While the global real estate industry seems to be growing at a promising rate, companies in this industry have been facing some challenges of late, such as credit crunch, reduced lending, reduced construction, slowdown, reduced prices of commercial properties, price mismatch between sellers and buyers, less constructions taking place, etc. As per a report by Forbes, the industrial real estate sector is projected to perform better in 2018 as compared to commercial real estate. In fact, the global real estate industry revenue is projected to increase in the next 5 years.
As the industry offers several opportunities for high volume transactions, it is important that players in the global real estate market keep a check on the inflow and outflow of money, almost at a regular basis. However, companies often find it difficult to maintain books of accounts themselves. Bookkeeping regularly can help you stay on course and paint an almost accurate picture of your financial standing.
This is where the art of impeccable real estate bookkeeping comes into play. When talking about exploring ways for efficient real estate bookkeeping, often a confusion arises between actual bookkeeping and accounting. Although important, bookkeeping is a small part of the bigger picture of accounting. The world of accounting for realtors encompasses a wide variety of jobs including, but not limited to, profit and loss evaluation, set up and execution of financial statements, filing tax returns and possibly, even financial analysis of the company. Below are a few in which you can go about effectively managing your bookkeeping in the real estate sector.
There are plenty of simple accounting tips for real estate professionals such as ensuring all bookkeeping tasks are up-to-date and periodic financial reviews are conducted to help ascertain goals have been met. However, there are certain tips for efficient real estate bookkeeping, which ensure business success.
Let's look at the important aspects that you must consider -
Bookkeeping is a meticulous process and it must be ascertained that all books are updated regularly to minimize error and provide greatest visibility. Often, smaller businesses tend to overlook or ignore bookkeeping because of the tedious nature of the task. If you think maintaining records or undertaking these mundane procedures is not for you or your business, your bookkeeping can be outsourced to organizations or service providers which not only take care of your basic bookkeeping needs such as account maintenance, ledger services, forecasting and budgeting, but also cover a lot of accounting and financial related services as well, such as, financial reporting including risk assessment, profit and loss statements and maintaining expense ledgers and balance sheets.
In the real estate industry, maintaining a perfect record of all transactions is important. The real estate industry deals with copious amounts of money at a fast pace with quick and powerful decision-making powers. In order to ensure that all transactions move smoothly, it is vital to have a pristine record book. Your bookkeeping can be as simple as Microsoft Excel spreadsheets, and maybe a tryst with QuickBooks or more sophisticated, complex options, such as FreshBooks, BusinessWorks, Buildium, etc.
Both approaches have their pros and cons and it is about finding the best fit for your business. The whole point of having your records perfectly in place is so that you can analyze your growth path and processes and chart a more suitable and effective growth path at every junction or optimize processes easily. A well-maintained record book also helps with your yearly tax filing or deal with any surprise IRS audits that you might encounter.
The real estate industry is riddled with several small costs going out in all different directions. It is important to maintain a neat record of all such costs. Equally important is to classify costs correctly. Hard costs are the easier batch. They are generally directly associated with the product and usually make up for 70% of the project costs. They are tangible entities and usually a good estimator will be able to arrive at this number early on without much margin of error. The remaining 30% of costs has to be carefully analyzed and classified as needed so as to avoid future error or pain.
Technology is key in today's day and age. Making the use of technology seems like the most obvious step. Employ bookkeeping software such as Expensify, Zoho Expense, or Abacus to help monitor data, keep a close track of records, and store eons of data in a fashion that is easily accessible. You could also use apps like Evernote to create an efficient online filing system and do away with age-old physical filing cabinets. A digital filing system would not only help with saving physical space but could also have a positive contribution to the environment by going the paperless route. Technology also helps quicken processes while making them less prone to error. Records could be maintained more easily and can also be fetched at the touch of a button.
With a lot of families entering the real estate business, the thin line of distinction between "professional" and "personal" is slowly diminishing. This holds doubly true when it comes to accounts in real estate, especially for a smooth functioning of tasks. Hence, it is advisable that family members maintain bookkeeping of real estate transactions regularly. Even small items, such as phone bills for official calls are best paid by a business account and a company debit card to avoid any mix-up between the two.
Trips to a CPA are essential in this process. A yearly visit, or preferably, visits at least twice a year, are highly recommended. The bookkeeping record will help analyze the situation for any tax liabilities. Doing timely tax reviews will help catching issues before the year end with enough time to address any problem that may arise.
Very often, the importance of real estate bookkeeping has been likened to that of a scoreboard in a sports game. Hence, it is important that it is managed accurately with the help of software. Some software tools make the work simple and easy for bookkeeping, and it is worth to invest in.
Here are some tools that you could consider investing in -
Bookkeeping in real estate is an essential aspect to all real estate management firms. No matter how good your sales might be, it means nothing if you are not able to track sales, profits, and essentially all records of the transactions made. If you have decided to undertake the task of bookkeeping in-house, then it must be done religiously. Records should be updated more regularly, such as weekly, or perhaps, even daily.
Considering the paucity of time real estate agents have, it is advisable they outsource the entire task of bookkeeping to a professional agency. This will help them focus on their core business goals. Benefits of partnering with a service provider for outsourced real estate bookkeeping services are as follows -
At Outsource2india, we provide a wide range of bookkeeping services, some of which are creation and management of general ledger, balance sheet, trial balance, financial statements, expenses ledger, and more. Our 20 years of vast expertise in finance and accounting services have brought us accolades and support of loyal clients who have been our partners from years. Our well-trained team and top infrastructure enables us to deliver cost-effective services that mostly surpass the expectations of our clients.
Contact Us to outsource your requirements for efficient real estate bookkeeping services. Our experts will follow-up with a customized quote within 24 hours.