Real estate companies have to deal with hefty transactions and bills. As a result, accountants of real estate companies are always under pressure.
Accounting errors can be quite costly for real estate organisations in the long run. This is why accountants cross-check every entry on the balance sheet to eliminate any errors.
Cross referencing is an age-old technique used by accountants to verify the entries in their books. Gone are the days when compliance laws for accounting weren’t so strict. At present, real estate agencies can get into legal hassles if bookkeeping errors are discovered.
Read on to know about the purpose of cross referencing for real estate companies.
Cross-referencing can be defined as relating an entry in the accounting book to its source. You can explain how a particular entry has arrived in your accounting book with cross referencing.
It is used when line items in the accounting book have a direct relationship. For example, real estate accountants have to organise receivables and payables separately. With this feature, accountants can match receivables and payables for each real estate customer.
Consider a real estate customer who has paid for a property in instalments. For the last instalment, you will provide a receipt to the customer, informing them about full payment.
However, the final receipt will be linked to past payments from the customer. In such a case, cross-referencing can help accountants identify whether the customer has paid all the instalments or not.
At the end of the month, accountants spend hours reconciling payments from different sources. Cross-referencing in accounting can decrease the manual burden on accountants during backtracking/reconciliation.
For cross-referencing, accountants mark the related entries with the same letter/number to find them quickly. Usually, a reference number is provided for a unique transaction. Any related entry in the future will have the same reference number.
The balance sheet of a company consists of many invoices that are interrelated. Accountants can match them via the reference number using cross-referencing.
A real estate company has to deal with many invoices daily. Cross-referencing can thus be useful for property accountants to help them view the transactions in an organised manner. The identification of entries that have not been processed yet is also easier.
Cross-referencing helps enhance the visibility of transactions in the books. Since large real estate companies deal with a greater number of daily transactions, they can use dynamic cross-referencing software features to easily identify incomplete payments/invoices.
The pros of cross-referencing in accounting are as follows:
Cross-referencing can get tricky at times for real estate accountants. Hence, instead of hiring expert accountants for cross referencing, a real estate company can outsource the bookkeeping processes to a reliable third party.
By doing so, real estate companies can save costs for cross referencing and other accounting processes. Use cross-referencing in 2022 to identify accounting errors!
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