Top 6 Ways for Efficient Real Estate Bookkeeping
While the global real estate industry appears to be growing at a promising rate, companies in the industry have recently faced a number of challenges, including a credit crunch, reduced lending, reduced construction, a slowdown, lower commercial property prices, price mismatch between sellers and buyers, fewer construction projects, and so on. According to a Forbes article, the industrial real estate sector is expected to outperform commercial real estate in 2018. In fact, revenue from the worldwide real estate business is expected to rise over the next five years.
Given the industry's numerous potential for high-volume transactions, it's critical that players in the global real estate market keep a close eye on the inflow and outflow of funds on a near-daily basis. Companies, on the other hand, frequently find it difficult to keep their own books of accounts. Regular bookkeeping can help you stay on track and give you a near-perfect picture of your financial situation.
Tips for Efficient Real Estate Bookkeeping
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 -
Update your Accounting Books Timely
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.
Perfectly Record Maintenance
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.
Classify Costs Correctly
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.
Leverage Technology
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.
Build a Wall between Business and Personal
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.
Tax Review Sessions
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.