Property ownership requires extensive accounting work and includes both tangible and intangible assets. Real estate is a vastly complicated jumble of structures and procedures. With so much to maintain, mistakes are unavoidable; however, they could be minimized.
Real Estate accounting includes maintaining information and data on buying and selling assets. It helps the owner’s in keeping track of assets owned and sold, safeguarding their financial health, up-to-date tax liabilities, compliance, etc. But any errors in accounting may result in significant losses that no business owner should ever experience. Your team may be working around the clock to keep the books in order but an honest mistake or an oversight could waste the entire year’s effort. Our team can help you to avoid those mistakes and grow your business.
The Top 5 Common Real Estate Accounting Mistakes Are:
- Failure to separate business and personal accounts
Keeping your personal and business accounts separate from the start is the best and most practical option. We may not see it coming, but one impulsive act is all it takes. Keeping organizational and individual finances in one account can and will lead to extensive exercise to clean books which proves costly and may still lead to regulatory non-compliance or tax notices.
- Failure to follow the tax filing procedure
Tax filing is an essential part of real estate accounting, and incorrect tax filing can jeopardize your organization's future. Your accounting data should be able to provide you with accurate tax obligations and errors in accounting data may result in making wrong tax filing choices. Make a thorough plan and discuss with your accountant if you have any confusion, to avoid mistakes.
- Failure to backing data daily
Backing up accounting data is very crucial for all businesses. If data is lost due to any reason, it can be a huge setback and costly. It is a best practice to keep a regular backup of your data, ensure that all information is stored, and have a backup process in place. It is best to invest in data backup software, which would save you from a lot of trouble in the future. Off-site backup, especially cloud backup is a very common practice.
- Having inexperienced personnel to check your books
Real estate accounting is very complex due to the complexity of the transactions. Having inexperienced personnel or staff with basic accounting education could be fatal for your business. Professionals like the CJCPA team would have comprehensive knowledge and
experience to deal with complex real estate transactions and help your business to take to a new height year after year.
- Lack of cash flow management
The first few years of any business are tough due to growth and poor cash flow management. The real estate business is no different than the rest of the businesses and requires strong cash due to higher volume and higher dollar value. It is acceptable to send the funds a few hours or a day even before the transaction, but this practice should be avoided or used minimum as you will be wasting resources and time on a daily basis to keep it going. Without strong cash flow management, you would be unable to forecast the expenses and plan future investments.
Our professional team can help and guide your team to develop cash flow management to run your business smoothly.
Final Words
Real Estate accounting is certainly difficult, and without an in-depth understanding of its complexities, there is always the risk of making mistakes such as those discussed earlier in this blog. It is best to seek the advice of professionals when managing your real estate accounting.
Professionals like the
CJCPA team bring industry expertise to help you to better understand the real estate process and develop the best strategy for your success. Feel free to
contact us and discuss your needs at 604-560-8020 or jas@cjcpa.ca
