Last editedOct 20222 min read
First we cover a couple of general accounting principles which must be adhered to, then there are some specific aspects of real estate accounting in greater detail in the next sections. The general principles are:
organising and securing all data and documentation
separating business and personal finances
Organise and secure all data and documentation
First and foremost, always keep your data and documentation safe and accessible. Obviously it helps to have your documents organised for your own purposes, but it is also important in case you become subject to an audit. Real estate businesses are sometimes targeted for audit by government tax inspectors, who examine the accounts in fine detail in search of any anomalies.
Keeping digital records of every transaction via real estate accounting software is probably the easiest and most reliable way of preparing for an audit. It also helps you reconcile any contracts, expense receipts and other important documents with your own book.
Separate business and personal finances
Always keep your business and personal finances separate. This is sound advice in any situation, and especially so if you use an LLC for your real estate property management business. This doesn't just mean day-to-day monies and cash flow, but also savings. Business savings and personal savings are entirely different and must never be confused.
Pay for your personal expenses only with your personal credit card, and pay for business expenses only ever with your business credit card.
There are many rules and regulations to understand and abide by in real estate accounting, and it is absolutely vital that you do so. You would be well advised to seek expert advice from a professional accountant in order to fully understand each aspect of compliance. This is true even if you knowhow to do real estate accounting and plan on taking care of it all by yourself.
When seeking expert advice, find an accounting firm that specialises in real estate accounting, as they are better placed to give you the information you need immediately. They can also advise you on how to structure your business in the most tax-efficient way and even how to avoid unnecessary expenses.
Real estate accounting software
In this digital age, the best way to keep your data organised and secure and your business compliant with all regulations is to use real estate accounting software. This has multiple advantages to make real estate accounting much easier.
For example, if you have a team who either work remotely or need to complete tasks offsite, online property management software suitable for a real estate business keeps everything on track. Offsite employees can input data from wherever they are and from their preferred device.
There are many options when selecting real estate accounting software, so decide what features you need before you choose. It must be easy enough to use and yet powerful enough to handle all of your transactions. It also needs to be smart online cloud accounting software so you can update your accounts securely from anywhere. Choose the software that lets you quickly and easily share real-time financial data with relevant parties.
It is a big help if the software lets you automate many of the tasks, such as direct debit payments or scheduled payrolls. Xero real estate accounting software does all this and more, allowing you to easily keep track of your financial status to more accurately evaluate the financial situation of the properties you’re managing.
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