About this Article
The Airbnb and short-term rental industry has created tremendous opportunity for Property Managers, Accountants and Renters alike, but getting your numbers precise is more important than ever before. In this article, we will discuss the Property Management business model as it relates to an Airbnb and short-term rental business. We will present an example business and discuss the Chart of Accounts, Product/Service codes and Classes/Locations to consider for a proper QuickBooks Online setup and preparation for a full Bnbtally integration.
Property Management Business Model Example
In this example business, you have negotiated an agreement with an owner of real estate to serve as a property manager of their property. In this agreement, the owner has agreed to pay you a 20% commission of the revenue generated by the occupancy of guests. Your agreement also entitles you to keep 100% of all cleaning fees, given that you manage the cleaning and turnover of the property. The owner will pay utilities and the cost of any property fixes needed. You will cover the cost of acquiring occupants and overall management.
Furthermore, the arrangement includes that you will receive all revenues generated by the property (deposited into your bank account) and you will pay out to the owner any rents (minus commissions, utilities and fixes) at a later date on a regular basis. This is a form of Trust Accounting.
Chart of Accounts & Products/Services to Create
Following are the accounts to create in your QuickBooks' Chart of Accounts and Products/Services for this example. In this article, we're mainly focusing on the accounts related to the Airbnb reservations, as this is what's being integrated with Bnbtally. There are other operational activities that will need accounts, which we can discuss in another article.
For simplicity, we've created a free import utility with all of the below Chart of Accounts...
Chart of Accounts Included
- Income (Service/Fee Income): "Airbnb Income - Property Mgmt Commission"
- Income (Service/Fee Income): "Airbnb Income - Cleaning Fee"
- Income (Service/Fee Income): "Airbnb Income - Resolution Adjustment"
- Income (Discounts/Refunds Given): "Airbnb Refund - Property Mgmt Commissions"
- Income (Discounts/Refunds Given): "Airbnb Refund - Cleaning Fee"
- Income (Discounts/Refunds Given): "Airbnb Refund - Resolution Adjustment"
- Current Liability (Rents in trust): "Owner Rents in Trust"
- Costs of Goods Sold (Other): "Airbnb Direct Cost - Host Fee"
- Current Liability (Sales Tax Payable): "Custom Taxes Payable"
We create income accounts for the commission, cleaning fee and resolution adjustments. We also create their refund accounts to track respectively. A trust account is created to track amounts owed to the owner, you can also pay utilities and maintenance from this account depending on your agreement with the owner. The host fee is accounted as a a direct cost of the reservation, this is the 3% fee Airbnb charges you (the host) for the reservation and since in this example you're responsible for the cost of guest acquisition, you'll want to keep track of this as a direct cost. The Tax account is optional, it's only necessary if you've set up custom taxes for your Airbnb listing. For most places, Airbnb collects and remits taxes on your behalf and therefore it usually isn't required.
One account that we're not including is the Airbnb Payment Clearing Account. This is a special account you can select within Bnbtally to make payments to invoices (automatic payments to invoices are optional, but we recommend it). For more information about the Payment Clearing Account, read the following article: Payment Clearing Account Overview for Airbnb & QuickBooks
Create your Classes or Locations for each Property
If you have more than on property to account for, we highly recommend using classes or locations to distinguish accounting between properties and for proper reporting. First, be sure to enable classes or locations for your organization by going to your "Company Settings" and selecting to track classes and/or track locations.
Now, you can either use classes, locations, or a combination of both. We usually recommend just using classes. Either way, be sure to create a class or location for each of your listings with either the address of the property or a distinguished listing name.
Listing Setup in Bnbtally
Now it's time to integrate your Airbnb listings and your QuickBooks Online organization using Bnbtally. If you haven't already set up your connection, follow this link here:
Once your connection is established, navigate to the Listing Manager and follow these instructions for configuring each listing...
For "Event: Reservation Income" create an Invoice
Set the following allocations to fulfill the Property Management example for your reservation income...
In this example, 20% of the Airbnb Accommodation Fare is parsed into the "Airbnb Income - PM Commissions" code while the remaining 80% of the Accommodation Fare is parsed into the "Owner Rents in Trust" code. 100% of the Cleaning Fee is placed into the "Airbnb Income - Cleaning Fee" code while 100% of the Host Fee is placed into the "Airbnb Direct Cost - Host Fee" code. We also parse 100% of the Resolution Adjustment into the "Airbnb Income - Resolution Adjustment" code.
You can choose the customer of the invoice to be the owner of the property or you can select to set the guest as the customer, either will work and is of your preference. Remember to set each class or location properly based on the listing you're configuring and what you've set in your QuickBooks Online account. If you need more specifics about setting up your listings in Bnbtally, read our article here:
For "Event: Reservation Refund" create a Refund Receipt
Set the following allocations to fulfill the Property Management example for your reservation refunds. You'll notice that the reservation refunds are setup very similar as the reservation income, the only difference is that we're using the refund accounts for the accommodation fare and cleaning fee.
In this article, we have covered the Property Management business model as it relates to an Airbnb and short-term rental businesses. We have presented an example business and discussed the Chart of Accounts, Product/Service codes and Classes/Locations to consider for a proper QuickBooks Online setup and preparation for a full Bnbtally integration.
Disclaimer: Each business can be highly customized and there is no single model of accounting that covers all businesses in any industry. This article is for informational purposes only and we recommend that you speak with your CPA or an Accountant who can consult with you about your specific business.