Success in the real estate business does not depend on the ability to connect and make sales only. It also depends on maintaining a working knowledge of administrative best practices, among them accounting. Now, this may not be the first thing many professionals in this field consider, but real estate accounting can make or break your business. It is an important part of your job as a real estate professional.

1. What is Real Estate Accounting?

As the name suggests, this is the practice of accounting with real estate entities in focus. As a professional, you have a lot to handle including a number of accounts with different transactions at a given time. With this in mind, good organization is important. This is where bookkeeping comes in. Keeping track of what you are earning and where it is going. Bookkeeping involves the recording, on a regular basis, of a company’s financial transactions. The data collected from bookkeeping is vital for business accounting. It helps you or your accountant to summarize, analyze and report on the health of your business.

In real estate, accounting paves way for accurate financial reports throughout the buying and selling process. To you as a real estate professional, it helps to secure your own personal financial situations and stay organized for important activities such as tax compliance.

2. Why is Real Estate Accounting important?

Regardless of whether you work on small or large scale real estate deals, having the right accounting practices is key. The main purpose of this accounting is to maintain a realistic, accurate picture of how your business is running at any given time. This ensures that you are better equipped to make sound decisions for growth and profitability.

Here is a breakdown of some the benefits of good bookkeeping;

• Track key performance measurements such as cash flow, profit, loss and watch for red flags
• Have an insight into your business growth
• Pay your bills and financial obligations on time
• Prepare for yearly tax returns
• Help evaluate your business strategies
• Analyze which properties did well
• Avoid extra time and stress digging up information for IRS audit

3. What to Track on Real Estate Accounting

• Income from commissions – As a primary source of income for most real estate professionals, it’s important to keep track and monitor sources of one’s incomes.
• Association fees and expenses
• Marketing expenses – These comprises the means through which you inform your community or target clients about your services. These include print and online advertisements, business cards, social media management, community outreach programs, website development among others.
• Travel costs – As a real estate professional you are bound to travel from place to place to meet clients, monitor properties among other business activities. Keep track of these expenses.
• Office related charges

I believe that this article has shared some invaluable information about accounting in the real estate business. It is important to seek a CPA to guide you on matters of real estate accounting. With one, you will be able to focus on growing your business as they take care of your books.