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Top 5 Bookkeeping Mistakes in Real Estate Industry
If you are a real estate agent or investor, chances are high that you have already got your hands in innumerable operational issues. Decision making, cashing in on slim opportunities and sales and marketing are some of the core activities that you cannot afford to ignore.
Add to these the importance of keeping a finger on the pulse of rising and fall of real estate prices and tracking new statutory regulations governing the real estate scenario and you are hardly left with any breathing space.
With all these core issues to reckon with you do not have much elbow room to focus on non-core yet crucial activities such as bookkeeping. In any industry, this is always a repetitive, mundane and tedious task, one that mainly involves processing operational data and figures to generate reports based on which current state of affairs can be evaluated.
As such bookkeeping will definitely not be a priority item for maintaining it yourself at the cost of more important tasks. It is therefore always preferable to spin off this component of your business to professional real estate bookkeeping services and get on with the more central tasks at stake.
Hence, keeping all this in mind as a player in this business, you should be aware of these top 5 bookkeeping mistakes in the real estate industry:
1. Poor maintenance of records
This is very common amongst real estate agents and investors not because you don’t know how to keep proper records but because you don’t have the time to be meticulous about it.
Back of the envelope, calculations can be quite uncomfortable for you at tax time when the smallest receipt has to be shown for verification, especially if there is an IRS audit. Producing accurate records maintained by real estate bookkeeping services will give you peace of mind.
2. Wrong employee classification
You will have a lot of people working for you when you are in the real estate industry. There will be employees working full time in administrative roles; there will be market analysts working part-time helping you make better investing decisions.
Each segment has its own specific tax structure and not adhering to it will lead to wrong calculations and paying excess taxes.
3. Not segregating bank accounts
Most real estate agents tend to have one bank account – personal and business clubbed together. So at the end of the year, during tax calculation when you have to account for your real estate activities there will be a problem of gigantic proportions untangling your business expenses from your personal expenses.
Have two separate accounts and entrust the responsibility of maintaining your trade account to real estate bookkeeping.
4. Lack of adequate back-up
Here again, you come back to square one – if you don’t have time dealing with the original bookkeeping aspects that involve taking back-ups of data generated or maintaining scanned copies of receipts, etc.
But in this age of IT generated business environment, it is imperative that backups of core data processing can be made possible as well as those in paper modes.
5. Improper classification of expenses
Without having a proper control over the finer nuances of tax exemptions on expenses, you are likely to club wrong items together or not make any classifications at all.
Different expenses attract specific taxes and you can save a pretty packet by categorizing them correctly. It will also give a comprehensive picture of the state of your business and a precise measure of profitability.
All these points in one direction – instead of making these mistakes as an investor and agent in the real estate industry, you’ll do well to entrust the responsibility to real estate accounting experts.
Do you wish to avoid any of these real estate bookkeeping mistakes from affecting your finances, reputation, or business growth? If yes, join hands with the accounting experts of Cogneesol and free yourself against any bookkeeping headache. Contact us now!
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