Accounting for real estate involves a high volume of transactions and high costs. Given that handling marketing and customer relationship management are the primary functions for real estate management, outsourcing accounting may be the best option.
Real estate management companies must focus on their core competencies to maximize profitability and improve the effectiveness of business operations. To be successful also requires better customer service and lower operational expenditure.
Here are some of the common accounting issues faced:
Incorrect Employee Grouping
Information pertaining to different departments should be stored separately. However, there are often mistakes in this area.
Incorrect Cost Classification
A range of different costs should be properly classified for proper financial records. Not classifying costs correctly is a common issue.
Same Bank Accounts
Keeping the same accounts for business and personal purposes makes it harder to correctly evaluate profits and expenses. It is good practice to segregate your bank accounts and even have separate accounts per property if there are large number of them.
Good records are the foundation of your accounting system. Without them chaos will ensue. However, many businesses fail to periodically update their records and store them properly.
Outsourcing real estate accounting services can be the right solution for real estate management firms. Some of the benefits are:
Outsourcing saves you the time required for hiring accounting staff and overseeing their work. This valuable time can be spent focusing on your primary business activities.
Outsourcing accounting reduces costs as you don’t need to spend on infrastructure and payroll for your accounting hires. Moreover, many of the outsourcing firms are in developing nations so they charge a fraction of the cost for these services.
Back Office Services
Real estate management firms often find it tough to manage back office activities. Outsourcing firms can help as they offer various options such as electronic payment voucher systems, correcting property entries, data entry and management, development and management of total quality management systems, developing and managing EFS, and so on. Make use of these convenient services that save you stress and allow you to focus on what you do best.
Variety of Accounting Services
When you outsource your accounting work, you can get access to a variety of accounting services. For instance, statement of cash flows, income tax returns, payroll administrative services, bank and mortgage reconciliations, month-end closing and reporting, GL and budget reconciliation, accounting for distributions and so on. You might find these other services extremely convenient in addition to the run-of-the-mill accounting work you need taken care of.
In addition, these outsourcing firms also have the latest software and staff who are competent in their use. They keep up with industry changes and trends.
This information should be helpful for real estate management firms who face these common issues with real estate accounting. If you need any further help feel free to drop us a line.