Things to Keep in Mind before Outsource Real Estate Accounting and Bookkeeping

The reasons and motives behind outsourcing accounting functions are almost universal and uniform cutting across all businesses. Real estate bookkeeping is molding raw data generated by business operations into easy to read format that conveys meaning and state of the finances.

Now, this activity of categorizing the data under different heads does not require any specific managerial discretionary powers. But on the other hand, it is a huge drain on finances. Investments have to be made in specialized hardware and software and qualified accountants at lucrative salaries have to be hired.

To circumvent this situation, more and more businesses are outsourcing their accounting process to proficient agencies without compromising on the quality of bookkeeping.

The real estate industry is no exception to this scenario; in fact, the very dynamics of the industry make it imperative that accounting functions should be outsourced. First, this sector is based on demand and supply of land and projects that are always susceptible to pushes and pulls of the global economic position.

Price fluctuations mean that your wealth can be eroded any time in terms of market value. Hence, you have to be over cautious to protect your investments. All documents of title, mortgages, sales and tax paid have to be scrupulously maintained and tracked and the database must be monitored and cleansed at all times. Under such circumstances, it is always advisable to outsource real estate accounting and bookkeeping so that you have the time to focus on core activities only.

However, it is easier said than done. There are a lot of factors and variables that have to be kept in mind before you outsource accounting functions.

While weighing the pros, the first point is the advantage that you will gain from taking the decision to outsource. There are basically two factors here –

Cost Savings – Setting up a full-fledged accounts department with state of the art hardware and software and qualified and experienced personnel to man them can set you back financially. By opting to outsource at affordable fees to agencies that perform the task just as well you are saving substantial amounts in the long run. This can be used for investment in your core activities and offer competitive prices to customers.

Time Savings – Every aspect of your accounting functions will be taken care of comprehensively. Even monitoring and tracking of expenses and cash inflows and outflows are not needed from you. On the other hand, you’ll get updated reports at regular intervals, even on a real-time basis in an urgent situation when you have to take crucial investment decisions based on the current state of your finances.

By having this repetitive and tedious accounting function taken off your hands, you have all the time to focus on your core activity of business growth and expansion.

After taking the decision to outsource but before you really do so, be clear in your mind about the areas that you want to spin off although it is always advisable to outsource comprehensively –

Bank and Credit Card Reconciliation – This should be almost mandatory in your scheme of things. It will allow you to access your true financial status once you know that the bank account debits and credits are matched with receipts and payments in your cash book. You can also be sure that no fraudulent transactions have gone through and are outstanding in your books of accounts.

Accounts Payable & Receivable – If you take time savings as a motive to outsource real estate accounting, there can be nothing better than deciding to outsource accounts payable and receivable. The number of invoices that you have to deal with and keep track of otherwise will divert you fully from your business development plans.

Further, when outsourcing agencies take full control over your invoice management process, you can be sure that your cash flows and cash management will be in capable hands and there will not be any default in payments or receipts from invoices on due dates.

Payroll Management – Outsourcing this function will free you from monitoring a tedious and repetitive task. Simply upload employee details and salary particulars and your payroll will be processed and data generated for salary disbursement including tax computation.

These are the main areas that you should compulsorily outsource. But make it a point to spin off accounting functions fully from data entry to data processing, from report generation to balance sheet preparation. Doing it partly will only lead to confusion in a consolidation since two different entities like in-house work and outsourced work have to be brought together for finalization of accounts.

One important thing has to be done before you outsource real estate accounting and bookkeeping. Many real estate players and agents have a common bank account for personal and business transactions. Compulsorily segregate the two first into different accounts.

Talk to the outsourcing agency and point out the personal and business transaction in the existing account so that future transactions can be taken forward from there.

Follow these simple steps before outsourcing your bookkeeping activity.

Also Read: Top 5 Bookkeeping Mistakes in Real Estate Industry

One of the leaders in real estate bookkeeping is Cogneesol Pvt. Ltd. We have systems in place that facilitates the process and enables us to deliver consistent and high-quality results. Get in touch with us at info@cogneesol.com.