In our last blog we showed how to easily systemise your property business. We explained how you need to have procedures and methods in place to minimise disorder and to ensure that you have control over your cashflow.
In this blog we will talk about streamlining your income by taking out the peaks and troughs.
To make your cash flow more predictable you need to have all your tenants paying rent on the 1st of every month. As you know most tenants have limited cash available, so here’s what we suggest:
How many of you start your rental date from the day your tenant moves in?
Let’s look at an example:
A tenant moves in on 17th Apr and they will pay 1 month’s rent (plus deposit) until 16th May. That way you always get your first month’s rent in full so that you are ahead of the game. The tenant will then pay pro rata from 17th May to 31st May and after that the full £500 on the first day of the month.
Let’s look at the numbers:
The first rental payment will be £500 taking them from 17th Apr until 16th May. The second payment is a pro rata payment of £230.14, calculated as follows:
£500 x 12 = £6000 (the monthly rent multiplied by 12 months giving the annual rental income)
£6000 / 365 = £16.44 (dividing the annual income by 365 gives the daily rental income)
£16.44 x 14 days = £230.14 (the remaining days of the month 17th May – 31st May)
From 1st June onwards the rent of £500 is payable on the first of every month.
People may argue some tenants get paid on a strange day of the month but if the quality and location of the property makes it a desirable place to live, then most tenants would be happy to do this.
The reason for doing this is so that you know that by the 4th of every month (taking into account weekends and bank holidays) who has and who hasn’t paid their rent.
In our next blog we will talk about streamlining your outgoings.
By making sure that your outgoings and incomings are streamlined you are more in control of your business finances.
If you have any questions regarding your property finances or business finances in general we offer a free 30 minute Skype or telephone call. Contact us at the website below or call 0121 740 0132
Positive Accounting Ltd – Looking after the business owner