Real estate is a changing business domain. Like other industries, bookkeeping is also important here. Bookkeeping is more or less the backbone of a real estate business, as it manages the financial resources effectively.
However, many real estate agents underestimate the importance of proper bookkeeping. This leads to hefty fines, increased negative cash flow, backdated business accounts, and many more.
If you ask any successful realtor, they will always see bookkeeping helped them grow their business. This is because they have a higher chance of managing their overall financial situation.
In this article, we will discuss everything you need to know about real estate bookkeeping. We will discuss its mistakes, best practices, and ultimately, some excellent real estate bookkeeping software.
Bookkeeping is one of the most important aspects of the real estate industry. The process involves recording the cash flow effectively while also maintaining the transaction records. When you use bookkeeping strategies to track expenses, you will have complete visibility over the financial condition.
Moreover, bookkeeping will help real estate agents ensure compliance with ever-changing tax regulations. They can identify cost-saving opportunities and monitor the financial health of their real estate business.
When you’re an independent real estate agent, you might overlook the importance of real estate bookkeeping. After all, checking the books may be your most minor concern.
But that’s where you’re wrong. Being a real estate property manager means going through complex financial stuff. You must also consider tax filings, which you can only obtain through proper bookkeeping.
With a robust bookkeeping practice, you can track your cash flow and ensure you pay bills on time. Bookkeeping can be highly beneficial, from saving tax bills to getting reminders on tax payments.
As mentioned earlier, real estate businesses involve complicated finances. Unlike other industries, it’s not straightforward in terms of payments. So, what’s the harm in handling your own bookkeeping?
Not only is it extremely complicated, but it is also time-consuming. Moreover, you may also risk missing your money on taxes, which can lead to IRS penalties.
If you have a large real estate business, choosing a third-party bookkeeping platform is of utmost importance. These bookkeepers will ensure you save money and stay on track.
Real estate agents often need to handle complicated financial matters. No matter how hard they try, they sometimes make common bookkeeping mistakes. These mistakes can wreak havoc on the operational efficiency.
Whether you’re a property manager or a real estate agent, you must understand real estate bookkeeping mistakes. Only them is the only way to ensure you’re not making the same mistakes. Here are some real estate bookkeeping mistakes you must avoid.
Most real estate agents don’t have enough time to go through irregular bookkeeping mistakes. And this is perhaps the biggest real estate bookkeeping mistake you must avoid.
However, you must devote plenty of time and effort to maintaining proper bookkeeping records. On the other hand, property managers and agents know that slight inconsistencies in bookkeeping can prove catastrophic.
So, how can real estate agents counter such mistakes? By hiring third-party real estate accounting companies. These companies can help you maintain accurate bookkeeping records.
Real estate agents often overlook employee’s classification. However, contractors and employees are important to grow a real estate company. They can handle various core operations.
Make sure you classify your employees and independent contractors properly. This way, you can avoid tax return mistakes and tax overspending. This is true, especially when your real estate business has over 50 employees.
Classification of employees will also help you understand the tax structure properly. You can also adhere to proper tax calculations.
This is another common real estate bookkeeping mistake you need to avoid. When you merge your business bank accounts with personal accounts, you will face lots of problems managing your financial investment.
This may not look like a major issue during the initial days. However, over time, overlapping these two accounts can create accuracy problems. This is why you should always complete your personal transactions from personal bank accounts, savings accounts, and personal cards.
But let’s say you’ve merged them. What will happen then? For starters, you will face many issues tracking the cash flow of your real estate business. Sometimes, you will feel like the cash outflow is bigger than the inflow, which might not be true.
We are currently living in a technologically advanced world. Whether you have a small or large real estate company, every agent needs various tools. These tools boost operations and improve financial structure.
However, using more tools means more pressure on the IT staff. Sometimes, due to certain situations, the data might get corrupted. And if you don’t have proper backups, you will find yourself in a sea of troubles.
This is because you may end up losing the data permanently. You will lose all the client and employee information. Moreover, people will start doubting your company's security.
Thus, make sure you create thorough backups of your data. Even if the data gets corrupted, you can easily restore it from the backups.
Now that you know the real estate bookkeeping mistakes, you need to know how to counter them. Even though we’ve discussed a thing or two, they are not enough.
So, following accurate real estate bookkeeping tips will help you meet your goals. These tips will also guarantee long-term success.
Bookkeeping is crucial, so you need to update it regularly. Real estate agents can minimize errors and boost transaction efficiency by following this tip. Don’t overlook the update because it is monotonous.
Moreover, regular updates will also help you track your transactions effectively. You will know where you’re spending your money and the sources from which you’re receiving payments.
But there’s another important thing you should know. You can use Microsoft Excel spreadsheets to track records. However, we suggest you should use a dedicated bookkeeping platform like Sofia. It’s more effective, sophisticated, and focused primarily on real estate bookkeeping.
Real estate property managers handle several small costs in various bearings. These costs may not look much, but failure to track them can affect cash flow. Thus, you need to record all such small costs and track them properly.
On the other hand, you also need to classify costs properly. High costs are easier to categorize as they are often associated with large projects and account for about 70% of the overall project costs.
Meanwhile, the remaining 30% is small costs. These require careful planning and close attention. Make sure you analyze and classify them properly to avoid any future errors.
As mentioned earlier, modern technologies are essential for standing out from the crowd. The same is true in the real estate industry.
To manage the overall process effectively, you need to use different types of bookkeeping software. Some of the most famous real estate bookkeeping software are Sofia, Zoho Expense, Abacus, etc.
With this software, you can track records and data from easily accessible folders. These platforms also provide an online filing system. Thus, you can get rid of backdated and error-prone physical filing cabinets.
Maintaining accurate records of all transactions is extremely important. We’ve seen many businesses fail due to their negligence in maintaining records. More than that, it can also lead to poor cash flow.
The real estate industry handles huge amounts of transactions within a short span. You must have a thorough record book if you handle such huge costs. It will guarantee that all of your business’s transactions are moved smoothly.
In the previous section, we discussed the importance of bookkeeping and accounting software. So, we thought, why not list the best real estate bookkeeping software so that you manage transactions properly?
We have listed the best software based on its features, pros, cons, and pricing. So, read this section to the end to learn more about them.
While Sofia provides excellent virtual assistants for real estate agents, it also has another eye-catching service. Yes, you guessed that right. Sofia also provides accounting and real estate bookkeeping services to real estate property managers.
With Sofia, you don’t need to worry about facing financial burdens. This platform will ensure your real estate bookkeeping is updated and per your needs. Some of the most eye-catching bookkeeping features of Sofia include:
Moreover, Sofia also provides budgeting features so that you can focus on growing your real estate business.
Pros
Cons
Pricing
Whether you’re looking for virtual assistants for property managers or reliable bookkeeping for real estate platform, we recommend Sofia. Visit their website and hire Sofia today.
Invesis provides excellent estate bookkeeping services. Unlike many other service providers, Invasive is designed to meet the needs of property managers and real estate agents.
It can handle various day-to-day tasks like recording your real estate business’s financial transactions. This way, it can ensure accuracy and help you save time. Some of the most notable features of Invasis are:
Invasis can segregate costs. This is one of the best tax-saving strategies to boost the depreciation of certain property improvements. Invesis can help you identify eligible improvements and complete the necessary paperwork.
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Cost
If you want real estate bookkeeping services from Invesis, make sure you contact the sales team.
Whiz Consulting is another popular real estate bookkeeping service provider. Whether you’re a real estate agent, manager, or builder, it can undoubtedly streamline financial management for you.
As Whiz Consulting has experience in the real estate industry, it will prove highly beneficial for your business. It can understand unique real estate bookkeeping needs. Here are some excellent features of Whiz Consulting:
It provides regular financial statements, including income statements, balance sheets, and key performance indicator (KPI) reports. This will help you understand the financial health of your real estate business.
Pros
Cons
Cost
When you contact Whiz Consulting, they will provide you with a customized quote. They will also provide a free 30-minute consultation.
CapActix handles a wide range of bookkeeping tasks, from setting up your chart of accounts to generating financial reports. If you want to reduce your accounting and bookkeeping burden, CapActix will prove highly beneficial.
Its services can be tailored to your specific needs, whether you manage a single property or a large portfolio. Here are the notable features:
It will ensure your financial records are up-to-date and accurate. Therefore, you can make more informed decisions for your real estate business. Moreover, CapActix also allows secure data access and collaboration.
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Costs
Do you think CapActix is right for you? Book a free consultation with the experts today, and they will provide customized real estate bookkeeping services.
Coming last in our list in BooksTime. It offers real estate bookkeeping services designed to free up your time. It will also ensure accurate financial management for your real estate business.
When you contact BooksTime, they assign you a specialist bookkeeper with real estate experience. These professionals understand the specific nuances of your industry. Here are some features of BooksTime:
BooksTime handles a comprehensive range of tasks. For example, it will record all your income and expenses related to your properties. Additionally, it will match statements with your accounting records to ensure accuracy.
Pros
Cons
Cost
If you want more than just basic real estate bookkeeping services, schedule a consultation to get a customized quote.
That’s all you need to know about bookkeeping for real estate agents. As we’ve said numerous times, bookkeeping will be key to your real estate business’s success. From payroll processing to tax preparation, it controls various aspects.
So, you need to ensure you’re preparing the best real estate bookkeeping system. We suggest you use a reliable bookkeeping software and an accountant to automate such processes.
And if you’re looking for the best platform to handle your real estate bookkeeping, make sure you try Sofia. Contact us and leverage the benefits of their bookkeeping services for real estate today!