Accounting Tips for Real Estate

April 16, 2021   |   Blog

a picture of a house on a calculator with the words "accounting tips for real estate" below it

Managing real estate accounting is an essential function to further your company’s success. It allows you to track your cash inflows and outflows, evaluate your financial performance and maximize your tax benefits. Good accounting practices give you tools for effective business analysis, helping you stay ahead and move your real estate business forward.

10 Accounting Tips for the Real Estate Industry

At Marshall Jones, we understand how crucial accounting is for the real estate industry. To help provide resources for your success, we’ve put together these real estate accounting tips with some valuable ideas on managing your financial records.

1. Open a Business Account

Although it may seem obvious to some business owners, all real estate professionals should open a separate account for their business, regardless of the size of their company. Business accounts can help you save significant time and money during tax time by making preparation more manageable and efficient. These accounts also reduce personal risk by protecting your assets.

2. Keep Personal and Business Spendings Separate

Besides maintaining a separate business account, keeping all personal spending independent from your business transactions is critical, including credit cards and cash purchases. Letting spending overlap can often cause concern for the IRS and initiate an audit. Separating expenses also allows you to quickly identify your deductions at tax time, saving you money in the long term.

3. Save Your Receipts

Digital transactions make it much easier to lose a receipt. However, virtual records can be incredibly useful if you keep track of them. Maintain a concise daily log of your spending. Travel and meal receipts are especially critical because they typically get the most scrutiny from the IRS.

4. Categorize Expenses

The primary goal of itemizing your real estate business expenses is determining taxable income. Since you’re tracking your receipts and keeping your personal and business spending separate, this process should be relatively straightforward. Knowing which category your expenses fall into can save significant effort during tax preparation.

5. Remember the Balance Sheet

While your income statement is important, make sure you give attention to your real estate balance sheet as well. Take the time to reconcile every balance and account with the supporting documents and schedules, so you have consistent, quality data on your transactions and accounts. Having an accurate record can save you time and effort later on if you or another party needs to access the information.2. Be Clear on Capitalization

6. Be Clear on Capitalization

Having the right capitalization process in place can help you move forward with your business. Go beyond capitalizing costs over a certain amount — it’s critical to maintain clear communication with construction and project managers and understand project progress as well. When you give careful attention to work-in-progress accounts and tenant improvements, you’ll be able to stay knowledgeable about the details of your real estate holdings. Ensure these buildouts have reached completion before you place them in service so your fixed asset schedule will be clean and accessible.3. Equity Is Important 

7. Equity Is Important 

Take the time to understand the real estate entity structure. After reading through your partnership agreements, special allocations and distribution tiers, make sure you have a thorough knowledge of the conditions and requirements. Keeping track of this data can help you handle operations and transactions more efficiently and make things easier for your owners and tax accountants. With in-depth insight regarding your equity situation, you’ll be able to take ownership of your assets and empower yourself to make strategic decisions in the future. 4. Conquer the Closing Statement 

8. Conquer the Closing Statement 

Ensure a clean start and finish to a property’s books by creating an accurate and comprehensive closing statement. If the task seems overwhelming at first, take it line by line and make sure you’re tracking each amount on your chart of accounts. Be careful to cover all necessary information, including appraisal fees, inspection costs, property tax deposits and loan origination fees.

9. Use Efficient Software

Accounting software geared toward real estate businesses helps maintain more accurate books than manual entry. Some programs offer scanning applications to track receipts more efficiently than individually entering each transaction into a spreadsheet. These software options also help you manage money owed to your business, preventing delayed and missed payments.

10. Choose a Financial Consultant With Real Estate Experience

If real estate accounting is still challenging after implementing these tips, connecting with the certified public accountants and advisors at Marshall Jones can help. Whether you’re a real estate agent, broker or investor, we can help you address your most critical issues, from offering help in specific areas to handling your books completely. We take a customized approach to your particular needs, allowing you to focus on the core business duties that matter most.

Get Trusted Accounting Services From Marshall Jones

At Marshall Jones, we are always standing by and ready to help at any time. Accounting can be challenging, and we’re here to help you navigate the process successfully and efficiently. We can provide services for tracking and verifying invoices, recording and organizing receipts, handling accounts receivables, billing and many other financial requirements.

Marshall Jones Certified Public Accountants And Advisors are a group of professionals dedicated to serving our customers with integrity. Whatever you may need to manage accounting at your business, we offer trusted financial services so you can have peace of mind as you pursue your business endeavors.

If you’re interested in learning more about how we can partner with you, contact us today for more information.