If you are a letting agent you may wonder how best to account for the collection of rent and the remittance of the net payments (less fees) to your landlords. This guide covers the following points:

• Rental income received from the tenants
• The deduction of management fees from the gross rent received
• The payment of the net balance to your landlords

Here we assume the landlord is the client, and we isolate all transactions for a given property in a loan type bank account. This holding account can then work as a statement that you can issue to your landlord, showing all relevant movements of money. The rent you collect is not your income: only your management fee is.

If you are a landlord recording statements from your agent, see Recording Letting Agent Statements and Fees (Standard Method) instead.

Before you start

• A client record for each landlord (Step 1) and a Property Holding Account for each property (Step 2)
• The example uses rent of 1,000.00, a management fee of 100.00 and a net payment to the landlord of 900.00

The Steps

Step 1: Create a client record for each landlord

1. Click Sales > Create to open a new invoice.
2. Click New next to Client Name.
3. Enter the landlord’s name in Client Name. The other fields are optional.
4. Click Save Client.

You can add more details to the client later, such as an address or email address.

Step 2: Create a Property Holding Account for each property

Create one loan account for every property you manage. It tracks the money received from the tenant and paid out to the landlord, and is referred to below as the Property Holding Account.

1. Click Banking > Create > Loan Account.
2. Select Other from the Bank Name list.
3. Leave Account Currency as GBP British Pound.
4. Enter the property address in Account Name, for example 29 Acacia Road.
5. Click Save Details.

The new account appears in the Loan Accounts group on the Bank Management screen, with a balance of 0.00.

Step 3: Tag the tenant’s rent as a transfer to the holding account

1. Click Banking and open your business bank account statement.
2. Find the line for the rent received and click Tag Me.
3. Select Bank transfer between accounts.
4. Choose the Property Holding Account from the Transfer from account list. The list starts on your first bank account, so you must change it.
5. Click Continue.

QuickFile creates the matching line on the holding account straight away.

Step 4: Invoice the landlord for your management fee

1. Click Sales > Create.
2. Type the landlord’s name in Client Name and pick the client from the list.
3. Enter a description such as Management Fee - 29 Acacia Road, the fee in Unit Cost and 1 in Qty.
4. Choose the VAT rate that applies to your fee. The example uses a 100.00 fee with 0% VAT.
5. Click Save Details.

Step 5: Pay the fee invoice into the holding account

1. Open the invoice preview and click Log Payment.
2. Tick Pay in full, or enter the Amount.
3. Choose the Property Holding Account from the Paid to list. The list starts on your first bank account, so you must change it.
4. Click Save.

QuickFile shows “A Payment of GBP 100.00 has been attributed to this invoice.” and the invoice is marked as paid in full.

Step 6: Tag the net payment to the landlord

After you pay the net amount to the landlord from your bank account, tag that money-out line as a transfer to the holding account.

1. Find the money-out line on your business bank account statement and click Tag Me.
2. Select Bank transfer between accounts.
3. Choose the Property Holding Account from the Transfer to account list. The list starts on your first bank account, so you must change it.
4. Click Continue.

Final Points

The balance on your business bank account should now match the actual balance remaining in your physical account after all rental income and management fees are accounted for.

The balance on the Property Holding Account should also net to zero, with three entries for the tenant monies received, the management fee and the net amount transferred to the landlord.

This schedule of transactions can form the basis of a statement for the landlord. Open the holding account statement and click Export Data to export the lines.

Troubleshooting

The wrong account is selected in the Transfer or Paid to list

The Transfer from account, Transfer to account and Paid to lists start on your first bank account. Choose the Property Holding Account before you continue or save.

The holding account balance is -100.00, not 0.00

The balance only returns to 0.00 once the management fee invoice has been paid into the holding account (Step 5).

Related topics

For more on recording landlord and agent transactions, see the guides below.

• Bookkeeping for Landlords - Recording Letting Agent Statements and Fees (Standard Method): The method for landlords recording the statements and fees their agent sends.
• Bookkeeping for Landlords - Recording Letting Agent Statement and Fees (Alternative Method): A second way for landlords to record agent statements and fees.
• How to record disbursements: Record costs you pay on behalf of a client without treating them as your income.
• Landlord Bookkeeping Basics: Set up QuickFile to record rental income and property expenses.
• Projects in QuickFile: Tag invoices and purchases to report on each property.
• Limited Company Bookkeeping - The Basics: An overview of everyday bookkeeping for a limited company.