Top 10 Real Estate Accounting Practices
Ensuring Smooth Business Workflow
Recently, the demand for industrial and commercial infrastructure is on an uptick. Statista predicts a 4.8% CAGR growth rate between 2021 and 2030 in the revenues of real estate companies worldwide. By 2030, the real estate market estimates an increase to 14.6 billion US dollars. In addition, the impact of market development shortly will also saturate the residential real estate market in specified countries and cities.
Lately, real estate is observing several challenges such as credit crunch, lesser lending, price mismatch between sellers and buyers, etc. As the industry gives several opportunities for high-volume transactions, the global real estate players need to keep track of the outflow and inflow of money at regular intervals. Maintaining books of accounts for these huge companies is a challenge. With regular bookkeeping and hiring real estate accounting services, your business can stay on course and can craft a perfect picture of your financial position.
Need for Real Estate Accounting Services
There are real estate accounting firms to help you file taxes and keep records of all the financial data. Daily, real estate agents deal with a gamut of clients including conducting several open house showcase properties that need to be sold. Managing properties for clients and offering valuable real estate services both are considered the core jobs.
Looking at such a high level of engagement in various activities, it becomes difficult for real estate agents to manage the accounting processes of their company. Moreover, the agents lack enough qualifications to look into accounts and have no time to perform the complex financial accounting procedures for the company.
Looking at this scenario, it becomes necessary to outsource the whole bookkeeping and accounting task to real estate accounting firms that are professional experts in their field. With real estate accounting outsourcing, you can focus more diligently on your business goals.
In addition, real estate client accounting services enable you to compare your financial performance over some time, calculate your tax returns, estimate your business cash flow and make bill payments on time. Below are the top ten best practices followed by accounting industries to ensure effective management of real estate accounting services
Top 10 Effective Practices For Managing Real Estate Accounting Services
1. Regular Account Updates
Bookkeeping is considered a strenuous task with an expectation to maintain high accuracy. By updating the books regularly, you can spot and weed out sub-standard clients and enhance your revenue generation by focusing on high-quality clients. It includes proper accounts maintenance, ledgers, and balance sheets - profit and loss statement, budgeting, and risk assessment. You can outsource every service to a well-qualified and highly experienced general accounting company.
2. Accuracy in Account Maintenance
Real estate is everything about the voluminous amount of money transactions, ensuring perfect record maintenance of outflow and inflow of cash. It leads to organizing proper records that can show the profit and loss in gist, further making it easier to check the regular growth and prospects. Accurate records will help you perform seamless annual filing of tax returns.
3. Proper Cost Classification
Another important practice is checking the expenditure levels of your agency. Because construction costs make a huge impact on the returns on investments. Therefore, practice doing a thorough analysis of the construction budget before you decide to invest anywhere. The tangible hard costs are easy to record.
Hard costs are nothing but construction and property development costs. They include material and labor costs for constructing the property and comprise 70% of the total cost. Whereas soft costs or intangible costs are the expenses indirectly associated with the construction and include permission, planning, inspection, and legal fees.
4. Leverage Latest Technology
Make sure you use the latest technology-driven accounting software that can process voluminous amounts of data and can also provide better data tracking across all the marketing platforms. With cloud-based accounting software, you can manage real estate accounting procedures with many benefits.
You can ensure data security and a secured gateway to dealing with recorded and accounted transactions. This will enable zero compromises on protecting your critical data related to business. Moreover, this option will reduce costs to a greater extent as remote servers will save the company costs of servers. There will be regular network backups with no data losses, no malfunctioning, or hardware failure.
In addition, cloud technology provides convenient outsourcing for real estate accounting services. This process enables great flexibility as anyone can use it from anywhere. With a single click of the button, multiple users can access it. You can print the receipts and invoices in a single go.
5. Keep Separate Business and Personal Accounts
This practice gives you a long-term benefit. By setting up a separate bank account you can track each of the business transactions easily. And further, this ensures accurate bookkeeping management. Also, you can easily file the tax returns at every year's end. To avoid discrepancies and errors, try understanding the difference between business and personal accounts. A clear distinction between these two will help you pay the phone bills for official calls by a business account. With a separate business account, you can make and receive payments leading to trustworthiness with the clients. A separate business and personal account will also enable easy connection with the accounting software giving you relevant insights.
6. Conduct Tax Review Sessions
It is very crucial to visit a local certified public accountant two times a year. Get the relevant information about your country, state, and city regulations along with real estate rules and compliances. Also, this will help you find ways to reduce your tax liabilities and get the best tax benefits. Keep a check on the tax reviews periodically, especially before the financial year begins. This will help you with having enough time to take care of unexpected financial issues.
7. Establish Accounting Chart
Keep a chart of accounts with the list of assets, liabilities, income, expenses, equity, etc. By maintaining these records you can get organized and label financial transactions. To create a suitable chart of accounts, maintain an excel spreadsheet or hire real estate accounting services that can give you viable solutions to help you put it all together.
8. Choose a Suitable Accounting Method
Generally, there are two main methods of accounting namely cash and accrual. With cash accounting, you can keep records of the money that comes in and that goes out. Accrual accounting will record the revenue and expenditure as and when they occur. Most real estate accounting firms will use cash-basis accounting. However, you need to be very careful not to lose track of the revenue and expenses when they occur. That is where you need professional accounting assistance from experts who can help you streamline your revenue and expenditures and give you necessary tips on money-handling and money coming in and going out.
9. Regular Account Reconciliation
To stay in the business of real estate you need to keep track of the daily transactions and avoid unnecessary discrepancies. With real estate accounting services, you will get the monthly reconciliation on regular basis to help you find out the typos, missing entries, duplicates, and any bank errors. For accurate bookkeeping and accounting, you need assistance from experts who can create reconciliation every month. They have the right tools and techniques to execute these tasks within the given period.
10. Stay Cash-Flow Positive
In the real estate business, with bookkeeping and accounting, every cash expenditure is not meant to be an expense. For example, a security deposit refund will move the cash. However, it will go into the liability account. Based on your company books, you can buy huge and expensive equipment, vehicle, computer, etc, and book it as a fixed asset. In cash basis accounting, you keep your business in black and still have a positive cash flow.
We Help You Discover Ways To Optimize Accounting Processes For Your Real Estate Business!
At Cube Accounting solutions, we offer a broad range of real estate accounting services such as balance sheets, general ledger maintenance, trial balance, financial statement, and more. Accounting is a very meticulous procedure making it difficult to analyze the progress of your business without its presence. As an entrepreneur, you need a proper understanding of compliance and accounting with the local legal entities. By outsourcing real estate accounting services to the most efficient and skillful professionals, you get a cost-effective model at an inexpensive price. We are the top accounting firm in USA and are backed up by highly qualified, experienced, and proficient real estate accountants who can deliver quality services and financial gains no matter in which part of the world your business is located.