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Common Issues Faced By Realtors While Managing Their Accounts
Before coming to the common issues faced by Realtors while managing their accounts, it will be relevant to clear up the air about the functioning of Realtors. The terms Realtor and Real Estate agents are often used interchangeably but basically it is not right. While both should be licensed to deal in real estate properties, a Realtor should be a member of the National Association of Realtors and subscribe to the strict Realtor Code of Ethics. A Realtor can be a broker-associate, a managing broker or an exclusive buyer’s agent amongst the many terms by which they are referred to. Hence most of the accounting issues faced by Realtors have a striking similarity with their counterparts in the industry like real estate agents.
There are many tasks that a Realtor has to perform apart 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 depending on the state of the world’s economies. Hence a Realtor has to be constantly on toes, looking for openings to cash in on even the slightest business opportunities. Given these variables it is not surprising that a Realtor is often found wanting in maintaining the necessary support services like accounting and bookkeeping in a precise and accurate manner. This in the long run can have an adverse effect on running the primary business activities.
Here are a few common issues that you as a Realtor might face in maintaining your accounts –
Not keeping records properly – More often than not maintenance of records will not be in order. This is not because you do not know how to do so but because you do not have the time for thorough checks. This can go against you when you submit your tax returns or during IRS audits when payment and receipt proofs of even the smallest transactions can be called for. To get around this problem it is advisable that you hire the services of an experienced real estate accounting firm. 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 services hired by you will help out. At the end of 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 not be truly reflected in your bank account, leading to wrong accounting and a misleading picture 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 services 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 real estate accounting firms 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.
These are some of the accounting problems that Realtors often face in their operations.
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