Understanding Real Estate Accounting

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Understanding real estate accounting can be a difficult process. In order to increase your revenue and improve your real estate business, you will need to understand what to track and how to keep your bookkeeping in order. As a property manager, you also want a qualified real estate accountant on your side to help you win in business. Real estate accounting is complicated as property management has many variables and moving parts, and it’s important to find a real estate accountant who you can trust. 

What is Real Estate Accounting? 

Real estate accounting is a necessary part of property management. Real estate accounting allows a person to gain a high level perspective on personal financial situations as well as provides insight on business growth year over year. Some of the most important parts of real estate accounting is helping property managers complete year-end taxes, understanding their taxes for Condo Corporations, as well as any necessary reviews and audits. A qualified real estate accountant can also help a Property Manager with their business decisions, as they would have in-depth knowledge of the business and be able to provide financial consulting.

Property management accounting deals with large sums of money flowing in and out of the business, so real estate accounting helps a business manage cash flow, track expenses to ensure proper reporting, as well as streamline processes. A real estate accountant should have a firm grasp on a business’ income from commissions, expenses, association fees, education costs, office related expenses, vehicle expenses, family situation, and marketing expenses in order to have a full picture of the necessary variables in real estate accounting. Typically, your real estate accountant will need to know all related expenses with any incorporated business as well as the income earned within the period. Real estate accountants work alongside all related parties within property management, from real estate agents, home buyers, landlords, and more. 

How Can a Real Estate Accountant Help?

Real estate accounting is incredibly important for anyone who works in property management. Whether you are unhappy with your current accountant and need someone more specialized in property management, need assistance on filing taxes, looking for a change, or seeking a more personal involvement in your taxes, hiring a us can greatly improve your business and how secure you feel with your finances.

We help businesses and property managers ensure their books are kept up to date and have the correct information logged. This data tracking can be complicated and a lot of work, and if done incorrectly can lead to serious losses. Real estate accountants use the information from a property manager’s bookkeeping in order to get a full picture of the business and provide financial advice and file taxes properly. This is important when it comes to budgeting, reviews, and assistance with taxes to ensure you’re getting the most out of your business.

Tips for Property Managers:

  1. Track every expense and all income generated for the year. This may seem tedious, but it is imperative to track all your expenses to ensure you can claim them on your business expenses against your income. 
  2. Understand that real estate accounting is through accrual, not a cash basis. That means you can estimate and plan on what you will generate, not just what is currently in the bank.
  3. Keep all your invoices and receipts. When organizing your books, be sure to use your bank statements and credit card statements, but also keep all receipts and invoices to ensure nothing is missed or incorrectly entered.
  4. Keep an organized folder and spreadsheet of financial records. Sometimes it’s easy to lose track of receipts by throwing them in a bag or random drawer, but organization is key when it comes to real estate accounting. There are many variables that impact property management bookkeeping, so ensuring you have an up to date spreadsheet with all your costs and only one place where you store physical copies.
  5. Ask your accountant for clarification on how to separate personal and business funds. There can often be perceived or accidental overlap between the two when dealing with real estate, so diligence in keeping personal and business separate is important.

What are the Common Real Estate Accounting Mistakes?

The most common, and biggest, mistake in property management is inaccurate data. Inaccurate bookkeeping and expense reporting can lead to a lot of issues in reporting your year end. Many clients may not know the difference between personal and business expenses, forget to claim expenses, or miss out on income. This can lead to losing out on the availability of deductions and other issues with your accounting. If your real estate accountant doesn’t have all the correct data, it can lead to many issues.

Do You Need an Accountant that Specializes in Real Estate Accounting?

With anything, specialization provides more experience and helps mitigate the risk of errors and misreporting. Many of the Chartered Professional Accountants at Gallo LLP have specialized knowledge in real estate accounting and can help your business. CPAs will help a project management business grow, separate personal and business funds, conduct yearly reviews, track expenses and revenues, and help streamline the accounting process.

Gallo LLP Chartered Professional Accountants can provide your business with financial consulting services, tax preparation, and all your real estate accounting needs. Alberta property management companies face many challenges, but your finances and accounting don’t need to be one of them.  Our team of experienced accountants will compile your financial statements, prepare you for tax season, and provide you with expert financial advice as you make your next moves. If you’re in need of a team of hardworking, innovative accountants to get you the best information regarding your business’ financials, contact Gallo LLP.