October 19, 2021
Real estate accounting is a complex task as some more regulations and transactions have to be kept a tab on. It takes a toll, especially on the bookkeeping front, which is why proper organisation becomes a vital and key factor in the management of real estate accounting, especially when it comes to keeping the books. Due to this, the concept of real estate accounting has emerged since, in real estate, one works with large sums of money. So, in this case, one needs to know how these transactions will be managed and accounted for.
Real estate accounting can be factored in when dealing with:
Many real estate companies prefer to hire small business accounting services instead of navigating through the complex elements of the legislation themselves. Of course, until you do not have the right accountant to manage things for you, knowing how to manage the accounts will not only help you to tide over this time but also in running your business more smoothly and better. Also, the books being maintained aren’t just for the taxman as understanding their management will help you in tracking your business progress. You will be better able to get an exact either of your profit margin and the properties that have done the best.
Well managed books also help when you want to compare your profits and expenditure of the current year versus that of the previous. You get to know the amount of cash on hand as well as the dual benefit of being able to prepare the tax return element on time while paying bills within the timeframe as well.
Despite all the pros, one enormous con is the fact that setting aside time for actually doing the books is very difficult. And yet, being such a crucial function, one cannot do without it as it falls under property management. A good accounting firm where you can outsource your work like Doshi Outsourcing can assist with the maintenance of your financial records.
However, if you are planning to go solo, then the below points should assist in giving you a roadmap at least:
What are the administrative code rules?
Financial management is even more necessary when we are dealing with property. The state agencies or local real estate commission set these guidelines. Furthermore, state codes change, so you need to keep a tab on the administrative code.
What accounting method to choose?
There are two methods of accounting that can be used when completing the work on your books (1) accrual and (2) cash. The rules used, of course, are slightly different. Cash-basis would be a simple method when it comes to tracking the transactions. However, what makes this method hard is that - an entry needs to be made each time when there is an exchange of physical cash. It applies to expenses too. So, when you pay someone, you’ll need to record the expenses, and when you receive income, you’ll have to repeat the recording process. In accrual, two entries (but opposite entries) are recorded.
Separating personal and business funds
It is the most important aspect when running any business as you cannot mix things up. It is better to keep separate accounts as then keeping track of income and expenditure becomes difficult. Also, you become more aware of which transactions are pending. Thus, keeping the business and personal separate is the best bet.
If possible, hire an accounting outsourcing service that facilitates all the different aspects of accounting. These companies, like Doshi Outsourcing, will shoulder nearly all of the accounting workload for you. That way, you can save your time and focus on core business.