Cleaning Up Messy Books for an STR Business

Working with a new client in the STR management business, we often encounter disorganized and inaccurate financial records. Cleaning up these books is essential in order to provide a clear financial picture and ensure compliance. Here are some examples of cleanup work that we typically perform for new clients…

1. Reconcile Bank Accounts

Issue: The bank statement shows a deposit of $2,500 that is not recorded in the books.

Solution:

• Compare the bank statement with the accounting records.
• Identify the missing deposit in the books.
• Record the $2,500 deposit in the accounting system with the correct date and description, such as “Payment received from Airbnb for Martha Jones.”

2. Review and Correct Chart of Accounts

Issue: The Chart of Accounts includes multiple categories for cleaning expenses: “Cleaning Supplies,” “Cleaning Services,” and “Housekeeping.”

Solution:

• Review the existing COA and streamline it by removing unused accounts and merging similar ones.
• Ensure that all transactions are categorized correctly according to industry standards.
• Set up a clear and logical structure for the COA to simplify future accounting tasks.

3. Clean Up Accounts Receivable

Issue: An invoice of $800 for a guest stay in May remains unpaid and uncollected.

Solution:

• Review the Accounts Receivable (AR) aging report.
• Contact the guest or the booking platform to follow up on the $800 outstanding payment.
• If deemed uncollectible after multiple attempts, write off the $800 as a bad debt expense and adjust the AR balance accordingly.

4. Clean Up Accounts Payable

Issue: A bill for $150 from a cleaning service provider from three months ago is not recorded.

Solution:

• Review all outstanding vendor invoices.
• Enter the missing $150 bill into the accounting system with the correct date and description.
• Ensure payment is scheduled and recorded once made.

5. Review and Adjust Journal Entries

Issue: A journal entry for property maintenance incorrectly debits “Office Supplies” instead of “Maintenance Expenses.”

Solution:

• Review all journal entries for accuracy.
• Adjust the incorrect entry by debiting “Maintenance Expenses” and crediting “Office Supplies” for the correct amount.
• Verify that all journal entries are correctly categorized.

6. Reconcile Payroll Accounts

Issue: The payroll records show $5,000 in wages, but only $4,500 is recorded in the books.

Solution:

• Compare the payroll records with the accounting software.
• Identify the missing $500 in wages.
• Record the missing $500 in wages and any associated payroll taxes in the accounting system.

7. Manage Supplies

Issue: The books show $300 worth of cleaning supplies, but a physical count reveals only $200 worth of supplies.

Solution:

• Conduct an inventory check of all supplies.
• Adjust the supply records to match the actual count, reducing the supply expense by $100.
• Implement a system for regularly tracking supply usage and restocking.

8. Review Fixed Assets

Issue: A new washing machine purchased for $800 is not recorded in the fixed assets.

Solution:

• Verify the existence and condition of all fixed assets.
• Record the purchase of the $800 washing machine in the fixed asset account.
• Update the depreciation schedule to include the new washing machine.

9. Ensure Tax Compliance

Issue: Sales tax collected from guests for the last quarter has not been filed or paid.

Solution:

• Review all sales tax collected and ensure it is accurately recorded.
• Prepare and file the sales tax return for the last quarter.
• Set up a system to track and remit sales tax on time in the future.

10. Generate Accurate Financial Statements

Issue: The income statement shows a significant discrepancy in cleaning expenses due to miscategorized transactions.

Solution:

• Prepare accurate and up-to-date financial statements.
• Review and correct any miscategorized transactions, such as reclassifying “Housekeeping” and “Cleaning Supplies” into “Cleaning Expenses.”
• Ensure that all adjustments and reconciliations are reflected in the final income statement, balance sheet, and cash flow statement.

Conclusion

Cleaning up messy books for an STR management business requires a detailed and systematic approach. By addressing these common issues and implementing best practices, we can help you achieve a clean and reliable set of books, providing a solid foundation for your business’s financial health and future growth.

You can transform a chaotic set of books into a well-organized and accurate financial system, enabling better decision-making and improved financial management for your business.