Accounting helps businesses track and report income sources, deductions, and expenses to the Internal Revenue Service (IRS). Essentially, accounting tells you:
- How well your business is doing
- How much money it's making
- Where the funds go
Speaking of funds, are you familiar with owner disbursements? These are funds that go directly to or come from you.
We'll discuss three types of owner disbursements and disbursement management tips. Read on to learn more.
What Is a Disbursement?
A disbursement is a property income distribution issued from a dedicated fund. Disbursements include operating expenses, cash dividends paid to shareholders, and interest paid on loans.
Disbursements are typically business expenses, but there are other kinds including:
- Education
- Escrow
- Special funds
Disbursements are paid in cash or some easily liquified equivalent by a company within a specific duration, like a quarter or year. An accountant records each disbursement when it happens, and not when they're paid.
The transactions are then posted into a disbursement journal or general ledger. Good property management strategies include proper documentation and adjusting your cash balance to account for the disbursements.
Each entry should include:
- Date
- Payee name
- Debted or credited amount
- Payment method
- Payment purpose
- Account coding
Types of Owner Disbursements
As stated earlier, a disbursement is a payment issued from an established pool of money issued by or coming from you. One of the three types is rental income, which goes to the landlord.
Rental income comes from tenants and is issued to the rental property owner, landlord, or property management company. This income is the primary source of owner revenue.
The second kind of owner disbursement is expense reimbursement. Landlords and owners make expense reimbursements to cover the costs of managing the property, like repairs and maintenance.
The third type of owner disbursement is profit, or the leftover money after you've deducted expenses from the monthly income. The profit comes from owning a rental property.
Disbursement Management Tips
Organization and regularity can make disbursement management less difficult. You'll know where your money is going and can calculate these payouts more easily.
Here is a list of what you can do to improve disbursement management:
- Keep accurate records
- Keep personal and business finances separate
- Create a system to track expenses
- Review monthly statements
- Calculate funds regularly
- Set aside funds for maintenance and repairs
- Understand tax implications
Understanding the Best Property Investment Strategies
There is a lot a landlord must know if they're going to own and manage a property. Owner disbursements are one facet of being a rental property owner. PMI North Alabama is here to help.
PMI North Alabama is a full-service real estate asset management company that works with residential and commercial clients. We offer accounting and reporting services, rent collection, and tenant screening.
All our services are accompanied by state-of-the-art technology that informs clients on how their investments are doing in real time. Meanwhile, tenants can access maintenance and billing requests.
Are you ready to make property management easier and maximize your income? If so, contact us today so we can get started.
