking category can be changed to several other options in the QBO settings (Business, Department, Division, Property, Store, Territory). Even though one of the options is “Property,” VRB does not recommend using this tracking category for your properties. Classes can be assigned to individual line items, but you can only assign one Division to an entire expense, bill, invoice, or deposit. Example: If you receive a housekeeping bill that is for more than one property, you will only be able to split the expense by property if you are using classes for your properties. If you use Locations, you will be forced to assign only one property to the whole bill.
*QuickBooks Online Plus allows you to have a maximum of 40 classes and divisions. If you need more classes and divisions, you can upgrade to QuickBooks Online Advanced which does not have a limit.
Fathom Reporting
Available only in the Advanced Version
This feature provides more visual reporting than the standard QuickBooks reports. Reports can be presented in graph form so that they are easier to analyze. Fathom also provides reports that predict your future income, expenses, and cash flow.
Ability to Import Invoices
Available only in Advanced Version
If you have a large number of properties, you may want to consider creating invoices in CSV format and then uploading the invoices into QuickBooks. This method can save time and manual data entry; however, it does take some time to set up the system. It should also be noted that there are third-party apps like SaasAnt Excel Transactions and Transaction Pro which allow you to upload invoices and other transactions to any version of QuickBooks Online.
While there are many other features involved in choosing a version of QuickBooks Online, the ones mentioned here have the biggest impact on most vacation rental owners. An owner with only one rental property could likely have most of what is needed with the Essentials version. For owners with more than one property, the Plus version’s class tracking ability is a necessity that will provide you with the reporting you need. If your needs change, you can easily upgrade your subscription at any time and keep all the data you have previously entered.
You can check out the current versions, features, and pricing here: https://quickbooks.intuit.com/online-compare/
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About Vacation Rental Bookkeeping
Ryan Gallagher is a virtual bookkeeper who specializes in providing accounting services to short-term rental owners and managers. He strives to take the burden of bookkeeping off business owners as well as help them stay on top of their finances, set and meet goals, and make their rentals the best they can be. Contact Ryan directly to see how he can help your business.