Accounting is a compulsory process for realtors around the world. The primary focus of realtors is to sell properties. However, they need to find some time for managing their books. Accounting books are required for many tasks, from tax filing to compliance checks. An individual realtor or a real estate company can land into legal hassles if accounting books are not up to date. Many realtors face issues understanding financial statements and eventually fail to keep their accounting books up to date. Read on to learn how to manage your real estate accounting books easily.

Understand Real Estate Accounting Services

A realtor must know about the various processes that fall under real estate accounting. Bookkeeping is just one process under the real estate accounting umbrella. The different types of real estate accounting services are as follows:

• Bookkeeping: Real estate bookkeeping includes recording expense receipts and payments from customers. From payroll processing to inter-company transaction recording, everything falls under the bookkeeping process. Different types of financial statements are documented and understood by bookkeepers
• Accounts Payable: Real estate accountants also identify the amount to be paid to suppliers. The overall overhead cost is also calculated under accounts payable. Accountants are responsible for reviewing different payable batches
• Accounts Receivable: The amount received from clients/customers also needs to be recorded by the accountants. If a real estate agent has many tenants to look after, their monthly payments should be recorded in one place
• Management Reporting: Accountants are also involved in making profit vs loss reports. Management reporting is concerned with maintaining balance sheets, cash flow sheets, and a general ledger
• Tax Preparation: Many accounting firms consider tax preparation their primary goal. Besides tax preparation, many real estate companies also partner with accounting firms to formulate better tax minimization strategies

Use a Real Estate Accounting Software

Gone are the days when real estate companies relied on manual accounting. At present, the real estate sector is also undergoing digitization. Most realtors prefer to use accounting financial software to maintain their books. When managing books manually, human errors are bound to happen. A single mistake in their financial books can be damaging to a real estate agency. This is why realtors use accounting financial software to minimise human errors. In addition, you can save time while creating financial books using dedicated software.

Bookkeeping is a continual process, and you need to depend on technology for speeding it up. New-age accounting financial software can even automate bookkeeping processes. Make sure you choose reliable accounting software that requires the least manual effort.

Reconcile Bank Statements

Reconciliation is a healthy practice for accountants and bookkeepers. If you are managing your books yourselves, make sure you reconcile bank statements at regular intervals. If you have hired accountants to maintain your financial books, ensure that they reconcile bank statements at frequent intervals as well. If any error has occurred in the financial books, you can discover it by reconciling your financial entries.

Reconciling financial entries and banks statements can get tiring. Many realtors try to reconcile their bank statements towards the end of the month or the financial year. However, accounting software can help you reconcile bank statements easily, in real-time. 

Dedicate Time to Manage Your Books

Realtors who don’t pay attention to their financial books pay a heavy price later on. A real estate agency has to maintain books, or it may experience a visit from the compliance officer. Investors and stakeholders often demand accounting records. You may also require these when indulging in a corporate deal like M&A.

It would be best to dedicate a fixed time to maintain your financial records. The ideal way is to enter transaction records in your accounting books daily. Ensure your accountants maintain financial books regularly as it can get challenging to manage all the accounting records on the last day of the month.

Enhance Communication with Your Accountant

Most realtors communicate with their accountants only when it is time to file taxes. It is an unhealthy practice, as you might not be aware of your financial performance. You should communicate with your accountants at frequent intervals to receive updates regarding your financial books. If any errors have occurred, you can know immediately by consulting with your accountants. You can reconcile your accounting records in real-time to fix any bookkeeping errors. Moreover, you will have complete control of your finances by communicating with your accountant on a regular basis.

Build a Future-Proof Accounting Strategy

Accounting will go hand-in-hand with your real estate business. You cannot ditch accounting processes at any cost. It is better to build a future-proof strategy adopting accounting habits and technologies that will help you in the long run.

Focus on Financial Statements

Besides feeding accounting records daily, a real estate agency/agent should also focus on preparing financial statements. Financial statements like balance sheets, income statements, and others state the financial performance of the real estate business.

Conclusion

Accounting/bookkeeping can be a mundane process for real estate agents. However, with accounting financial software and clear accounting strategies, one can ease the bookkeeping process. Make sure you communicate with your accountants at regular intervals for better results. Start taking your financial books seriously! 

About Us

OHI is a fifteen-year-old real estate services company working with 50+ commercial and residential real estate developers, funds and property management companies across USA. Our deep expertise in real estate accounting, financial analysis, lease administration and asset management has helped clients cut associated costs by 40-50%. We currently provide these services to a portfolio of 75000 units across clients.

We invite you to experience finance and accounting outsourcing through us.