5 Bookkeeping Mistakes to Avoid in the Real Estate Industry
Bookkeeping refers to the process of regularly recording a company’s financial records into systematized accounts. Different businesses use various bookkeeping techniques to record their financial transactions. One should read thoroughly about them before choosing which bookkeeping technique would work best for their firm.
Since bookkeeping is an essential part of the firm’s accounting process, it should not be ignored and business owners should regularly check on their financial records. This ensures that there are not any outstanding dues or unnecessary payments being made. Doing this, business owners can have their transaction records updated, which can help them generate accurate financial reports to optimize business performance. Detailed records can also help in the event of a tax audit.
There are two types of bookkeeping that business owners should be aware of:
● Single-entry bookkeeping:
A straightforward process where a single entry is made for each transaction in the company’s books. Usually recorded in a cash book, these transactions track incoming revenue and outgoing expenses. This type of bookkeeping can be applicable for small private businesses who have little to no physical assets, as they might not even need a formal system to maintain this type of bookkeeping.
● Double-entry bookkeeping:
Double entry bookkeeping involves a set of principles in which every transaction affects at least two accounts. To get more info on it, you can read here. Double-entry bookkeeping is mostly used by large firms who buy and sell on credit. This also leaves less room for error since it ‘double-checks’ your books.
As a real estate agent, you might have to navigate through the complex financial matters of your firm, but doing so may lead you to ignore your bookkeeping matters. This can be detrimental to your firm’s success.
Although bookkeeping may seem like a repetitive and mundane task, it serves as a backbone to your firm’s road to gaining a competitive foothold in the industry. Thus, look out for these top 5 bookkeeping mistakes that real estate agents tend to make.
Top 5 Bookkeeping Mistakes in the Real Estate Industry
1. Unorganized Expenses
Most real estate businesses may not classify their expenses i.e., payments made to full time resources and freelancers. Operating a real estate firm, you may heavily rely on freelancers for contracts so it is suggested that you classify your freelance payments and payments made to fulltime resources to avoid paying extra taxes.
2. No data backup
Adapting to technology and cloud storage can be challenging for real estate owners. However, technology is today’s norm and if businesses do not adapt well to it, they may fall behind in the success race. Real estate firms having no financial data backup are prone to losing their data if their personal storage malfunctions. Losing all of the firm’s data can be detrimental, thus real estate owners are advised to keep their data stored in a Cloud storage.
3. Cutting Costs on Finance
Although finance may seem like a less significant department to real estate owners, hiring unqualified resources for the finance department can hurt their firm’s development in the long run. Further, most real estate owners prefer to do their business finances by themselves, but this can make them unable to focus on business development tasks or worst-case scenario, their finance department may not get the required attention, which can lead to inaccurate financial records, making the business vulnerable to getting bankrupt.
4. Unorganized Employee Classification
Since real estate investors require independent contractors and employees to handle business operations, they can poorly classify or might not classify these resources. Hiring an outsourcing firm or an accounting resource can help real estate owners classify their independent contractors and employees. This can help them avoid paying extra taxes and misfiling tax returns.
5. Poor maintenance of records
Among other mistakes, keeping inaccurate, outdated, and unorganized financial records can prove to be a setback in the firm’s development when there is a need to scrutinize the firm’s financial records to make future decisions and strategies.
Financial calculations can be challenging for real estate owners, especially when their schedule is occupied by client meetings and property dealings. For accurate and updated financial records, real estate can hire a full-time resource or an outsourcing accounting firm to take their firm’s financial burden off their shoulders.
Some real estate owners might be good at doing their own bookkeeping, but getting an expert opinion from industry experts can open the doors for more efficient and accurate bookkeeping.
Since increasing payroll costs may be one of the factors why real estate owners choose to do their bookkeeping by themselves. Outsourcing costs less than hiring an in-house bookkeeper as you can cut hiring and training costs, and utility bills.
Further, outsourcing your bookkeeping can help you gain access to your financial records 24/7 more easily as these outsourcing firms stay updated with industry trends. Plus their industry experts can better navigate the new bookkeeping software.
Work Accelerated: Your Gateway to Highly-Skilled Bookkeepers
Real estate owners can rely on Work Accelerated to significantly cut down bookkeeping costs and hire a highly-skilled bookkeeper. This can help them focus on business development and strategic planning for their company’s growth.
Amid the surging inflation, Work Accelerated is your partner in providing accounting resources from bookkeepers to CFOs.
WA feels the plight of the US recession and is dedicated to providing real estate owners in the US the opportunity to have access to highly skilled offshore bookkeeper resources all at a fraction of the US costs. In turn, business owners can focus on key areas that can help their company gain a competitive foothold in the corporate world.