How To Use Accounting Software with A Property Management System
Founder & CXO
Some property management systems have built-in accounting modules to handle a few basic functions for vacation rentals, but these solutions ultimately fall short of the visibility and functionality that comes with a true accounting software like Sage Intacct or QuickBooks Online. Luckily, it doesn’t have to be a competition.
Vacation rental management is an attractive venture, but it also comes with specific financial duties and obligations. For example, property managers have a duty to keep owner funds secure and accurate by preventing commingling. Commingling funds means to mix expenses or income inappropriately, and it must be avoided by keeping business funds and owner funds in separate accounts.
At the same time, vacation rentals operate through various digital channels, services, and platforms, which means there are multiple streams of financial data that need to be integrated for the business to work. So, property managers need software that can bring the data together and also keep it separate. It’s no wonder that accounting for vacation rentals is complex!
Some property management systems have built-in accounting modules to handle a few basic functions for vacation rentals, but these solutions ultimately fall short of the visibility and functionality that comes with a true accounting software like Sage Intacct or QuickBooks Online.
Luckily, it doesn’t have to be a competition.
By using a solution designed to support the finance functions of your business with software designed to support property management functions, you can leverage the strengths of each to help your business run more efficiently as a whole.
1) have a property management system and want to know how to choose an accounting software,
or 2) have an accounting software that you want to connect to a PMS,
this article will highlight some of the key integrations vacation rental management companies are using today to streamline accounting for their short term rental management businesses.
What Does Accounting Software Do?
Before jumping into integrations for property management and accounting software, it’ll be helpful to clarify what we mean by “property management software” and “accounting software”.
- Property management software is designed to handle the operations of vacation rental management including listings and bookings, receiving guest deposits, scheduling building services, and other hospitality integrations. MyVR, Guesty, Hostaway, Hostfully, and Track are just a few examples of rental management platforms with powerful integrations, open API, rich data and sales & marketing tools. These systems represent the revenue engine of your enterprise.
- Accounting software, on the other hand, is designed to record business transactions, track financial data, and provide reporting and other tools to manage business assets. Without accounting software, businesses have to manually update paper records or digital spreadsheets to keep track of what’s been earned, what is owed, and what has been paid. Linking your PMS with accounting creates a seamless platform to record and analyze financial data, effortlessly meet your accounting obligations, and inform fiscal decision making.
How Accounting Software and Property Management Software Work Together
To understand how accounting software will work alongside your property management system, it helps to understand how the payment process works. Through different channels, like Airbnb and Booking.com, guests make reservations, and their payment is processed by a merchant processor like Stripe, who receives a fee on each transaction.
Assuming the guest completes the stay and there are no cancellations or reimbursements, the property manager (PM) may receive a commission on the reservation, and any cleaning fees, reimbursable expenses, and lodge taxes will be factored in. Once all payments and taxes are deducted from the deposit, the amount leftover goes to the owner.
For the most part, these transactions are taken care of by the PMS, but what about reporting? Owner statements are one of the most common pain points for property managers because built-in solutions have limited reporting functionality. More importantly, the property management system doesn’t have all the inputs to tell if the business earned a profit or a loss at the end of the month.
So, PMs need a better way to aggregate monthly cash flows and calculate the business expenses that don’t get billed through the property management system, like payroll, facilities and equipment, interest, and taxes. This is where accounting software comes in.
By recording the details of guest payments, management commissions, and billable expenses from the PMS into accounting software along with business expenses, managers can track all their sources of financial data, produce better reports, and ensure GAAP compliance from a centralized system.
The Benefits of Integrating Accounting Software with a PMS
Once you’ve committed to using accounting software, you need to configure it for your business. This involves entering bank account information and setting up your accounts receivable, payable, and general ledger accounts.
Note: It’s important at this stage to get input from a CPA or accounting consultant who can ensure your processes and protocols will keep your data running smoothly and flowing to the proper accounts.
Getting equipped with accounting software is an important step, but integrating your financial and property management systems so that they work in unison is the key to optimizing it for your vacation rental business.
Today, there aren’t many built-in integrations that allow you to connect a property management platform like Hostaway or Guesty directly to your QuickBooks Online or Xero account, but there are significant benefits to doing so.
Reduces manual data entry
Integrating these systems eliminates the time and resources needed to manually enter financial data from the PMS into accounting software each month, making owner statements, bank reconciliations, and closing the books much easier.
Fewer resources tied up in accounting
With automation at work in the background, your teams can grow at the pace you want because you don’t need to support hours of manual labor each week to conduct tedious and error-prone tasks.
Understand your business in greater financial detail
Controlling how financial data flows across your business is exactly what accounting software is designed to do, so integrating multiple apps into this type of system allows you to factor in additional data for accurate cash balances and KPIs.
For property management companies who want to leverage these benefits, Ximplifi offers VRPlatform, a proprietary integration software that syncs PMS data with accounting software. If you’d like to learn about the specific integrations supported by VRPlatform, check out our product page.
Selecting the Right Combination of Software for Property Management Accounting
Both accounting and PM software come in many different packages, some more sophisticated than others, so selecting the right software mix for your vacation rental business comes down to understanding what features and capabilities will best serve your needs. Below are some of the combinations that vacation rental property managers have successfully integrated to help manage their businesses:
This is one of the most common software pairings for property managers with 10-50 property listings. For companies that are listing more than 50 properties and have specific reporting requirements, we recommend migrating to Sage Intacct for dimensional tracking and reporting.
2. Airbnb to QuickBooks Online
For smaller vacation rental businesses using Airbnb as the primary booking channel, QuickBooks is often the accounting software of choice.
3. Track to Sage Intacct
For technology-driven firms, Track’s powerful management software linked to best-in-class financial data within Sage Intacct is a game-changing combination.
4. Additional Technologies:
- Hostfully – a property management solution for growth-oriented vacation rental managers
- Hostaway – a modular property management solution for vacation rental management
- Xero – accounting software for users who don’t need a lot of bells and whistles
(For a more detailed description of accounting software options, check out this blog post titled Essential Ximplifying Applications.)
Keep Data In Sync with VRPlatform
To summarize, tasks like guest invoicing, owner reporting, and bookkeeping can be done in spreadsheets, but it is a slow, manual and error-prone process. Instead, property managers can save a lot of headaches by using property management software and accounting software side-by-side to manage their business. With solutions to integrate these systems like VRPlatform, data can sync automatically for better reporting flexibility and business insights.
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