Manage Your STR Business Financials Like a Boss
Kate Stoermer 
Wondering about the backend tasks for your STR biz? Grab some behind the scene tips for handling the financial reins like a boss!
Running a short-term rental (STR) business efficiently involves more than just understanding the market and attracting guests. It's equally crucial to effectively manage the backend - importantly, the financial aspects. Today, I want to share some insights into handling the finances, tracking expenses, and similar operational aspects of your STR business.
In this ever-changing digital era, there's an app or a vendor solution for almost every aspect of STR management, often for a fee. However, remember that the landscape is constantly evolving, and what works today might need to be reassessed tomorrow; so I appreciate some grace in terms of software and the like offered here.
Growth Intentions and Business Models
Your approach to backend management should align with your business goals. Are you aiming to expand your portfolio, or are you content with managing one or two properties? This decision will significantly influence how you structure your backend processes. A growth plan means establishing a plan to be organized in a way that grows with you, while simply adding a second home that you rent out to your life means just using your current personal organizational structure for this added business.
A Disclaimer
As someone deeply immersed in the STR world, but not a licensed accountant, CPA, lawyer, or bookkeeper, my advice is based on personal experiences and research. It's essential to consult with a professional for advice tailored to your specific situation.
Also, this is just one perspective. I have friends that obsess daily over their books and others who barely know what they make month to month. These are just ideas based on one person's experience and approach, take what's useful to you and leave the rest!
What to Expect in STR Financial Management
Before Your First Guest: You might incur expenses for things like educational courses, which can be considered business expenses. Keep detailed records and verify with your tax professional.
Acquisition Phase: Your purchase documents are critical for tax purposes, including for establishing your property's cost basis at tax time.
Setup Phase: This typically involves a flurry of expenses. Keeping track of receipts is not just vital for taxes but also for operational management, like future claims or repurchases. Many software programs enable you to upload receipts to keep them available, but I found it more helpful to scan them into a file and then process them weekly - using a file naming convention to help.
Ongoing Operations: Regular expenses include consumables (like toiletries), vendor payments, mortgage, internet bills, and occasional updates or replacements.
Establishing a Backend Routine
Having a routine for backend tasks can streamline your processes. This includes setting schedules for paying vendors, reconciling accounts, and reviewing procedures. How frequently you process receipts or update your books will depend on your personal preference and the volume of transactions. I personally keep receipts updated weekly, I have a tickler to pay vendor invoices 2x a week, and reconcile my books monthly.
Expense Tracking
Track all business-related expenses diligently. If in doubt about whether an expense is business-related, consult your tax advisor. Remember, expenses for tax preparation may not always align with operational needs. For instance, understanding the ongoing cost of consumables per stay requires a different categorization than what might be used for tax purposes.
Example: My “Supplies” category, as per Schedule E tax classification, is further broken down into consumables, linens, decor, and amenities for operational clarity. This allows me to track these items as a business metric.
Income Tracking
Rental income tracking for STR can be complex, especially if you use multiple booking platforms. For example, for one property, Airbnb remits taxes - but doesn’t give great reports about what they’ve collected and remitted. Further, while the cleaning fee and pet fees are all just income I like to track my amounts over time by line item; but the information sent from the platform is a lump sum. Furthermore, VRBO doesn’t remit taxes so I have to make sure to capture that, and in some markets lodging taxes are submitted monthly to the local county.
While there are solutions catering to large property management companies to help sync up data from the platforms to their accounting software, they might not be feasible for owner/operators with fewer properties. I manually input my income data, which, despite being time-consuming, offers me comprehensive insights into my financials.
To elaborate, I enter in by line item every piece of income. So I can tell you how much of my revenue is attributed to pet fees, cleaning fee’s, and actual accommodations. I also enter in taxes collected - and a corresponding payment to the booking platform where remitted by the platform. This work is less than an hour a month for a property, and I do it monthly as part of my reconciliation process.
You may not need/want this level of data but I prefer to have it, and it helps operationally.
Documentation and Policies
Documenting procedures and establishing clear policies can save time and provide clarity during audits. This is a lesson I’ve learned from my corporate leadership experience; and just practically if we only do something once a month having it written down is helpful.
Some examples might include if you travel to your short-term rental for a work day - having a “work day” policy - what you and your CPA consider a work day versus a personal day might be helpful to document as its not spelled out in regulations and it is helpful to show consistency. Minimum of 6 hours was suggested by my CPA, so I document this for my business. Another example of documentation might be to have a process to reimburse yourself if you expend personal funds on your business - so submitting the receipt with a simple form to document the purpose for the expense is required to be reimbursed by the business. For example, I forgot my business bank card and purchased consumables for the rental on my personal account. It was a simple matter to document the expense as a reimbursement request and maintain good records.
Tool Selection
For beginners or those with a single property, simplicity is key. Use tools like Google Drive or OneDrive for organized record-keeping; have a file specifically for scanning receipts which you can later process as needed, documents to keep record of decisions and policies and maybe Tasks to keep on top of repeating operational requirements. My advice, esp. If you are not planning to expand is to fit STR business needs into your existing personal organization system and bookkeeping. Many allow you to tag expenses, so you can simply tag expenses or just set up a separate bank account for the business (which would be a best practice anyway).
Bookkeeping -
For my “books”, I tried several systems - Quickbooks, which is a powerful tool at a pricey cost. Wave, Xero, Stressa. While they all offer some great features - some free, some at a price, I landed on Quicken for Home & Business. I’d been using simple spreadsheets, but as my business grew I needed more functionality.
Quicken Home and Business is highly customizable to my businesses, functions essentially as an automated spreadsheet that connects to my bank accounts and works super well for my purposes - at a highly reasonable price. . Regardless, the tool needs to match how you work, so gaining clarity will be helpful for you as you elevate your ideal tool.
Project Management -
My organizational brain is actually housed in Trello - project management software. There are many similar tools out there, but keeping my task lists, notes, and links to files all in one place - a visually pleasing one, was important to me.
I’m able to keep documentation to support how I did something (did I put lightbulbs under consumables or repairs?) or when I did something (oh, yeah - I had them change the furnace filter 2 months ago) or just remind me on autopilot (Hey, its vender payment day). While I think Google Drive + Google Task or Google Keep can do the same thing - I appreciate the visual component of Trello (and its free).
Considering a Bookkeeper
While outsourcing bookkeeping can be beneficial, it's not essential for everyone. If you decide to go this route, ensure clear communication about responsibilities, deliverables, and expectations. Keep in mind that a Bookkeeper will default to accounting for tax purposes, so be clear on any additional categorization that might help you manage your business, such as my previous example to further categorize my supply category to allow more management and operations focused tracking.
Final Thoughts
Whether you manage your books yourself or outsource, remember that the ultimate responsibility lies with you. Maintain clear procedures and policies, and stay informed about the financial health of your business.
Managing the financial backend of your STR business doesn’t have to be daunting. With the right tools, routine, and approach, you can ensure that this aspect of your business runs as smoothly as your guest experiences.
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Hey Boss! I'm Kate, owner/founder of The CEO Host. If you are interested in taking a leap into short-term rentals - or have some questions about your existing business, my goal - passion, and career, is to help YOU succeed. I've coached hundreds of folks getting started or looking to optimize, analyzed more deals (and duds) than I could count, completed thousands of hours of education and training, attended conferences... So don't be shy. A good CEO knows to bring in expert help - and that's what I'm here for! Lets HOP ON A CALL and chat!
Categories: operations