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Common Issues Faced By Realtors While Managing Their Accounts
Before coming to the common issues when it comes to accounting for realtors, let’s clear the functioning of Realtors. The terms Realtor and Real Estate agents are often used interchangeably. However, both are incorrect. They should be licensed to deal in real estate properties, a Realtor should be a National Association of Realtors member. They should also subscribe to the strict Realtor Code of Ethics. A Realtor can be a broker-associate, a managing broker, or an exclusive buyer’s agent among the many terms. Most of the accounting issues faced by Realtors have a striking similarity with their counterparts in the industry.
There are many tasks that a Realtor has to perform from the basic one of buying and selling real estate property. The most crucial one is dealing in a commodity land that is subject to constant price fluctuations. Hence a Realtor has to be constantly on their toes, looking for openings to cash for the slightest business opportunities. It is not surprising that a Realtor is often found maintaining the necessary support services like accounting and bookkeeping. This in the long run can have an adverse effect on running the primary business activities.
Accounting for Realtors: Top Challenges Encountered by Experts
Not keeping records properly
More often than not maintenance of records will not be in order. This is not because you know how to do so. But because you do not have the time for thorough checks. It can go against you when you submit your tax returns or IRS audits. Hence, payment and receipt proofs of even the smallest transactions need to be mentioned. To get around this problem, it is advisable that you hire experienced accountants. You can also implement expert tips to resolve issues of real estate accounting. You can be sure that their record compilation and processing will be accurate and true. Additionally, you can have it done by them at very affordable rates without incurring expenditure in setting up infrastructure and hiring additional accounts staff.
Not enough backup of records
This is actually a continuation of the situation of poor records maintenance. If you do not have the time for maintaining accounting records you can hardly be expected to meticulously keep backups of them. Scanned copies of every receipt and payment made or better still stacking them in digital form is absolutely essential should the original ones be tampered with or damaged. You will then have to spend a lot of time preparing fresh records thereby deviating from the more pressing tasks of business growth and development. Here again, real estate accounting experts hired by you will help out. At the end of the day, upload all bookkeeping records to them over secured networks and you can fully bank on them to keep them safe and secure for future use.
Not distinguishing personal and bank accounts
Most Realtors have a loosely structured operational system with ill-defined lines of control in key departments like accounts. Hence they do not keep separate bank accounts for personal and business expenses, more so if the business operates on a single personal name. However, if you do this, you will be complicating things to the detriment of your business. Your business transactions will reflect in your bank account, leading to wrong accounting of your true financial state. Further, you will have issues with payment of taxes as business and personal deductibles are totally different. Your real estate accounting service provider will be able to offer expert help and guide you in this regard and will precisely segregate your business dealings from your personal ones.
Not classifying expenses accurately
Classification of expenses to get the maximum out of tax benefits is a very intricate process best done by experienced accountants. If you do not have the expertise, it is best to leave it to the real estate accounting firm that you should hire for finalizing your accounts. Realtors left on their own tend to club expenses wrongly, thereby either paying more taxes or claiming less deductible. It also gives an inaccurate account of the profit and loss position of the business, leading to wrong investment choices in real estate. When competition is so severe in this industry, error-prone decisions are something that you can hardly afford.
The world of real estate is bustling with opportunities, but it also presents its fair share of accounting challenges. From managing complex financial transactions to staying compliant with ever-changing tax regulations, realtors often juggle multiple financial tasks. However, streamline accounting for realtors by leveraging the right method.
If you’re a realtor looking for expert accounting solutions to streamline your financial processes and ensure compliance, consider partnering with Cogneesol. Our accounting outsourcing services has the ability to meet the unique needs of real estate professionals.
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