Why do you need real estate bookkeeping?
It is no longer a secret for anyone that each area of business has its own specifics. This includes the organization and maintenance of bookkeeping records. However, when it comes to real estate bookkeeping, especially a wide-profile real estate agency, there are many things that need to be taken into account. We are talking about buying, selling, and renting real estate objects, not only residential but also non-residential ones, concluding various transactions with both individuals and legal entities, etc.
The main part of the financial expenses in such an agency is the salaries of employees, the rent of office space and, of course, one should not forget about advertising and real estate maintenance and improvements. If we add the sale and acquisition of new property to the equation, this creates an imbalance in income and expenditures. Having accurate real estate bookkeeping records can help to effectively plan and manage these business activities.
Here are a few more reasons to have proper real estate bookkeeping in place.
- It helps to stay in compliance. There are a few parties, such as the IRS or your investors, that would want to see that your company’s financial records are in place and accurate. If they are not, your real estate business is likely to suffer.
- It prepares you for tax time. When the bookkeeping process is in place, you do not have to sort through piles of receipts and invoices and worry that you missed something. Having it all organized in one central system is one of the biggest reasons for doing your books from day one.
- It allows you to track your income and growth. Real estate bookkeeping is a tool for analyzing your business performance on a monthly, quarterly, and yearly basis. With data presented in accounting reports, you can observe trends, gain a better understanding of your business cycle, and compare the results across periods.
- It gives you an opportunity to analyze. Bookkeeping helps you make changes or adjustments that can help you pivot your business. Knowing your real estate business strengths and being able to improve its weaknesses is a powerful management tool. It allows you to look at what is working and what is not working.
- It provides for better decision-making. In order to make the best decision possible, you will need to have access to all available information. Bookkeeping provides this information. After all, making profitable decisions without financial information to back them up is practically impossible.
- It helps to have a strategy in place. Tactical and strategic planning is the core of what you do as a real estate business. With real estate bookkeeping as a tool, you can be closer to your short and long-term goals.
Managing real estate finances
To make your life as a real estate agent easier, save you a lot of stress, and help you take control of your finances, we would like to share some real estate bookkeeping tips.
- Bank account for real estate business
It is important to keep your private, personal transactions separate from your real estate transactions.
- Keep your books at the top of your priorities
Create a bookkeeping routine each week to do bookkeeping tasks. Besides, regular reviews will let you know how your business is going and allow you to control your cash flow.
- Keep thorough records
Create the right categories for your real estate business and record each and every transaction with enough details. You also should keep records, including your receipts, for as long as the law requires you.
- Plan for your taxes
Learn everything there is to know about real estate tax deductions and other ways to reduce your tax burden. It is recommended to get professional tax advice at the beginning of the year and not when taxes are just around the corner and not much can be done.
- Automate as much as possible
Getting accounting software will not only save you a ton of time and headache but will also allow you to access your financials anywhere, anytime.
- Get a great bookkeeper
Being a business owner does not mean you have to do everything yourself. Hiring a bookkeeper helps you focus on growing your real estate business and have bookkeeping specialists do what they are best at.