Updated: Aug 2, 2019
It's important to establish a fair system of setting, collecting, holding and returning security deposits.
In conjunction with this, inspect and document the condition of the rental unit BEFORE the tenant moves in to help avoid disputes over security deposits when the tenant moves out.
Be aware of your legal responsibilities, per state law, to help avoid legal disputes with your tenants. NOLO.com has a great resource area for finding some of this information.