Vacation Rental Accounting

SeadanceRental

I have setup my bank accounts to sync, classified my lodging income, tax and expenses and have succeeded in balancing and creating my P&L, etc. Currently, I enter a 'bill' if I buy something and need to be reimbursed from these accounts. Or, I record the expense when it hits the bank account. The 'income' is tracked when a deposit is made from AirBnb (paid out at end of reservation), or as 'liability' from VRBO or my website (payment received in advance of arrival). Now I want to test the waters in creating invoices to track AirBnB, VRBO and my vacation rental website rentals - or determine if this is actually worth the effort. I would like to track each if the rentals in Wave which would encompass the lodging, my property managers fee which is a deduction from the lodging, occupancy tax, cleaning fee and security deposit we collect for each rental. When payments are receive from my booking sources, they are reduced by the fees charged by the booking sources for processing the payments - about 3%.

Is there a way to make an invoice line item an expense so that when the payment is received and applied towards the invoice, the expense is recorded along with the income?

Is there a better way to handle the recording of vacation rental transactions?

OR, should I keep it simple and just stick with what I have and track my rentals in Excel like I am now?

Thank you for any helpful insight and advice from the community

Alexia

Hi, @SeadanceRental.

You would essentially account for this the same way a different business would account for, say, their Paypal fee. Here's how you do it:

1. First, you'll need to create an asset account called "Undeposited Funds". Choose "Bank & Cash" as the account type. This is where the money paid by your client will exist before it's reduced by the merchant fee and sent your way. It'll make more sense in a second.
2. When you mark your invoice as paid, choose "Undeposited Funds" as the payments account. This will mark your invoice as paid in full.
3. Create an expense for the amount of the merchant fee to "Undeposited Funds".
4. When the transaction imports from your bank account, categorize it as a "Transfer from Undeposited Funds". Wave will create a matching transaction for the other account.

By following this workflow, you make sure to keep track of everything. Your invoice will be marked as paid in full, the merchant fee is accurately indicated as an expense to you, and you end up with the right amount in your bank account.

Does this all make sense?

SeadanceRental

Alexia,
It does make sense so far. I'll give this a try and report back.
Thanks!

cgarai

Hi
I have the same issue and have a couple of questions:
1. I don't see how to do the transfer from Undeposited Funds. Do I create a category called "Transfer from Undeposited Funds" and Wave will automatically create the matching transaction?

2. The balance in Undeposited Funds account should be kept at zero by matching all the fees that cause the difference between the invoice amount and the net deposit, correct?

Thanks,
Chris

Alexia

Hi, @cgarai,

You don't need to create a category with that name. The process is a little different for you because you use the old version of Wave. You'll have to create a transaction for both sides of the transfer (a withdrawal from Undeposited Funds, and a deposit to your bank account), select both transactions and click on the Transfer button. It's next to the Merge button, at the top of the screen.

As to your second point, yes, you're absolutely right.

cgarai

Older version of Wave? How and why would I move to the new version?

Alexia

Hi, @cgarai,

We released a new interface for Wave's accounting page, as well as quite a few new features (new reports and a new dashboard) in a new version of Wave that we've been migrating users to for some time now. We're moving Wavers over as the resources become available and aim to be done with this migration within the next few months.

You can read about the changes here, if you're curious. You can navigate between different new features using the sidebar on the right.

cgarai

Sounds good, especially if it's faster! Sign me up if possible.

Thanks
Chris

Alexia

We did speed things up quite a bit, @cgarai! We can't speed it up for individual accounts, but we're working hard to bring this new version to everyone as soon as we can. We just have to be careful about to make absolutely sure the move won't affect the integrity of your data.

cgarai

Hi @Alexia,
In your step 4 below, how will the categorization appear in the new version? Will it actually be a category or will it be one of the drop-down options on the right hand side of the transaction? Or....?

I notice the look has changed, but I don't think the version has changed.
Thanks,

Chris

@Alexia said:
Hi, @SeadanceRental.

You would essentially account for this the same way a different business would account for, say, their Paypal fee. Here's how you do it:

1. First, you'll need to create an asset account called "Undeposited Funds". Choose "Bank & Cash" as the account type. This is where the money paid by your client will exist before it's reduced by the merchant fee and sent your way. It'll make more sense in a second.
2. When you mark your invoice as paid, choose "Undeposited Funds" as the payments account. This will mark your invoice as paid in full.
3. Create an expense for the amount of the merchant fee to "Undeposited Funds".
4. When the transaction imports from your bank account, categorize it as a "Transfer from Undeposited Funds". Wave will create a matching transaction for the other account.

By following this workflow, you make sure to keep track of everything. Your invoice will be marked as paid in full, the merchant fee is accurately indicated as an expense to you, and you end up with the right amount in your bank account.

Does this all make sense?

Efi

Hi there,

Thanks for the informed comments so far. My case though is a bit particular as I work as an agency, thus my "income" splits into the amount I have to give off and my commission fee.

I've followed your advice on creating the "Undeposited Funds" asset account. I include the whole amount for an Airbnb booking as an invoice marked as paid in this account. The Airbnb's withholding is deducted as an expense (receipt) in the Undeposited Funds account. So, upon this stage, everything is in line and the amount in the "Undeposited Funds" balances the actual net deposit from Airbnb into my connected bank. Thus, I categorise the input transaction as a transfer from Undeposited Funds and a matching transaction is created. So far so good.

Henceforth, the incurred cost is tracked as an output from my bank account and the remaining amount is my actual commission. I issue an invoice for this which has to be marked as paid. However, I cannot do so as this would bring about to a falsely appearing income.

Is there a further step I should follow to levelling up all transactions?

Thanks,
Efi