paperwork nightmare

Hi All,

I'm a beginner investor and am loving all I am learning. I've now been convinced property is the way to go and previously dumped all shares for property (which worked very well!). Everything I've learnt is very straightforward and totally logical.
I have had one major problem though - my paperwork and recordkeeping is TERRIBLE and a big headache which I can never seem to get perfect.

I've been keeping 5 folders for each financial year, 1 for work, 1 for misc, 1 for shares, 1 for bank statements and 1 for property (only have 2 at this stage). At tax time I dump the folders on my accountants desk and he does my tax, gives me a printout with the figures for each taxpack item and away I go.
I guess you can figure out that this is not ideal and I need to reorganise (again!) to optimise this.

I was wondering if anyone wants to discuss their methods of filing and organising all their paperwork?

How do you categorise? Divide into categories and use seperators for financial years?
Or divide into financial years and use seperators for categories?

And what categories do people use?
And do you group by IP or group by type of item (eg keep all rates notices together regarldless of IP, or keep all IP items together regardless of type of item). This has perplexed me most.

And if you have costs that go across more than 1 property eg if they are sharing a loan where to put these things?

Generally I've been thinking it would be best to keep things organised around the way tax works, which would be helpful in an audit.
It's my understanding that the tax pack doesn't care about individual properties just income and expenses as a whole - ie my property investment as a business is this correct?
But I'm also thinking that as I get more and more of these properties it will be too much and will REQUIRE some sort of breakdown based on IP otherwise I'll start forgetting which borrowing costs I've already claimed etc.

And on yearly returns I've been thinking of doing a summary spreadsheet of what I'm claiming for that IP and wondering what format. For example my accountant is claiming things but his summary isn't broken down enough and it's hard to tell what makes up the rental property expense deductions.

Looking forward to hearing anyones ideas, it would be nice to find a perfect system for handling this that would not have to be changed later. Those of you with many properties ie 20+ how do you do it? it must be very time consuming and stressfull.

Dan

Hi Dan

We use a set of files for each property. For our last few IPs we bought land and built, so for these the files we use are: Land Purchase (everything to do with, obviously, the purchase of the land - contract, legal correspondence, etc. etc.); Construction (all bits and pieces involving the house construction - contract, correspondence with builder etc. etc.) - these files are more or less closed once the house becomes livable; Property Management (all statements from and correspondence with our property managers); General Expenditure (this is where we file our rates notices, insurance, water, land tax and all other payments that the property managers don't handle); and Mortgage Loan (loan contract and bank statements). Our IPs before those were established houses, so instead of Land Purchase and Construction files we have one file - Purchase Related, plus the others. I set this up 8 years age when we first started investing in IPs and it's worked fine for us.

I also keep a spreadsheet on the computer for each of our IPs. Columns are: Rent; Misc Rec (payment by tenant for water etc.); and all the expenses - Agent Fees, Advert, Maint, Insurance, Emergency Service Levy (Adelaide), Water, Rates, Land Tax, Bank Charges, and Interest. I also have a separate column for Capital Expenditure.
These are maintained on monthly totals in quarterly blocks (we're self-employed so we have to submit quarterly BAS and IAS to our friends at the Tax Dept). From these it's easy to work out how individual properties are performing (expenses as a % of rent, gearing etc.).

At the end of the fiscal year, I print out the spreadsheets for each property, and hand these to our accountant. All expenses are accounted for, and all receipts in their proper place where they can be accessed if necessary.

Very long-winded - sorry - but this is how we do it, and it has worked well for us.

Good luck.
Des

Hi dantheman,

As discussed below we use a small database program that collates all expenditure.

We also use a scanner to store documents that may need to be referred back to such as tax returns, offer & acceptance documents, settlement documents and have a devoted data partition on a hard drive to store all of this. Getting off the track a bit, every couple of weeks the contents of this partition are backed up to cd rom twice, with one copy kept at home and another copy kept at work. If anything happens to the pc between backups, only a couple of weeks worth of receipts needs to be re-keyed.

With bank account statements, we download the data from our bank's internet banking site in csv format.

Like Des, we have manila folders for "Documents related to purchase of <property>", "Renovation receipts for <property>", "Expenditure for <property>". We will shortly be moving to a larger filing system as the current one draw setup is a bit inadequate.

Hope this helps

Glenn

Filing Systems

I too am terrible at filing. Even though in a former life many moons ago I was a Personal Assistant. I found it nightmare even then, and I still haven't really mastered it.

I have my own business as well so keep all that stuff in a separate filing cabinent. The only thing is, I seem to generalise my folders too much so when I want to actually look up something I never seem to be able to find it. When I file things in an orderly fashion it doesn't work for me. I now have what I call "an organised mess". I don't have wallpaper in my office I have files, but at least I can find them!! haha.

I use to do everything on Excel but I found it time consuming, and there was alot of double entry that I had to do. I bought Quicken recently, and although still quite basic for my needs it will do me for now. It's really easy to enter the data, you just enter new data at the bottom and it pops into the correct place in your database. Although some thought does have to go into the Caterogies you're going to use.

But I've found it's really good for creating reports for anything you may need to know. Like if you need to know how much petrol you've spent in the last 3 months or whatever, you just ask for a report - and whammo - it's there.

At the moment, all my property stuff is in a box folder, with manila folders inside it, Legal, Expenses, Renovation info, tenancy agreements etc. I keep receipts in a A4 envelope and everything month empty it, staple them all together and print out a cover sheet titled e.g. May 2003 Receipts/Expenses and then put that in another folder. So if I need to find a receipt for e.g. petrol $20.00 in April, I just go to the April 2003 Receipts/Expenses folder. It seems to work OK.

I keep all my work expenses for the upcoming month together on a bulldog clip and hang it on the wall and everytime I get a new receipt for the month I just put it on the wall. At the end of the month I put it in a folder with a cover sheet.

All my bills to pay for the month are also hanging on the office wall off bulldog clips and when I've paid them they get transferred to the Expenses/Receipts bulldog clip etc.

I now permanently hang all my GST returns, PAYE returns, any tax returns that I've paid off the bulldog clips, because then they're all together and at least I can find them.

I find this the easiest way, it may sound stupid, but it seems to work for me!!


Cheers
Queen Bee

Thanks for the replies ppl,

I've been using quicken which is good, I find it very usefull to alert you to how much money you are wasting on eating out, going to the pub, fast food etc and enforcing your savings goals.

I'll take those filing ideas into account and try and devise a good method that suits my situation.

If you scan things into the computer or use CSV text files from your bank for statements will the ATO accept this as documentary evidence though?

Dan

DTM,
small files ...drop folders in filing cabinet.
mid-files ...marbig box files 80080 ..kmart
large-files ...marbig archive boxes ...kmart.

after a few years you'll have enough for a
room divider . Not jokin' !!

LL

Dantehman asked "If you scan things into the computer or use CSV text files from your bank for statements will the ATO accept this as documentary evidence though?"

My understanding with this issue is that you must have the 'source document' somewhere to show how you can account for the info (i.e. the orginal documents and the bank statements that bank would have to send out to ya anyway.)


Danny D.

Hi Danny,

No one is suggesting that the original entry be destroyed, it is just easier to look up documents on the computer than go looking through filing cabinets when referring back.

Glenn

Thanks guys for clarification.

I use quicken to do my personal accounts etc but wouldn't it be nice if you could eliminate the paperwork too!

Dan