Being a real estate firm owner, you probably have staff members to help you out with the various business and sales processes. Now, when it comes to managing the staff, there are various components that come into the picture. Their remunerations or the salaries, the number of hours they put in the office, their payroll, commissions must be managed effectively. The real estate accounting best decision an entrepreneur can make is to use cloud-based accounting software since it allows them to access financial information anytime, anywhere. Deskera, for instance, provides an entirely fresh perspective on accounting. It’s a platform that not only lets you have all your accounting elements in one place but also enables you to keep a tab on each of them.
NetSuite offers an advanced accounting software solution for large real estate businesses. Blurring the lines between personal and business funds can lead to complicated tax issues and potential financial confusion. For transparency and accuracy, it is essential to set up separate bank accounts for your personal finances and your business transactions. This allows you to clearly track your real estate-related income and expenses separately from your personal expenses. Remember, mingling personal and business funds can raise red flags during audits and may impact your ability to accurately analyze your business’ financial performance.
Real estate professionals looking for a hands-off basic bookkeeping and tax service should consider hiring Bench. Access Xero features for 30 days, then decide which plan best suits your business. In short, the right accountant will save you more money than they cost you. Derek Miller is the CMO of Smack Apparel, the content guru at Great.com, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy, Score.org, and StartupCamp.
For example, you can record the costs to stage a home, even if you don’t pay the stager until the following month. Accrual-based accounting is a better option if you want more visibility into the finances of your business, including future expenses and revenue streams. The real estate accountant prepares financial information for property management firms and real estate development companies. These accounting professionals may work for real estate companies or serve as public accountants. Real estate accounting is used for the purpose of property management which is a process that involves enormous sums of money. To record and track the transactions of these sums is referred to as real estate accounting.
If your business expenses aren’t clearly recorded and labeled, you may miss out on a significant amount of deductible income. If you lack clear balance sheets and P&L statements, it may take longer to file your business taxes. Good accounting habits can make the tax process easier and faster—while also optimizing your tax deductions. The purchase of marketing materials is a simple example, but double-entry accounting also becomes valuable when you start adding assets to your real estate firm.
In all of these roles, well-managed real estate accounting can make all the difference. Real estate agents have some of the most diverse expenses in business. They face costs ranging from landscaping services that improve curb appeal to lunches for clients and gifts for buyers. Realtors’ expenses can reach a few hundred dollars a month or into the thousands, depending on their listings, marketing strategies, and many other factors. Real estate agents also accrue these business expenses daily—which means you can easily get overwhelmed if you don’t have a system in place. For example, if you keep a marketing agency on a monthly retainer to maintain your real estate website, you will factor this expense into your OPEX.
Regardless of whether you choose the cash or accrual model for your real estate bookkeeping, you’ll want to establish a double-entry system for your accounting materials. By the time a property closes, there are dozens of transactions related to the realtor and their clients. This can be an accounting nightmare if you don’t have a clear system in place.
