Are you a busy real estate owner focused on maintaining and increasing your client base? Yes, well that’s good to know! But what about your relationship with business vendors that play an important role to boost the overall efficiency of your business?
Particularly your accountant! Real estate bookkeeping and accounting are inevitable for your organization, enabling you to stay on top of money and avoid extreme financial crash situations.
Many realtors prefer to Do It Yourself (DIY) approach to manage their accounting books, though it is good, due to lack of expertise, you may face difficulties at a certain point. However, many business owners are wasting a lot of time doing their bookkeeping on their own, time that could be spent on tasks related to running and growing their business.”
According to a leading accounting outsourcing firm- Cogneesol Inc. stated that: “With over 10 years of experience, we’ve observed that around 85% of the time when we get DIY books from small business owners, they are in horrible condition.” In this matter use an online accountant like https://www.wizzaccounting.co.uk/.
Who requires real estate accounting?
Well, it is obvious that real estate business owners require real estate accounting. This statement might seem audacious to you, but every individual that runs a business has to deal with numbers to stay ahead in the competitive market. But many face problems while handling these numbers and reasons are countless behind it.
You are applicable to reap benefits of an accountant if you:
- Run a construction firm
- Manage an investment trust
- Provide commercial sales
- Provide residential sales
- Manage real estate for clients
- Run a real estate agency
You can perform excellently in your business if you take care of your books in a better way- but many avoid this part because of lack of time and resources.
Understand the common issues in accounting
Accounting is beyond managing numbers; it enables realtors to keep their entire real estate business on the right track, which is way more important than you may realize at the outset.
Being a real estate business owner, you have to meet certain accounting regulations, which are not meant to increase your burden, but these rules intended to boost the real estate’s contribution to the GDP. It also gives confidence to real estate business owners for generating more revenue and overlooking past mistakes to avoid future financial crises.
Some of the instances related to real estate regulation include offset expenses, the inheritance of taxes, and a lot more.
Some effective tips to make your real estate accounting less stressful and more productive:
1. Keep dedicated bank accounts-
You might have seen this tip in so many articles across the web, but what matter is how much seriously you have considered this point?
Did you open a dedicated bank account for your business purpose? I can bet you; the small organization has not yet taken this step!
See what happen is- when you mix your personal and business accounts, so while sifting through your business expenses- you’ll be in turmoil. This will become the biggest time sucker for your business, which you cannot afford.
Make your life simple by dedicating bank account for business and personal, so when you receive the statement, things would be less stressful.
However, lastly, everything depends on you, how you want to structure your finances because the actual concern is you organize it well.
2. Optimize your smartphone well for managing accounts-
With the advancement in technology, people can get the work done with a few clicks on their smartphone. We always recommend real estate business owners to use their smartphone as much as possible because they are on the go always.
In such a scenario, carrying your Excel spreadsheets and noting each transaction happened doesn’t make sense. You should have access to immediately pay any bill or generate a receipt for the vendor, etc.
Therefore, accounting software such as QuickBooks online or Xero provides you with a fast and responsive mobile app that can make your life easier.
These tools are compelling and flexible, allowing you to review your balance sheets or invoices whenever you want- with an internet connection- anytime anywhere.
3. Don’t forget recurring transactions-
Recurring transactions are absolutely predictable as it happens every month so automating the recording of recurring transactions is an ideal way.
You can utilize QuickBooks for the same. It is easy-to-use and provides you with accurate financial statements that further help you to visualize the financial position of your company.
While setting up recurring transactions in QuickBooks, prefer to set up the following transactions first:
- Depreciation– Every business depreciates the value of their fixed assets that include land, property, and machinery. However, in the real estate industry, you have to depreciate the value of different properties.
So to set up the recurring transaction for depreciation in QBO divide the building basis by the number of years and then divide that number by 12 months.
In this way, you can calculate the actual depreciate amount by inputting the acquired value in specified accounts and amount for debit and credit.
- Amortization– Setting up the recurring transaction for amortization is vital, for which, you should know the sum of the cost incurred to acquire a loan and the loan period. Because loan fee involves many expenses such as credit checks, origination fees, appraisals, etc.
By dividing the loan cost by the loan period, you can get the amortization by further diving everything by 12 months. When you will input this in a recurring transaction you will have to specify accounts and amount for debit and credit.
4. Seek the help of accounting experts-
Many real estate owners are not from accounting and finance background or don’t have any technical knowledge of using accounting software. Such issues often take real estate business owner in a state of chaos and books in a mess.
While doing things on your own, may land you up in trouble. Thus, it is highly recommendable to hire real estate accounting firms or CPAs to manage the books of your real estate business.
These firms have a qualified and experienced accountant that are well-versed with your business domain and accounting principle, enabling you to be more proficient while handling any financial situation.
Experts can guide you through different laws, related to taxes, or employee benefits, etc. so that your business should not be on the radar of IRS.
Once IRS will feel negative about the business financial statement they might knock your door for audit during tax season, charging you heavy penalties and fines. Don’t make your tax season a nightmare!
How can you find the right company or CPA for your real estate business?
As there are countless accounting firms and CPAs available for your real estate business, it becomes quite challenging to find a reliable company. If you are in a similar situation, then consider the following factors:
- The reputation of an accounting firm should be good in the market
- Ask for referrals
- Cross-verify about the company with their previous clients
- Look for specialization in the real estate domain
- Read online reviews
- Check the technology and infrastructure of the company
- Steps your partner takes concerning data security
- Availability and responses for your queries
- Check with their pricing plans and match it with your set budget
You can make your real estate accounting less stress by hiring an accounting expert, but don’t rush! Be calm and asses the goals of your real estate business then choose the company that can meet your expectations within your budget.