We are commercial real estate owners and we use QuickBooks for our bookkeeping. We want to incorporate Tiller as a supplement, just see we can readily see data, charts, graphs, month-to-month comparisons, etc.
The first columns in the Categories tab on Tiller are Categories, Group, and Type. I’ve added our common expense categories. But there are some I do not know how to categorize on Tiller. The default types on Tiller are Income, Expense, and Transfer.
For example, in QuickBooks, besides Income and Expenses, there are the following types:
- Assets—which includes categories like Land, Leasing Commission, Loans Receivable
- Liabilities—which includes categories like Security Deposits, Loans Payable, Accounts Payable
- Equity—which includes Capital Contributions and Draws
How should these be categorized on Tiller? Should new types be created? Is it better to just list them as expenses for our purposes?
Hi @ksh24, Welcome! I’m not a QuickBooks user and I’m not an accountant, but I’ll offer an unqualified opinion based one using Tiller to manage RE investments and transactions, having switched from another platform and currently working through a similar exercise. In general the first thing that comes to my mind is an accountant’s favorite phrase – “it depends” (no offense to the CPAs out there, it’s one of my favs as well).
The classifications that you’re mentioning with the major headings Assets, Liabilities, and Equity are Balance sheet items and my thinking is that if you have funds exchanging in or out of your business under those categories, the point is that often times they aren’t hitting the Income statement. And to me that means they are frequently/mostly Transfer items. I say mostly because it really depends on your business and the details for each item, so you may need to consult with an accountant. It depends on your use case for Tiller - ex. if you are primarily monitoring cash flow, every strict bookkeeping transaction may not be necessary.
A Security Deposit may be one of the easier ones to talk about. If you own the real estate and someone is paying you a refundable Security Deposit contingent upon satisfactory lease performance, then you would likely transfer it to a Liability account for a later disposition. That’s why for me a Security Deposit is a Transfer type in the Categories tab in Tiller.
To my understanding, in Commercial RE a leasing commission can be capitalized and amortized in certain cases (hence the Quickbooks heading of Asset), so that one is probably either a current expense or a transfer.
A loan payment is divided between principal and interest payments - the former is a reduction in the liability account (i.e. a transfer) and the latter an expense item.
Bottom line is that these items could be interpreted in more than one way and the good news is that you have a lot of flexibility in Tiller to manage it the way that works for your use case.
Thank you, @KyleT, that was helpful.
How would you categorize capital contributions (transfers in) and draws (transfers out)? What type, group, and category are appropriate?
The issue is that we co-own many of our properties with partners. On Tiller, would we use the same category for our capital contributions and draws that we would for that of our co-owners?
Let me explain. Let’s say Property X is owned by Company A (50%) and Company B (50%). The Property X account has $500 in it. A draw is made, and each partner draws $100 from the account, leaving $300 in the Property X account. On Tiller, I will see the $100 being drawn from Property X (transfer out) and another transaction for the deposit into Company A’s account (transfer in). However, while I will see another $100 being drawn from Property X for Company B, I do not manage Company B’s account, so the transfer-in transaction will not appear.
In other words, Company A’s draw remains part of our books; it is going from one account we own (actually, co-own) to another that we own. But Company B’s draw is a transfer to an account that we do not own or have any interest in. In a way, it is like an expense (correct?).
Please let me know your thoughts.
You’re welcome @ksh24 - again I’ll preface I’m not an accountant, but my opinion and how I run it on my transactions is that I have categories labeled Owners Distributions and Owners Contributions which are both classified as Transfer group and Transfer type. These are again Balance Sheet items in my view and therefore Transfer items. It doesn’t really matter whether I transfer to my own account or a co-owner account, I still wouldn’t see that as an expense. I suppose you could use a Tag or place a note on the $100 that is going out to Company B or just modify the description as “Distribution/Draw to Company B” for your own tracking purposes. Hope that helps.