Accounting Practices – What they mean
Accounting practices can be defined as financial activities of organizations or companies recorded on a daily basis. In case of real estate firm, real estate accounting practices involve the implementation of accounting policies concerned with a real estate firm involving the daily recording of financial data that is important for evaluating and monitoring of the concerned real estate firm’s economic activities.
Managing real estate properties requires real estate firms to follow the best real estate accounting practices for all real estate transactions such as retail land sale, real estate sales, property exchanges, sale of time-share intervals etc. Real estate accounting involves a high volume of transactions and costs. To get it done efficiently, real estate management companies must follow the best accounting practices. Let’s have look:-
Best Accounting Practices – An Overview
As such, utilizing the expertise of firms involved in property management services is the best option that can help the firm in structuring the financial operations in a way that ensure compliance with property management accounting basics.
The following best practices in terms of accounting for real estate would help real estate firms in achieving financial acumen and these include-
1. Maintaining reliable and timely financial records
Careful record keeping of the financial transactions related to real estate business allows the accountants to troubleshoot the potential problems and to respond quickly to the inquiries of managerial hierarchy such as-
2. Reconciliation of Bank Accounting Statements
Bank reconciliation is a necessary part of property management accounting. Bank reconciliation helps the real estate firms in finding out the duplicate entries, bank errors, missing entries and other typical errors. Bank reconciliation helps real estate firms in avoiding lousy bookkeeping.
3. Separation of Trust Funds
It is important to keep company and personal funds separate from the trust account funds as money in these funds belongs to the client or in case of security deposits to the tenants.
It is illegal in many states to coalesce funds as some states have laws that dictate more specifically, as to how funds should be handled. It is better to avoid depositing company’s operating funds into trust accounts that handle property owner funds or tenant security deposits.
By following the above-mentioned accounting practices – a real estate firm can keep its books clean that in turn would help them in reducing operating costs, administering payroll, manage employee benefits and enhancing its profitability in the long run.